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United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

or

Commission File number: 0-22048

STARCRAFT CORPORATION

(Exact name of registrant as specified in its charter)

Post Office Box 1903, 1123 South Indiana Avenue, Goshen, Indiana 46526

(Address of principal executive offices)

Registrant’s telephone number, including area code: (574) 534-7827

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, without par value

Common Share Purchase Rights

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated, filer (as defined in rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the issuer’s voting common stock held by non-affiliates, as of October 3, 2004, was $31,135,000.

The number of shares of the registrant’s common stock, without par value, outstanding as of December 1, 2004, was 8,968,691 shares.

Documents Incorporated by Reference

Table of Contents

STARCRAFT CORPORATION

Form 10-K

Index

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PART I

ITEM 1. BUSINESS

OVERVIEW

Starcraft Corporation, an Indiana corporation founded in 1990, including Tecstar, LP, Tecstar Manufacturing Canada Limited, and Wheel to Wheel, LLC (the “Company” or “Starcraft”), is a second-stage manufacturer of motor vehicles, primarily pick-up trucks and sport utility vehicles. The business also has engineering and design capabilities for concept vehicles, and distributes automotive accessories through a dealer network. The Company became a public company in July 1993, and its shares are currently trading on the NASDAQ SmallCap Market under the ticker symbol “STCR.”

BACKGROUND

Starcraft traces its name to 1903 when Star Tank Company was founded in Goshen, Indiana as a maker of metal farm equipment, then became a leading manufacturer of aluminum boats and recreational vehicles and, finally, led the automotive conversion industry by producing luxury van conversions for middle and upper income consumers. In January 1991, the Company purchased certain of the assets of the automotive and recreational vehicle divisions, including intellectual property, from a group of companies in a consolidated bankruptcy proceeding. Starcraft simultaneously sold the recreational vehicle assets to a third party.

In July 1994, a Starcraft subsidiary acquired substantially all of the assets of Imperial Industries, Inc., another conversion vehicle manufacturer. In February 1997, another Starcraft subsidiary purchased the assets of National Mobility Corporation in Elkhart, Indiana, a manufacturer of vehicles for the mobility impaired. In February 1998, a Starcraft subsidiary started manufacturing and marketing commercial shuttle buses. In May 2001, the Starcraft subsidiary sold its van conversion business, and in August 2001, the other Starcraft subsidiary sold the bus and mobility business. The results of the sale of these two businesses are recorded in the Company’s financial statements as discontinued operations in fiscal 2001.

In October 1998, the Company, with a partner, Wheel to Wheel, Inc. (“Wheel to Wheel”), started an OEM Automotive Supply business now known as Tecstar, L.P. The primary purpose of this business is to provide final exterior and interior assemblies on vehicles directly to the OEM automobile manufacturers. In May 2002, Starcraft and Wheel to Wheel started Tecstar Manufacturing Canada Limited (“Tecstar Canada”), an OEM Automotive Supply business similar to Tecstar, L.P. We refer to Tecstar, L.P. and Tecstar Canada collectively as “Tecstar.” In October 2003, the Company, along with Wheel to Wheel, started Tarxien Automotive Products Limited (“Tarxien”), an OEM compliant painting and plastic injection molding business.

In January 2004, the Company acquired Wheel to Wheel, its partner in Tecstar and Tarxien. As a result, the Company owns directly or indirectly 100% of the equity interests in Tecstar and Wheel to Wheel.

SUBSEQUENT EVENT

On November 23, 2004, the Company entered into an Agreement and Plan of Merger whereby Quantum Fuel Systems Technologies Worldwide Inc. (“Quantum”) will acquire all of the outstanding shares of Starcraft Corporation in a tax-free stock-for-stock exchange valued at approximately $185 million at announcement, including the assumption of debt and other consideration. Under the terms of the definitive Agreement and Plan of Merger, each Starcraft shareholder will receive 2.341 shares of Quantum common stock for every share of Starcraft common stock. Refer to Item 7 for additional detail regarding this proposed merger.

BUSINESS

In 1998, the Company started a new operation with Wheel to Wheel to supply conversion vehicle type products directly to OEM automotive customers as a Tier 1 automotive supplier named Tecstar. In 2002, the

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Company invested in a similar operation in Tecstar Canada, Oshawa, Ontario, Canada with Wheel to Wheel. In January 2004, the Company acquired Wheel to Wheel and now directly or indirectly owns 100% of Tecstar. Tecstar’s business is OEM automotive supply and is the primary driver of the Company’s financial results. All of Tecstar’s OEM Automotive Supply sales in 2004, 2003 and 2002 were to General Motors Corporation (“GM”) and its subsidiaries.

Tecstar’s strategy is to provide OEM’s with faster time to market, less costly, high quality exterior and interior appearance packages. At October 3, 2004, Tecstar operated four manufacturing facilities in close proximity to the OEM vehicle assembly plants. Each facility is QS 9001 registered. Tecstar also operates a parts distribution operation supplying parts for the H2 Hummer to OEM dealers, and wheels for trucks and SUV’s to OEM dealers.

Tecstar receives vehicle chassis from the OEM and adds certain appearance items such as ground effects, wheels and badging. Chassis are provided by the OEM on a drop-ship basis and are not included in the sales of the Company. After completing the final appearance assembly work, the vehicles are placed back into the normal OEM distribution stream. The vehicles carry the full OEM warranty and are marketed directly by the OEM through its dealerships. Tecstar engineers and validates the products to OEM standards. Programs range from two to five years and are backed by contractual agreements with the OEM. A summary of contract lengths and sales is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of this report. Tecstar provides a limited warranty of its products to the OEM, which is substantially the same as the OEM warranty provided to the OEM’s retail customers.

