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On November 29, 2006, in-home movie rental and game entertainment provider Blockbuster (BBI) announced that in connection with the Company’s sale of its corporate aircraft, the Board had also entered into an addendum to its employment contract with Mr. John Antioco, its Chairman and Chief Executive Officer. Specifically, Mr. Antioco’s employment contract was modified by reference so that instead of use of the Blockbuster aircraft, he was entitled to continued use of a chartered aircraft.

According to the Company’s Proxy Statement filed with the SEC last April, during fiscal year 2005 and fiscal year 2004, Mr. Antioco (1) received a base salary of $1,250,000 and additional, deferred compensation of $383,333 and $1,045,192 in base salary and $1,000,000 in deferred compensation, respectively; (2) received a cash bonus of $5.0 million paid in 2004 (for 2003 performance); received 5.0 million restricted stock units worth $26.8 million in 2004; (3) received a car allowance of $1,100 per month for each year; and, (4) recorded expenses of $92,125 for personal use of the Company’s plane in each year.

Since early 2001, Blockbuster’s tickets to failure include an average net margin of (10.0)% per annum, more than $3.0 billion in net losses, and about a 70 percent decline in the market value of its common stock [$10K invested in Blockbuster’s stock five years ago would be worth approximately $3,100 today].

Continued declines in worldwide same-store sales, uncertainty in execution to an online subscriber business model (Total Access), increased competition for traffic from other online channels of video distribution (Netflix (NFLX)), margin pressures on the sales of in-store videos from mass-merchandisers of lower-priced DVDs (such as Wal-Mart (WMT)), and a leveraged balance sheet—Total Debt/Equity of 141.6 percent—which will curb marketing and limit business options (to simple decisions like closing under-performing stores)—Blockbuster has more to worry about than whether or not its CEO flies chartered or coach.

As for Mr. Antioco, in our view he is just another expression of a pampered CEO (he is still making gobs of money—albeit shareholders and the Company have made nothing). “Mr. Antioco, the peanuts they serve in coach taste just fine!”

BBI 1-yr chart:

Source: Blockbuster: Sinking Stock, High-Flying CEO