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AMRE, Inc.
Company and Technology Background

Short for American Remodeling, AMRE, Inc., was a firm started in Irving, TX, that specialized with the in-home sale and installation of exterior home improvement products. These products ranged from siding to custom countertops to fencing, roofing, and patio enclosures. Just a few years after the start of the company, AMRE, Inc. dominated an industry that primarily belonged to smaller businesses that provided services to specific metropolitan areas. Soon, in 1987, the firm went public and listed its common stock on the New York Stock Exchange.

Advertising Strategy and Expenses

AMRE’s primary expenses came from advertisements that were incurred from identifying and following potential customers, or leads, through direct mail and television commercials. During the mid-1980s, AMRE created a computer-based system which resulted in the immense early success of the home siding company. This system recorded data from potential leads that contacted the company; such information was pertinent to the buyer, things like the age of the customer, income, and home market value helped mold a sales pitch. When sales went through, this “lead bank” system kept track of the transaction, recording the dollar sale per appointment, cancellation rate, and other valuable sales information. With all this information retained from ongoing transactions, AMRE managed to stay ahead of the competition.

Fraud

Going public in February 1987 seemed to be a big step for the once-small firm. After giving very optimistic financial projections to analysts for their first quarter, AMRE found towards the end of the quarter that the projected net income was far from attainable. If the company was unable to reach its projected net income in its first quarter, the stock would drop dramatically. Fearing this, a company executive and major stockholder by the name of Robert...