The major domestic market for Tecstar’s products is highly competitive. Competition is based primarily on price, product engineering and performance, technology, quality and overall customer service, with the relative importance of such factors varying among products. Tecstar’s global competitors include a large number of other well-established independent manufacturers.

The Company’s sales are directly impacted by the size of the automotive industry and GM’s market share. Further, GM periodically reduces production or closes plants for several months for model changeovers. During the fourth quarter of fiscal year 2000 and continuing into the second quarter of fiscal 2001, one of the Company’s manufacturing facilities was substantially shut down as a result of a GM vehicle model changeover. This adversely affected the Company’s 2000 and 2001 financial results. The facility was back in production in the third quarter of fiscal 2001. Accordingly, a decline in sales in the automotive market or in GM’s automotive sales, or production cutbacks and plant shut downs for model changeovers by GM, could have an adverse impact on the Company’s sales and profits. Sales are subject to long-term contracts with GM, which, at its option, may extend or reduce the terms of such contracts depending upon market conditions and chassis manufacturing plans. Continued sales and growth of this segment is subject to the Company’s ability to continue to satisfactorily perform and to obtain such contracts over time.

At October 3, 2004, Tecstar’s backlog of firm orders was $4.8 million compared with a backlog of $4.3 million at September 28, 2003. The increase in backlog is primarily due to the addition of the Ontario, Canada operation in 2003. Tecstar utilizes an internal sales force and independent manufacturer representatives to market and sell its services.

PATENTS AND TRADEMARKS

Other companies have manufactured conversion vehicles, boats, motor homes and other recreational vehicles under the name “Starcraft.” In 1991 Starcraft acquired certain of the assets of the van conversion business, and recreational vehicle business, from a group of companies in a consolidated bankruptcy proceeding. The sale included intellectual property rights. Starcraft immediately sold the recreational vehicle assets to an unrelated RV company. Prior to the 1991 sale to Starcraft, another corporation in the boating industry had purchased marine business assets and related intellectual property, and independently registered the “Starcraft”

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mark and related trademarks for use with boats and marine products. Starcraft has no control over the quality of boats produced and sold under the “Starcraft” mark. Starcraft retains ownership of “Starcraft” and related registered marks for use with automotive products, recreational vehicle products, conversion vans, shuttle buses and mobility vans. It licenses the use of the “Starcraft” brand to the owners of the Starcraft RV business, as well as the owners of the former conversion vehicle and bus and mobility businesses. While license agreements reserve some control over the quality of licensees’ products, Starcraft does not have control over a licensee’s business operations. The amended license agreement for the owner of the conversion vehicle business requires payment of a license fee of $100 for each conversion vehicle unit sold for the calendar year 2005, and thereafter, provided, however, for calendar years 2007 and 2008 a guaranteed minimum license fee of $146,500 for year 2007 and $70,700 for 2008 shall be due.

MANUFACTURING

OEM second stage manufacturing facilities have been established in Louisiana, Texas and New Jersey in the United States and in Oshawa, Ontario, Canada. The New Jersey facility will be shutdown the first quarter of fiscal 2005. All facilities are located near GM assembly plants. Tecstar also has an engineering center, corporate office and parts distribution operations near Detroit, Michigan. In addition, Tecstar operates a tooling and plastics manufacturer in Rochester Hills, Michigan and a paint and injection plastics molder in Ontario, Canada. Wheel to Wheel operates an administrative, engineering and concept vehicle development facility in Troy, Michigan and also has a powertrain facility in Madison Heights, Michigan.

Substantially all components for the business are purchased from outside suppliers. The Company does supply various painted parts and plastic parts internally from its Canadian paint facility and its plastics manufacturer in Rochester Hills. The primary raw material used in the components is plastic, which the Company believes is readily available from several sources. One of Tecstar’s primary plastics vendors has experienced some financial difficulties. To date, minimal supply problems have been encountered. However, to mitigate any potential supply disruptions, Tecstar has established relationships with additional suppliers. The Company’s products are generally produced to firm orders and are designed and engineered by the Company. However, from time to time the Company may experience delays in delivery of certain components or materials from suppliers.

SAFETY AND REGULATION

The manufacture, distribution and sale of the Company’s products are subject to governmental regulations in the United States at the federal, state and local levels. The most extensive regulations are promulgated under the National Traffic and Motor Vehicle Safety Act, which, among other things, empowers the National Highway Traffic Safety Administration (“NHTSA”) to require a manufacturer to remedy certain “defects related to motor vehicle safety” or vehicles that fail to conform to all applicable federal motor vehicle safety standards.

Federal Motor Vehicle Safety Standards are promulgated by the NHTSA. Many of the Company’s components are affected by these standards. The Company engages various testing companies, which also perform testing for NHTSA, to test certain of the Company’s components. The Company believes that its components subject to these standards meet or exceed applicable standards. Promulgation of additional safety standards in the future could require the Company to incur additional testing and engineering expenses which could adversely affect the Company’s results of operations. NHTSA can require automotive manufacturers to recall products. The Company has not experienced any material recalls.

The Company’s international sales are subject to foreign tariffs and taxes, changes in which are difficult to predict and which can adversely affect sales. Starcraft’s products must also comply with government safety standards imposed in its foreign markets.

Both federal and state authorities have various environmental control standards relating to air, water and noise pollution that affect the business and operations of the Company. The Company believes that it has

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complied in all material respects with applicable environmental regulations and standards and does not currently expect that any failure of compliance will have any material adverse effect on the Company.

