##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Year ended December 31, 2006
 Commission
File No. 333-51839
 DAY INTERNATIONAL GROUP, INC.
 
      o þ
 o þ
 þ o
 þ
  o o þ
 o þ
 At the close of business on March 1, 2007:Number of shares of common stock outstanding
    
    
    24,823Aggregate market value of the Companys voting and non-voting common stock held by non-affiliates
    
    $
    0




---



##### Table of Contents



Safe Harbor Statement; Industry Data
     2




---



TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURESITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPart IVItem 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSignaturesINDEX TO EXHIBITSEX-10.20EX-21EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
 Company Background
      Company Description
  3




---



##### Table of Contents



Transfer Media
  Chemical Products
  Flexographic Products
  Products
  4




---



##### Table of Contents



® ® ® ® ® ® ® ®
        5




---



##### Table of Contents



®
 Sales and Distribution
   Raw Materials
   6




---



##### Table of Contents



Research and Development
   Competition
   International Operations
   7




---



##### Table of Contents



Environmental Matters
    Associates
  8




---



##### Table of Contents



ITEM 1A. RISK FACTORS
  Substantial Leverage and Debt Service Obligations: Our indebtedness could adversely affect our
financial health, limit our ability to grow and compete and prevent us from fulfilling our
obligations under our indebtedness.
   
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on the debt, limiting available cash for other purposes, such as funding
working capital, capital expenditures, dividends, research and development efforts and
other general corporate purposes;
    
    limit our ability to obtain additional debt financing in the future for working
capital, capital expenditures, research and development or acquisitions;
    
    increase the amount of our interest expense, because certain of our borrowings are
at variable rates of interest, which, if interest rates increase, would result in
higher interest expense;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    limit our flexibility in planning for, or reacting to, changes in our business and
the industries in which we operate;
    
    restrict us from making strategic acquisitions, introducing new technologies or
exploiting business opportunities; and
    
    place us at a competitive disadvantage compared to our competitors that have less
indebtedness.
  9




---



##### Table of Contents



Risks Associated with our Exchangeable Preferred Stock: Various restrictions in the New Credit
Agreements limit our ability to pay cash dividends.
 1 4
 Risks Associated with International Operations: Our substantial international operations subject us
to risks inherent in non-U.S. activities, including political uncertainty, import and export
limitations, exchange controls, unfavorable economic conditions outside of the United States, and
currency fluctuations.
  
    
    agreements may be difficult to enforce and receivables difficult to collect through a
foreign countrys legal system;
    
    foreign customers may have longer payment cycles;
    
    foreign countries may impose additional withholding taxes or otherwise tax our foreign
income, impose tariffs or adopt other restrictions on foreign trade or investment,
including currency exchange controls;
    
    intellectual property rights may be more difficult to enforce in foreign countries;
    
    fluctuations in exchange rates may affect product demand and may adversely affect the
profitability in U.S. dollars of products and services provided by us in foreign markets
where payment for our products and services is made in the local currency;
    
    general economic conditions in the countries in which we operate could have an adverse
effect on our earnings from operations in those countries;
    
    our business and profitability in a particular country could be affected by political or
economic repercussions on a domestic, country-specific or global level from terrorist
activities and the response to such activities;
    
    unexpected adverse changes in foreign laws or regulatory requirements may occur,
including with respect to export duties and quotas;
    
    compliance with a variety of foreign laws and regulations may be difficult;
    
    overlap of different tax structures may subject us to additional taxes; and
    
    significant increases in the value of the US dollar relative to foreign currencies could
have an adverse effect on our ability to meet interest and principal obligations on US
dollar-denominated debt.
  10




---



##### Table of Contents



We are exposed to fluctuations in foreign exchange rates, which may adversely affect our operating
results and net income.
    Interest Rate Risks : We are subject to market risk from exposure to changes in the interest rates
based on our financing activities.
  Commodity Risks: Increases in costs or reductions in supplies of specialty and commodity products
used in our manufacturing process could materially and adversely affect our operating results.
  
