Starcraft Shareholders Approve Combination With Wheel to Wheel, Tecstar; Starcraft Announces 2004 Fiscal Year Financial Guidance

GOSHEN, Ind.--Jan. 1, 20042, 2004--Starcraft Corporation announced today that its shareholders have voted overwhelmingly to approve the proposed merger agreement with Wheel to Wheel, Inc. of Troy, Michigan.

The transaction has received all required regulatory clearance. Closing is expected to occur by the middle of January, 2004.

The agreement calls for Starcraft to acquire the remaining 50 percent ownership of Tecstar LLC and Tecstar Canada that it does not currently own by acquiring closely held Wheel to Wheel, an automotive engineering and design business. The transaction merges Wheel to Wheel into a newly created subsidiary of Starcraft, which will exchange Starcraft common shares for shares of Wheel to Wheel. As a result of the merger, Starcraft will own directly or indirectly 100% of the equity interest in Tecstar.

Starcraft will issue 3.55 million common shares of Starcraft to the owners of Wheel to Wheel. The current owners of Wheel to Wheel will own approximately 40% of Starcraft's fully diluted shares outstanding.

Starcraft and Wheel to Wheel jointly formed Tecstar in 1998. Tecstar provides and installs appearance enhancement items on vehicles provided by and returned to an original equipment manufacturer. Tecstar had revenues of $190 million for fiscal year 2003. Wheel to Wheel had revenues to customers other than Tecstar of approximately $6 million for the same period, which includes revenues from production, design, engineering, validation and testing of automobiles and automotive components.

"This merger is key to the long term strategy of the Company," said Kelly L. Rose, Chairman of the Board. "As a single-focus company with improved financial flexibility and strong operating and financial management, we are positioned to more effectively take advantage of new opportunities to enhance shareholder value."

Rose, 51, remains Chairman of the Board of the combined company. Effective upon the merger, Jeff Beitzel, 49, President of Wheel to Wheel and Tecstar, and Mike Schoeffler, 42, President and Chief Operating Officer of Starcraft, will become co-CEOs of Starcraft.

"The co-CEO structure gives us very strong executive leadership," Rose said. "Mike and Jeff's complementary experience will unify our corporate structure while helping clarify management's roles and accountability."

Richard Anderson, 50 and Doug Goad, 46, remain executive vice presidents of Wheel to Wheel and Tecstar, and will join Beitzel as members of Starcraft's Board of Directors. "Doug's and Rich's knowledge and leadership will benefit the combined companies," Beitzel added. "They have been key in our successful penetration of the automotive industry since Wheel to Wheel was founded in 1995."

At the meeting, shareholders also voted to re-elect two directors, to double the number of authorized shares of common stock to 20,000,000 shares, to ratify the selection of Crowe Chizek and Company LLC as auditor's, and to ratify changes to Starcraft's 1997 Incentive Stock Plan.

DIRECTOR APPOINTMENT

Separately, Starcraft announced the appointment of Michael J. Starshak to its Board of Directors. Starshak is Managing Director and co-Head of the Midwest Region for Alvarez & Marsal, a financial consulting firm. Mr. Starshak is an independent director under the most recent standards being implemented by Nasdaq.

2004 OUTLOOK

Starcraft also announced that it currently expects revenues for the fiscal year ending October 3, 2004, to be in a range of $205 million to $210 million, up from fiscal 2003 revenues of $192.1 million, driven principally by new aftermarket automotive parts programs for which Starcraft is the exclusive or principal supplier.

Fiscal 2004 net income is expected to be in a range of $12 million to $13 million, including a 50 percent interest in Tecstar's earnings until completion of Starcraft's merger with Wheel to Wheel, and 100 percent of Tecstar earnings for the remainder of fiscal 2004. In fiscal 2003, Starcraft's net income was $11.8 million. Starcraft's current view is that the shipments for the North American light truck market most closely related to Starcraft's OEM automotive business will be flat for the 2004 model year.

Other factors to be considered in comparing Starcraft's projected fiscal 2004 net income with actual fiscal 2003 net income include the following:

-- In 2004, Starcraft expects to recognize $2.1 million in amortization of intangibles related to the merger with Wheel to Wheel;

-- a projected increase of $4.2 million in income tax expense. Net operating loss carryforwards that offset the liability for U.S. taxes on fiscal 2003 income will be fully utilized in the second quarter and not available to offset federal tax expense for the remainder of fiscal 2004.

Fully diluted per-share earnings are projected to be in a range of $1.36 to $1.45 for fiscal 2004, compared with $2.25 for fiscal 2003. Earnings per share reflect the issuance of 3.55 million additional common shares in the Wheel to Wheel transaction and the financial points discussed above. As a result, the average fully diluted number of Starcraft common shares outstanding is projected to be approximately 9 million for fiscal 2004, compared with 5.2 million for fiscal 2003.

Starcraft's estimates reflect softness in certain OEM automotive programs, particularly the Canadian operation, as well as merger related expenses associated with the Wheel to Wheel merger. Starcraft's first-quarter results are expected to be announced on February 9, 2004.

New and expanded aftermarket parts programs are expected to begin or accelerate as the fiscal year progresses, although such programs have somewhat lower margins than the Company's Tier 1 automotive programs. Starcraft continues to pursue extensions and expansions of its current Tier 1 programs, as well as new programs for both current and new OEM customers.

Starcraft Corporation, through its interest in Tecstar, is a leading supplier to the OEM automotive supply market. It also supplies after-market parts and accessories to wholesale and retail customers throughout North America.

This news release contains forward-looking statements regarding Starcraft's business operations and outlook, including projections of revenues and earnings, prospects for consummation of the proposed business combination and certain governance and operational changes that may follow such transaction if effected. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties, including, but not limited to risks and uncertainties detailed in the Company's Form 10-K for fiscal 2003 filed with the Securities and Exchange Commission.