Like other automotive manufacturers, the Company may be subject to claims that its products caused or contributed to damage or injury sustained in vehicle accidents or may be required to recall products deemed to contain defects related to motor vehicle safety. Any such claims in excess of the Company’s insurance coverage or material product recall expenses could adversely affect the Company’s financial condition and results of operations.

EMPLOYEES

As of October 3, 2004, the Company employed 601 people. Of these, 434 were production line associates and 167 were salaried sales, engineering and administrative staff. In addition to its employee personnel, Tecstar utilized 91 contract laborers in its plants. During peak production periods, the Company may increase its work force. Historically, the available labor force has been adequate to meet such periodic requirements. The Company considers its relationships with its personnel to be satisfactory.

ITEM 2. PROPERTIES

The following table summarizes the Company’s properties as of October 3, 2004:

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ITEM 3. LEGAL PROCEEDINGS

The Company does not anticipate that any pending legal proceeding to which it is party will have any material adverse effect on its financial condition or results of operations. The Company maintains product liability insurance which it currently considers adequate.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Starcraft’s common stock is quoted on the NASDAQ SmallCap Market. As of October 3, 2004, there were 53 shareholders of record of Starcraft’s common stock. The Company believes its shares are owned beneficially by approximately 2,287 beneficial owners.

The following table sets forth the high and low daily sales prices for Starcraft common stock for the periods indicated as quoted on the NASDAQ.

Dividend Policy. During the second quarter of fiscal 2004, the Company declared and issued a 5% common stock dividend. As a result, the Company issued 421,539 additional shares of common stock. The Company has paid no cash dividends since its initial public offering. The Company currently intends to retain earnings for use in the operation and expansion of its business and, therefore, does not anticipate paying cash dividends on Common Stock in the foreseeable future. The payment of dividends is within the discretion of the Board of Directors and will be dependent, among other things, upon earnings, capital requirements, any financing agreement covenants and the financial condition of the Company.

Anti-Takeover Provisions. Indiana law and the Company’s Articles of Incorporation and Code of By-laws contain provisions that restrict the acquisition of control of the Company. Such provisions can affect the rights of shareholders acquiring substantial interests in the Company’s shares. For example, a shareholder who acquires more than 10% of the Company’s shares without prior board approval will be limited in the timing and terms of any transaction it may enter into with the Company and will be subject to related provisions.

SHAREHOLDER RIGHTS PLAN

In August 1997, the Company adopted a Shareholders Rights Plan issuing one right for each outstanding share of common stock. Each right entitles the registered holder to purchase from the Company one share of common stock at $15 per share, subject to adjustment. The rights become exercisable if a person or group (other than certain related persons) acquires or announces a tender offer for prescribed percentages of the Company’s

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shares or is declared an “adverse person” by the Company’s Board of Directors. In these events, each right holder may purchase shares with a value equal to twice the exercise price. Furthermore, if the Company engages in certain mergers or similar business combinations a right holder may purchase shares of the acquiring company with a value of two times the purchase price of the right. The rights expire on August 12, 2007.

On November 23, 2004, the Company amended the Rights Plan so that it will not apply to the transaction with Quantum.

SALES OF UNREGISTERED SECURITIES

The Company had no sales of unregistered securities that have not been reported previously.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table summarizes the number of shares issuable under Starcraft’s equity compensation plans, the weighted-average exercise price and the number of shares available for issuance, as of October 3, 2004.

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The consolidated statements of income summarize operating results for the last three years. This section of Management’s Discussion highlights the main factors affecting the changes in operating results during the three-year period.

2004 VERSUS 2003

(Dollars in Thousands)

Net sales decreased $18.7 million and 9.7% to $173.4 million in 2004. Primary sales decreases were $11.2 million from the product discontinuance and closing of the New Jersey facility and $23.4 million from product demand reductions in our Canadian facility. These declines were partially offset by increased sales of $13.6 million from businesses acquired in 2004. Businesses acquired in 2004 include Wheel to Wheel, Tarxien and Classic Design Concepts, Inc. (“Classic Design”), which are further described later in this section. Our Shreveport facility increased sales by 27.9% due to a new product introduction while the Texas facility sales decreased 2.2% primarily due to softness in the overall sport utility vehicle market. Parts distribution sales increased 7.4% to $30.5 million due to sales generated from the new wheel distribution program. H2 parts sales, which are included in parts distribution sales, declined 27.8%, which is consistent with the decline of the overall H2 vehicle market, which reported a decrease in sales of 23.9% and the elimination of two high volume parts. Fiscal 2004 consisted of 53 weeks of activity versus 52 weeks in fiscal 2003.

Gross profit decreased from $44.3 million (23.0% of sales) to $23.1 million (13.3% of sales) in 2004. In addition to the effect from lower sales at the New Jersey and Canadian facilities, gross profit was adversely affected by minimal gross profit generation from businesses acquired in 2004, and a temporary interruption in the supply of chassis to the Texas facility. Gross profit as a percentage of sales also decreased in 2004 due to increased product mix of the parts distribution business, which carries a lower margin than the second stage manufacturing sales. Total second stage revenue declined by $45.8 million in 2004 compared to prior year levels.

Selling and promotion expenses increased to $2.9 million (1.7% of sales) in 2004 compared to $1.9 million (1.0% of sales) in 2003. Acquired businesses in 2004 accounted for $.5 million of the increase in selling and promotion expenses. Show and travel expense increased by $.5 million in 2004.