    
    new laws or regulations;
    
    suppliers allocations to other purchasers;
    
    interruptions in production by suppliers;
    
    changes in exchange rates; and
    
    worldwide price levels.
  11




---



##### Table of Contents



Impact of Significant Competition: The competitive pressures we face could harm our sales and gross
profit.
  Environmental Matters: Environmental and health and safety liabilities and requirements could
require us to incur material costs.
  
    
    those governing discharges to the air and water;
    
    the handling and disposal of solid and/or hazardous wastes; and
    
    the remediation of contamination associated with releases of hazardous substances.
     12




---



##### Table of Contents



Impact of Technological Change: We may be unable to respond effectively to technological changes in
our industry, which could reduce the demand for our products and adversely affect our results of
operations.
   Recently enacted changes in the securities laws and regulations are likely to increase our costs.
  Due to inherent limitations, there can be no assurance that our system of disclosure and internal
controls and procedures will be successful in preventing all errors or fraud, or in informing
management of all material information in a timely manner.
   13




---



##### Table of Contents



There are inherent uncertainties involved in estimates, judgments and assumptions used in the
preparation of financial statements in accordance with US GAAP. Any changes in estimates, judgments
and assumptions could have a material adverse effect on our business, financial position and
results of operations.
  Dependence on Key Personnel: We may be adversely affected if we lose the services of any member of
our senior management team.
  Our production facilities are subject to operating hazards, the occurrence of which could have an
adverse effect on our business, financial condition or results of operations and business
disruptions could seriously harm our future revenue and financial condition and increase our costs
and expenses.
    14




---



##### Table of Contents



We are exposed to intangible asset risk.
  Prolonged downturns of our customers industries and general economic uncertainty could adversely
affect our sales and operating profit.
  We rely on patents, trademarks, and confidentiality agreements to protect our intellectual
property. Our future performance and growth could be adversely affected if we fail to protect our
intellectual property rights.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  15




---



##### Table of Contents



ITEM 2. PROPERTIES
  Size
    
    Owned/Location
    
    (Sq. Ft.)
    
    LeasedManufacturing:Addison, Illinois
    
    
    38,600
    
    
    OwnedBatavia, Illinois
    
    
    110,000
    
    
    LeasedAsheville, North Carolina
    
    
    240,600
    
    
    OwnedHouston, Texas
    
    
    64,000
    
    
    OwnedThree Rivers, Michigan
    
    
    58,000
    
    
    OwnedWest Chester, Ohio (sold 12/31/06)
    
