This MD&A section of our Quarterly Report on Form 10-Q discusses our results of operations, liquidity and capital resources, and certain factors that may affect our future results, including economic and industry-wide factors. You should read this MD&A in conjunction with our consolidated financial statements and accompanying notes included under Part I, Item 1, of this Quarterly Report, as well as with our Annual Report on Form 10-K for the calendar year ended December 31, 2008.

RESULTS OF OPERATIONS

Overview

Highlights related to the second quarter of 2009 include:

· Net sales and operating revenues decreased $29.2 million, or 2.9%, to $965.7 million when compared with the same period last year. Comparable store sales decreased 4.0%. These decreases were driven primarily by sales declines in wireless accessories, digital-to-analog converter boxes, GPS products, music players and digital cameras. These sales declines were partially offset by increased sales of netbooks, television antennas, prepaid wireless handsets and airtime, digital televisions, and Voice over Internet Protocol ("VoIP") products.

· Gross margin decreased 110 basis points to 46.1% from the second quarter of 2008. This decrease was primarily driven by a change in our sales mix towards lower margin products such as digital televisions and netbooks.

· Selling, general and administrative ("SG&A") expense decreased $39.7 million to $335.7 million when compared with the same period last year. As a percentage of net sales and operating revenues, SG&A declined 290 basis points from the same period last year to 34.8% of net sales and operating revenues. This decrease was primarily driven by decreased advertising and compensation expense. In addition, the second quarter of 2008 included a net charge of $12.1 million associated with the amended lease for our corporate headquarters and a benefit of $5.1 million related to a sales and use tax settlement.

· As a result of the factors above, operating income increased $16.4 million, or 23.0%, to $87.7 million when compared with the second quarter of 2008.

· Net income increased $7.4 million, or 17.9%, to $48.8 million when compared with the second quarter of 2008. Net income per diluted share was $0.39 compared with $0.32 for the same period last year.

· EBITDA increased $15.1 million, or 15.7%, to $111.0 million when compared with the second quarter of 2008.

EBITDA, a non-GAAP financial measure, is defined as earnings before interest, taxes, depreciation, amortization and other loss. The comparable financial measure to EBITDA under GAAP is net income. EBITDA is used by management to evaluate the operating performance of our business for comparable periods. EBITDA should not be used by investors or others as the sole basis for formulating investment decisions as it excludes a number of important items. We compensate for this limitation by using GAAP financial measures, as well, in managing our business. In the view of management, EBITDA is an important indicator of operating performance because EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs. The following table is a reconciliation of EBITDA to net income.

                                              Three Months Ended          Six Months Ended
                                                   June 30,                   June 30,
 (In millions)                                 2009          2008         2009         2008
 EBITDA                                     $    111.0      $  95.9     $   215.2     $ 185.1

 Interest expense, net of interest income         (9.6 )       (3.3 )       (19.6 )      (6.8 )
 Provision for income taxes                      (29.3 )      (26.0 )       (56.3 )     (46.4 )
 Depreciation and amortization                   (23.3 )      (24.6 )       (47.4 )     (49.6 )
 Other loss                                         --         (0.6 )          --        (2.1 )
 Net income                                 $     48.8      $  41.4     $    91.9     $  80.2

RadioShack Retail Outlets

The table below shows our retail locations allocated among U.S. and Mexico
company-operated stores, kiosks, and dealer and other outlets at the following
dates.

                                    June 30,       March 31,       Dec. 31,       Sept. 30,       June 30,
                                      2009           2009            2008           2008            2008
U.S. RadioShack company-
operated stores                         4,450           4,448          4,453           4,435          4,439
Kiosks (1) (2)                            617             662            688             685            721
Mexico RadioShack company-
operated stores                           201             202            200              --             --
Dealer and other outlets (3)            1,372           1,384          1,411           1,407          1,444
Total number of retail locations        6,640           6,696          6,752           6,527          6,604

(1) Kiosks, which include Sprint-branded and Sam's Club kiosks, decreased by 45 locations, net of new kiosk openings, during the second quarter. This decrease in locations was partially due to the closure of underperforming Sprint kiosk locations. The remaining decrease was attributable to the assignment of certain kiosk locations to Sam's Club control in accordance with the contract extension signed in February 2009. In June 2009, Sam's Club notified us of their intent to exercise their right to assume operation of certain kiosk locations in September 2009. This could result in the transfer of up to approximately 25 kiosks to Sam's Club.
(2) In April 2009 we agreed with Sprint Nextel to cease our arrangement to jointly operate the 135 Sprint Nextel kiosks in operation at that date. This agreement allows us to operate these kiosks under the Sprint name for a reasonable period of time allowing us to transition the kiosks to our format.
(3) Our dealer and other outlets decreased by 12 locations, net of new openings, during the second quarter. This decline was due to the closure of lower volume outlets.