General administrative expenses decreased 6.4% to $16.2 million in 2004 due to reductions in employee incentive compensation, partially offset by increases in salaries and $1.2 million of additional general and administrative expenses associated with businesses acquired in 2004. General and administrative expenses as a percentage of sales in 2004 approximated 2003.

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A goodwill impairment charge of $47.9 million was recorded during the second quarter of fiscal 2004 related to the Company’s acquisition of Wheel to Wheel, its partner in Tecstar. According to Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” purchase accounting guidelines applied to this non-cash transaction. Goodwill generated from the transaction was $125 million. This goodwill is not subject to amortization, but rather is tested annually for impairment per SFAS No. 142 “Goodwill and Other Intangible Assets.” The principal driver of this impairment test is the trading price of the Company’s shares at the time of testing for impairment. Due to a material decline in the trading price of the Company’s shares, the Company decided to perform its annual impairment test in the second quarter of fiscal 2004. Accordingly, a $47.9 million, non-cash charge was recorded.

Amortization expense attributable to intangible assets recorded in the Wheel to Wheel merger was $1.4 million in 2004.

Interest expense was $.9 million in 2004 compared to $.5 million in 2003 primarily due to higher borrowing levels. In addition, in the fourth quarter of 2004 the Company completed a $15 million private placement of unsecured senior subordinated convertible notes bearing interest at 8.5%, which is higher than the Company’s current revolving credit line interest rate.

Minority interest results from the Company owning 50% of Tecstar prior to the January 2004 merger with Wheel to Wheel. In 2003, Tecstar’s profits were much higher than 2004 levels resulting in a much higher minority interest.

Income tax benefit of $1.9 million in 2004 is attributable to federal tax refunds received from research and development credits and a $1.1 million deferred tax credit arising from the reversal of the valuation allowance recorded against certain deferred tax assets. See Note 7 of notes to consolidated financial statements for further information on income taxes.

Income tax expense for 2003 is comprised of state tax expense and Canadian tax on the profits of the Canadian operations, net of a $1.3 million deferred tax credit arising from the reduction of the valuation allowance for the NOL carryforward deferred tax asset. The Company did not record any U.S. federal income tax expense in 2004 and 2003 due to net operating loss tax carry forwards generated from losses in prior years.

2003 VERSUS 2002

(Dollars in Thousands)

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Net sales increased 83.5% to $192 million in 2003.

Sales increased $87.4 million in 2003, primarily due to an increase in demand for its products from its OEM customer, increased capacity expansion in the Texas facility resulting from increased product demand, the addition of the H2 parts program for the Hummer sport utility vehicle and the start-up of the Ontario, Canada program.

The increased sales generated $19.3 million more gross profit in 2003 compared to 2002 primarily due to the increased sales. Gross profit as a percentage of sales slightly decreased from 23.8% in 2002 to 23.0% in 2003 due to increased product mix of the H2 parts business, which carries a lower margin.

General administrative expenses increased $3.8 million in 2003 due to higher support requirements for the increased sales, primarily for the increased capacity in Texas and the new plant in Canada. The Company incurred a $1.1 million foreign currency gain in 2003 which reduced general and administrative expense, which was partially offset by merger related costs and a provision for asset impairment. General and administrative expenses as a percentage of sales decreased to 9.0% in 2003 because the fixed expenses did not increase proportionately with the sales growth.

In 2002, the Company reached agreement to redeem and cancel 360,000 warrants and 500,000 options to purchase shares of common stock, previously issued to two individuals, both of whom are directors and one of whom is an officer of the Company, as incentive for their partial guarantee of the Company’s debt. The Company incurred a one-time expense of $2.1 million in 2002.

Other income in 2002 included $332 related to the cancellation of debt owed to a former vendor of the van conversion business.

Minority interest results from the Company owning 50% of the OEM Automotive Supply business. Income tax expense for 2003 is comprised of state tax expense and Canadian tax on the profits of the new operation in Canada, net of $1.3 million of deferred tax credit arising from the reduction of the valuation allowance for the NOL carryforward deferred tax asset. The Company did not record any U.S. federal income tax expense in 2003 due to net operating loss tax carry forwards generated from losses in prior years and the reduction in the valuation allowance for deferred tax assets. Income tax expense in 2002 was comprised only of state taxes, as the Canadian operation had not begun operations.

Federal income tax expense was impacted by the elimination of our deferred tax asset valuation allowance in 2003 by $1.3 million. This deferred tax asset, of which the majority is attributable to the $3.2 million dollars in NOL carryforwards at September 30, 2003, was fully reserved in previous years due to uncertainties in eventual recognition of the benefit of this asset. See Note 7 of notes to consolidated financial statements for further information on income taxes.

SEASONALITY AND TRENDS

The Company’s sales and profits are dependent on the automotive markets, primarily located in North America and one customer. The business may be influenced by a number of factors including OEM programs affecting price and supply, interest rates, gasoline prices, atypical weather for any sales region, OEM plant shutdowns and model year changeovers. Sales are dependent upon long-term contracts.

In the ordinary course of business, the Company has entered into multiple contracts of varying size and duration with General Motors (GM). At the end of these contracts, the Company seeks to replace the expiring contracts with similar contracts. However, the Company can provide no assurances it will be able to continue to do so in the future. To mitigate this potential exposure, the Company generally structures its facility leases and vendor supply contracts to correspond with the terms of its GM contracts. Due to the lack of availability of suitable buildings, the Oshawa, Ontario, Canada lease is ten years compared to a five year program life for the other plants.

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The Company is currently largely dependent upon one customer and contractual agreements with this customer. The terms of the agreements are tied to the customer’s anticipated life of the vehicle chassis. Following is a summary of existing program lives and the percentage of 2004 sales attributable to each plant. The program lives are tied to contractual agreements, but may be shortened or extended based upon market conditions and chassis manufacturing plans at the option of the customer. Historically, the customer has continued programs upon the introduction of a new vehicle chassis, although the Company is not assured of receiving such new contracts.

The sales program related to the New Jersey facility ended in October 2004. Sales for this program accounted for 2.8% of the Company’s sales in fiscal year 2004.

A supply program in Shreveport ended during the fourth quarter of fiscal 2003. The Company had minimal sales for the Shreveport plant during the first six months of 2004 compared to $6.1 million during the first six months of fiscal 2003. A new supply program started during the third quarter of fiscal 2004, which returned the Shreveport facility to profitability, and should continue at this pace into fiscal 2005.

The Canadian facility operated at a loss for fiscal 2004 due to substantially reduced sales volume. Operating losses at this facility will continue to occur if sales volumes do not increase. We do not anticipate sales in the first quarter of fiscal 2005 to improve over current levels. Currently, the Company is working with its customer in attempts to increase sales at this location, and anticipates a return to profitability at this facility during fiscal 2005. Businesses acquired during the year incurred $2.8 million in operating losses in 2004. Results for these businesses are expected to improve in 2005.

ACQUISITIONS AND JOINT VENTURES

In January 2004, the Company and Wheel to Wheel Acquisition Company, LLC, an Indiana corporation and a wholly owned subsidiary of the Company (the “Acquisition Subsidiary”), consummated an Agreement and Plan of Merger (the “Merger Agreement”) with Wheel to Wheel and the shareholders of Wheel to Wheel (the “Shareholders”). The Merger Agreement provided for the acquisition of Wheel to Wheel by the Company pursuant to a merger of Wheel to Wheel with and into the Acquisition Subsidiary (the “Merger”), with the Acquisition Subsidiary surviving the Merger and continuing as a wholly owned subsidiary of the Company.

Wheel to Wheel owned 50% of Starcraft’s joint venture subsidiaries Tecstar, LP and Tecstar Manufacturing Canada Limited. As a result of the Merger, the Company owns directly or indirectly 100% of the equity interests in the Tecstar entities and Wheel to Wheel.

In the Merger, the Shareholders of Wheel to Wheel collectively received 3,550,000 shares of Starcraft common stock. The Company entered into employment and non-competition agreements with the three key executives of Wheel to Wheel. The merger agreement restricts transfer of the shares issued in the merger for two years, with provisions for up to approximately 500,000 shares in 2004 and 300,000 shares in 2005 to be available for sale without contractual restriction, subject to compliance with applicable securities laws and Company policy.

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Wheel to Wheel provides design, engineering, validation and testing of automotives and automotive components and also manufactures show and specialty vehicles and pace cars.

Wheel to Wheel is the sole provider of engineering, design and validation services to Tecstar. Tecstar could be significantly harmed if Wheel to Wheel no longer provided these services. The merger of the Company and Wheel to Wheel enabled the Company to control this critical aspect of Tecstar’s business.

In addition, Wheel to Wheel generated incremental revenues of approximately $5 million in the specialty vehicle and automotive engineering markets in the Company’s fiscal year 2004.

The acquisition of Wheel to Wheel was treated as a purchase for financial reporting purposes. Accordingly, the purchase price was first allocated to the fair value of assets received, net of assumed liabilities. The remaining purchase price was then allocated to any identifiable intangible assets, which in this case, included a customer relationship and several supply contracts, with the remainder allocated to goodwill. The identifiable intangible assets, valued at $14.3 million, are being amortized to expense over the expected lives of the assets ranging from three to twenty years. Goodwill, approximating $125 million at acquisition, will not be amortized to expense, but will be evaluated annually for any impairment in the carrying value, and adjusted accordingly through the income statement. As previously discussed, the Company performed its annual review of goodwill impairment and recorded a $47.9 million, non-cash charge in the second quarter of fiscal 2004.

On July 13, 2004, the Company and IMPCO Technologies Inc. of Cerritos, California announced the formation of Powertrain Integration, LLC (“PI”). The new company will provide Powertrain integration, engineering expertise and production capabilities to satisfy the OEM need for low volume, on-highway vehicle applications. PI is owned 51% by Wheel to Wheel, a wholly owned subsidiary of Starcraft, and 49% by IMPCO. PI expects revenues to begin in calendar 2005.

In October 2003, Starcraft and Wheel to Wheel jointly acquired the assets of Tarxien in Ontario, Canada. Tarxien, with $6.6 million in sales in 2004, was acquired for its OEM-compliant, highly efficient horizontal paint line, and its plastic injection molding facilities that will further support Starcraft’s ongoing automotive aftermarket initiatives.

In November 2003, the Company acquired the assets of Classic Design of Walled Lake, Michigan. Classic Design provides design and engineering services, concepting and show car development for automotive OEMs, primarily Ford Motor Company. Classic Design also develops and markets aftermarket parts. Classic Design’s senior staff brings additional expertise in direct sales and corporate relationships. Classic Design contributed $1.8 million in sales in fiscal 2004.

The total purchase price of the assets, net of assumed liabilities, for Tarxien and Classic Design was $1.2 million.

In October 2004, the Company formed a 50-50 joint venture company with AM General LLC to provide second-stage manufacturing capabilities and design and engineering expertise for low volume OEM needs. The venture, named Amstar, will also offer a full line of aftermarket accessories to compliment the General Motors special equipment packages available for the HUMMER consumer.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities generated $7.7 million in cash in 2004 compared to $13.7 million in 2003. Cash generated in 2004 before working capital usage was $7.1 compared to generation of $24.4 million in 2003. Cash generated by reducing accounts receivable levels associated with the decline in sales was $3.0 million net of inventory increases associated with the wheel program, and net of reductions in accounts payables. Cash used for accounts receivable, inventories and accounts payable in 2003 to fund the sales growth was $6.7 million.

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The Company invested $5.7 million in property and equipment during 2004 primarily attributed to leasehold improvements in the Texas plant, tooling to develop the aftermarket parts business and tooling and engineering projects.

In January 2004, the Company entered into a $30 million revolving credit agreement with its current lending institution, and a new lending institution, which matures on April 1, 2006. The facility was amended to accommodate the increased revolver needs associated with the Wheel to Wheel acquisition. Advances under the agreement are limited to a specific percentage of eligible receivables and inventories, subject to a maximum of $30 million. The advances bear interest subject to a pricing matrix with ranges of  ³/4% below the prime rate to  ¹/4% above the prime rate dependent upon a ratio of funded debt to EBITDA. The revolver also contains a LIBOR based borrowing option with rates ranging from 150 to 250 basis points above Euro dollar rates, dependent upon the same calculation. Substantially all of the Company’s assets collateralize the borrowings.

As discussed in Note 6 of the notes to consolidated financial statements, the Company and its subsidiaries, have two bank lines of credit, which provide for $35 million of credit subject to borrowing base limitations of which $1 million was outstanding at October 3, 2004.

The Company, in relation to the acquisition of Wheel to Wheel, entered into employment contracts with three employees that among other things, allow for severance payments of two years worth of base salary for termination without cause. Obligations under these severance agreements total $1.8 million annually. The Company had previously entered into two employment contracts with two and five year terms, which among other things, have severance provisions totaling $2.8 million annually.

Effective July 13, 2004, Starcraft Corporation completed the private placement of $15 million of unsecured senior subordinated convertible notes. The notes were placed with accredited investors in a transaction exempt from registration under the Securities Act of 1933, pursuant to Section 4(2) of the Securities Act, and Regulation D thereunder. The notes bear interest at 8.5% and mature in July 2009 with semi-annual interest payments payable on January 1 and July 1 of each year, commencing January 1, 2005. The payments can be made in either cash or stock, to be determined at Starcraft’s discretion. The notes are convertible at the option of the holder, subject to certain conditions, in whole or in part, into shares of Starcraft’s common stock at a 25% premium to the previous five-day average closing price of Starcraft’s stock price as of July 12, 2004.

Starcraft has filed a registration statement under the Securities Act of 1933 to register the shares of its common stock issuable upon conversion of the notes for potential resale by note holders. Starcraft paid a placement fee of $0.4 million and an origination fee of $0.2 million in respect of this issuance. The funds from the debt issuance were used to pay down the revolver. Available funds on the revolving line of credit, subject to borrowing base limitations, approximated $25 million at October 3, 2004. At December 14, 2004, available funds under the revolver line of credit are $20 million.

The Company believes the additional capital provided by the convertible notes proceeds will better align its long term growth initiatives with capital not subject to borrowing base fluctuations, enhancing management’s flexibility in addressing long and short term capital and liquidity needs as they arise. The Company believes the additional flexibility provided by the convertible notes together with borrowings available under revolving credit facilities and internally generated funds will be sufficient to satisfy its liquidity requirements, and growth initiatives through 2005.

On February 9, 2004, the company declared a 5% common stock dividend. The stock dividend was paid on March 19, 2004 to stockholders of record as of February 20, 2004.

INCOME TAXES

At this time, the Company does not have U.S. federal income tax expenses due to existing net operating loss carryforwards generated from prior years’ tax losses that are being utilized to offset current taxable income. The Company is incurring certain state taxes.

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As the net operating loss carryforwards are utilized, the Company will begin recording U.S. federal income taxes, along with Canadian and state taxes. At October 3, 2004, the net operating loss carryforwards were approximately $3.6 million related to U.S. income taxes and $1.8 million related to Canadian taxes.

PROPOSED MERGER

On November 23, 2004, the Company entered into an Agreement and Plan of Merger whereby Quantum will acquire all of the issued and outstanding shares of common stock of Starcraft in a tax-free stock-for-stock exchange valued at approximately $185 million, including the assumption of debt and other consideration. Under the terms of the definitive Agreement and Plan of Merger, each Starcraft shareholder will receive 2.341 shares of Quantum common stock for every share of Starcraft common stock.

The proposed transaction received the unanimous approval of both Boards of Directors. Four of Starcraft’s largest shareholders, who collectively represent 51.3% of Starcraft’s issued and outstanding shares of common stock have entered into a voting agreement with Quantum pursuant to which they have agreed to vote their Starcraft shares in favor of the merger. General Motors, Quantum’s largest stockholder, owning 14.2% of the issued and outstanding common shares of Quantum and 11.4% of the voting power of Quantum’s stock, has entered into a voting agreement with Starcraft agreeing to vote in favor of the transaction.

Starcraft common shareholders will own approximately 40% of the pro forma Quantum common stock outstanding immediately following completion of the transaction. Quantum will maintain its listing on the NASDAQ National Market under the symbol “QTWW.” Starcraft Corporation will survive the merger with a newly formed Quantum subsidiary and will operate as a wholly owned subsidiary of Quantum.

The transaction will be submitted to the shareholders of both companies for approval. The transaction is also subject to customary regulatory review and closing conditions, and is expected to close in the first quarter of calendar year 2005.

Quantum is a leading designer, integrator and manufacturer of packaged fuel systems for fuel cells and alternative fuel applications in the transportation, fuel cell stationary power generation and hydrogen refueling infrastructure markets. Leveraging its core competencies in ultra-light weight composite fuel storage, fuel injection, fuel metering, electronic controls, OEM-level systems integration, and years of OEM production experience, Quantum also designs and manufactures hybrid and fuel cell vehicles. Quantum is a Tier 1 OEM supplier and has product commercialization alliances with General Motors, Sumitomo and IMPCO. Quantum’s customer base includes General Motors, Toyota, Opel, Hyundai, Suzuki, Ford, Sunline, Yamaha, AeroVironment, and the U.S. Army. Quantum’s website is www.qtww.com.

The combined company would have an extensive range of operational expertise in areas such as vehicle systems design, powertrain engineering, systems integration, validation, assembly and service readiness for traditional vehicles, alternative fuel platforms, and hydrogen-based fuel cell vehicles. The complementary strengths of each company should support expansion of current customer programs and create the potential to attain new OEM programs. If the merger is effected, the combined company is expected to maintain operations in California, Indiana, Louisiana, Michigan, Texas, and Ontario, Canada, with its headquarters located in Irvine, California.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

In the course of normal business and in the preparation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States, management is required to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The significant policies under which such estimates and assumptions are made include:

Revenue Recognition: The Company generally manufactures products based on specific orders from customers. Shipments are generally made by common carrier after receiving authorization from the customer, and revenue is recognized upon shipment under FOB factory terms.

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Warranties: The Company follows the policy of accruing an estimated liability for warranties at the time the warranted products are sold. The Company’s OEM Automotive Supply segment provides products to Original Equipment Manufacturers under warranty terms similar to those offered by the OEM to its customers, generally three years. The Company accrues an estimated liability for potential warranties at the time products are sold, based on past claims experience.

Accrued Insurance: The Company is self-insured for a portion of its employee medical benefits. Medical claims are routinely reviewed by the Company’s insurance carrier for purposes of establishing ultimate loss estimates. In addition, management must determine estimated liability for claims incurred but not reported. Such estimates and any subsequent changes in estimates may result in adjustments to our operating results in the future.

Property and Equipment: Property and equipment are stated at cost. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. The Company is depreciating buildings over periods of 15 to 50 years. Building improvements over periods of 5 to 20 years, and equipment over periods of 3 to 12 years.

Identifiable Intangible Assets and Goodwill: The identifiable intangible assets generated by the Wheel to Wheel merger will be amortized to expense over the expected lives of the assets ranging from three to twenty years. Goodwill will not be amortized to expense, but rather will be evaluated annually for any impairment in the carrying value, and adjusted accordingly through the income statement.

OFF-BALANCE SHEET ARRANGEMENTS

As part of the Wheel to Wheel merger, the Company assumed a consulting agreement for a former shareholder of Wheel to Wheel. As of October 3, 2004, Wheel to Wheel has 103 remaining monthly payments of $28 due under this arrangement, which is not recorded on the balance sheet.

CONTRACTUAL OBLIGATIONS:

AVAILABLE INFORMATION

Availability of Reports. Starcraft is a reporting company under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and files reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). The public may read and copy any Company filings at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Because the Company makes filings to the SEC electronically, you may access this information at the SEC’s internet site: www.sec.gov. This site contains reports, proxies, information statements, and other information regarding issuers that file electronically with the SEC.

Web site Access. Our internet Web site address is www.starcraftcorp.com. We make available, free of charge at the “Investor Relations” portion of this Web site under “SEC Filings” annual reports on Form 10-K,

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quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the 1934 Act are also available on our Web site.

DISCUSSION OF FORWARD-LOOKING INFORMATION

The discussion above includes forward-looking statements respecting domestic and international market and economic trends, the Company’s products and marketing plans, anticipated capital expenditures and revenues, the adequacy of capital resources and other matters. From time to time, the Company may make oral or written forward-looking statements regarding its anticipated sales, costs, expenses, earnings and matters affecting its condition and operations. All such forward-looking statements are subject to a number of material factors which could cause the statements or projections contained therein to be materially inaccurate. Such factors include, without limitation, the following:

General Operating Contingencies. The Company may not be able to attract and retain employees with sufficient skills to conduct its operations efficiently and may from time to time be subject to work slow-downs or stoppages. The Company may be adversely affected by delay or unavailability of supply of numerous component parts. The Company will not always be able to satisfy its capital requirements with internally generated funds and may, from time to time, need to rely on bank financing and other third party capital resources. There is no assurance that such resources will always be available to the Company or as to the terms that will apply to any financing, or as the Company’s ability to continue to comply with such terms over time.

Acquisitions and Diversification. The Company may be engaged in negotiations from time to time regarding prospective acquisitions of related businesses. Such acquisitions could be material to the Company and, if affected, could have a material effect on the Company’s financial condition or results of operations. There is no assurance as to when or whether the Company will be able to effect acquisitions, whether it will be able to generate requisite funding to effect such acquisitions, or as to the terms on which such acquisitions may be effected. The Company may have less experience manufacturing and marketing such acquired products than it has in its business. There is no assurance that such new acquisitions will be profitable.

Economic Conditions. The level of disposable consumer income affects the Company’s sales because its products are generally considered discretionary expenditures by consumers. In difficult economic times, consumers tend to spend less of their income on discretionary items. Other economic factors affecting the demand for the Company’s products include the availability and price of gasoline, the level of interest rates and the availability of consumer financing.

Reduced gasoline availability could adversely affect the demand for the Company’s products. A significant increase in the price of gasoline could reduce demand for the Company’s products because it would increase the cost of operating these products. Because many consumers finance their purchase of vehicles on which Company products are installed, the availability of financing and level of interest rates can affect a consumer’s purchasing decision. A decline in general economic conditions or consumer confidence can be expected to affect the Company and Tecstar’s sales adversely.

Revenues. All of the Company’s sales in 2004, 2003 and 2002 were to GM. The Company’s OEM Automotive Supply sales are directly impacted by the size of the automotive industry and GM’s market share. Further, GM periodically reduces production or closes plants for several months for model changeovers. During the fourth quarter of fiscal year 2000 and continuing into the second quarter of fiscal 2001, one of the Company’s manufacturing facilities was substantially shut down as a result of GM’s model changeover. This adversely affected the Company’s fiscal 2000 and 2001 results. A decline in sales in the automotive market or in GM’s automotive sales, or production cutbacks and plant shut downs for model changeovers by GM, could have an adverse impact on the Company’s sales and profits. Sales of the Company are subject to long-term contracts with GM. Continued sales and growth of this segment is subject to the Company’s ability to continue to satisfactorily

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perform and to obtain such contracts over time. Sales programs are tied to contractual agreements, but may be shortened or extended based upon market conditions and chassis manufacturing plans at the option of the customer. Historically, the customer has continued programs upon the introduction of a new vehicle chassis, although the Company has no assurance that it will receive such new contracts.

The Company’s agreements with its customer may be shortened or extended by the customer at its discretion. There is no assurance that the Company’s agreements will remain in effect for the stated periods.

Single Customer. GM has publicized its interest to put significant pressures on its suppliers to reduce costs, including GM’s intention to change suppliers if suppliers do not comply. As the Company’s sole customer is GM, there is no assurance that the Company’s sales and margins will not be adversely affected by this program.

Regulation. The Company is subject to various foreign, federal, state and local regulations. The Company must comply with certain Federal and state regulations relating to the disposition of hazardous wastes generated in its production processes. The Company’s failure to comply with applicable regulations or changes in current regulations, including the adoption of new safety or environmental standards, could have a material adverse effect on the Company’s results of operations.

Competition. The OEM Automotive Supply business is also highly competitive with several large companies competing in this market. There is no assurance the Company will be able to maintain its current competitive position in this market.

Potential Product Liability and Warranties. Like other automotive manufacturers, the Company may be subject to claims that its products caused or contributed to damage or injury sustained in vehicle accidents or may be required to recall products deemed unsafe. Any such claims in excess of the Company’s insurance coverage or material product recall expenses could adversely affect the Company’s financial condition and results of operations. It is possible that actual expenses the Company incurs to honor warranties on products could exceed the warranty liability accrued on its books for such expenses, which could adversely affect its results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, operations of the Company are exposed to fluctuations in interest rates and foreign currencies. These fluctuations can vary the cost of financing, investment yields and operations of the Company.

The Company does not have any investments that would be classified as trading securities under generally accepted accounting principles. The Company’s non-trading investments, excluding cash and cash equivalents, consist of certificates of deposit and debt securities. These financial instruments are subject to market risk in that changes in interest rates would impact the market value of such investments. The Company generally does not utilize derivatives to hedge against increases in interest rates which decrease market values.

Based on the Company’s overall interest rate exposure at October 3, 2004, including variable rate debt, a hypothetical 10 percent change in interest rates applied to the fair value of the financial instruments as of October 3, 2004, would have no material impact on earnings or cash flows over a one-year period.

The Company’s foreign currency risk exposure results from fluctuating currency exchange rates, primarily the U.S. dollar against the Canadian dollar. The Company faces transactional currency exposures that arise when its foreign subsidiaries enter into transactions, denominated in currencies other than their local currency. The Company also faces currency exposure that arises from translating the results of its Canadian operations to the U.S. dollar at exchange rates that have used financial derivatives to hedge against fluctuations in currency exchange rates. During fiscal 2004, the Company incurred a $0.2 million net foreign currency gain.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

STARCRAFT CORPORATION AND SUBSIDIARIES

Goshen, Indiana

CONSOLIDATED FINANCIAL STATEMENTS

October 3, 2004, September 28, 2003 and September 29, 2002

CONTENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Starcraft Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Starcraft Corporation and Subsidiaries as of October 3, 2004 and September 28, 2003 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended October 3, 2004. Our audit also included the financial statement schedule listed in the index at Item 15(c). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Starcraft Corporation and Subsidiaries as of October 3, 2004 and September 28, 2003, and the results of their operations and their cash flows for each of the three years in the period ended October 3, 2004 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the financial statement schedule referred to above presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

As explained in Note 16, the Board of Directors has agreed to a sale of all the common stock of the Company under an Agreement and Plan of Merger.

/S/    CROWE CHIZEK AND COMPANY LLC

Crowe Chizek and Company LLC

Elkhart, Indiana

November 19, 2004

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STARCRAFT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

October 3, 2004 and September 28, 2003

See accompanying notes to consolidated financial statements.

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STARCRAFT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

October 3, 2004 and September 28, 2003

See accompanying notes to consolidated financial statements.

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STARCRAFT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended October 3, 2004, September 28, 2003 and September 29, 2002

See accompanying notes to consolidated financial statements.

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STARCRAFT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the years ended October 3, 2004, September 28, 2003 and September 29, 2002