    
    14,500
    
    
    Closed 2/25/06Ahaus, Germany
    
    
    36,200
    
    
    OwnedChrastava, Czech Republic
    
    
    9,300
    
    
    OwnedDundee, Scotland
    
    
    184,300
    
    
    OwnedFoshan, China
    
    
    19,000
    
    
    LeasedKuala Lumpur, Malaysia
    
    
    8,300
    
    
    LeasedManchester, England
    
    
    66,000
    
    
    OwnedMelbourne, Australia
    
    
    28,700
    
    
    OwnedParana, Brazil
    
    
    10,800
    
    
    LeasedSlough, England
    
    
    55,000
    
    
    LeasedSwindon, England
    
    
    19,000
    
    
    LeasedWarehouse/Converting:Cleveland, Ohio
    
    
    37,800
    
    
    LeasedCovington, Georgia
    
    
    8,100
    
    
    LeasedEagan, Minnesota
    
    
    10,500
    
    
    LeasedHanover, Massachusetts
    
    
    20,000
    
    
    LeasedLittle Elm, Texas
    
    
    16,200
    
    
    LeasedCity of
Industry, California
    
    
    25,900
    
    
    LeasedNashville, Tennessee
    
    
    5,000
    
    
    LeasedRockland, Massachusetts
    
    
    26,700
    
    
    LeasedRochdale, England
    
    
    5,800
    
    
    LeasedLerma, Mexico
    
    
    15,900
    
    
    OwnedMoscow, Russia
    
    
    1,000
    
    
    LeasedParis, France
    
    
    23,400
    
    
    LeasedReutlingen, Germany
    
    
    19,400
    
    
    LeasedSwindon, England
    
    
    13,000
    
    
    LeasedSales Office:Dayton, Ohio*
    
    
    13,800
    
    
    LeasedAlbavilla, Italy
    
    
    400
    
    
    LeasedHong Kong, China
    
    
    8,000
    
    
    LeasedTokyo, Japan
    
    
    600
    
    
    Leased
 
 *
    
    Includes Corporate Office 16




---



##### Table of Contents



ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
  17




---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  2006
    
    2005
    
    2004
    
    2003(a)(c)
    
    (a)
    
    (a)
    
    (a) (b)
    
    2002(Dollars in thousands)Statement of Operations Data:Net sales
    
    $
    348,134
    
    
    $
    310,242
    
    
    $
    305,447
    
    
    $
    231,611
    
    
    $
    211,015Gross profit
    
    
    131,509
    
    
    
    116,984
    
    
    
    112,759
    
    
    
    87,389
    
    
    
    80,179Operating profit
    
    
    55,976
    
    
    
    47,222
    
    
    
    43,546
    
    
    
    35,344
    
    
    
    32,349Income (loss) from continuing operations before cumulative
effect of change in accounting principle
    
    
    2,092
    
    
    
    (9,884
    )
    
    
    (15,662
    )
    
    
    (12,097
    )
    
    
    2,192Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    616Net income of discontinued operations
    
    
    21,534
    
    
    
    3,694
    
    
    
    5,639
    
    
    
    5,724
    
    
    
    6,990Net income (loss)
    
    
    23,626
    
    
    
    (6,190
    )
    
    
    (10,021
    )
    
    
    (6,373
    )
    
    
    9,798Net income (loss) available to common shareholders
    
    
    23,626
    
    
    
    (6,190
    )
    
    
    (10,021
    )
    
    
    (16,041
    )
    
    
    (7,493
    )Other Financial Data:Capital expenditures
    
    $
    10,921
    
    
    $
    7,478
    
    
    $
    10,433
    
    
    $
    6,874
    
    
    $
    8,264Depreciation
    
    
    10,708
    
    
    
    10,782
    
    
    
    10,501
    
    
    
    9,309
    
    
    
    8,197Amortization
    
    
    1,876
    
    
    
    4,124
    
    
    
    4,984
    
    
    
    6,303
    
    
    
    6,332Balance Sheet Data (at end of period):Fixed assets, net of accumulated depreciation
    
    $
    72,843
    
    
    $
    57,999
    
    
    $
    61,674
    
    
    $
    61,556
    
    
    $
    60,228Total assets
    
    
    407,307
    
    
    
    385,562
    
    
    
    329,977
    
    
    
    323,930
    
    
    
    281,331Long-term and subordinated long-term debt (including current maturities)
    
    
    360,437
    
    
    
    399,307
    
    
    
    252,390
    
    
    
    279,820
    
    
    
    252,145Redeemable preferred stock
    
    
    55,342
    
    
    
    48,657
    
    
    
    169,805
    
    
    
    146,649
    
    
    
    126,646Stockholders equity (deficit)
    
    
    (113,635
    )
    
    
    (151,254
    )
    
    
    (136,018
    )
    
    
    (127,724
    )
    
    
    (119,450
    )
 
 (a)
    
    Effective July 1, 2003, the Company adopted SFAS No. 150 and recorded dividends on the
redeemable preferred stock as interest expense subsequent to adoption. Preferred stock
dividends included in interest expense were $6,685 in 2006, $24,813 in 2005, $23,156 in 2004
and $10,336 for the period from July 1, 2003 through December 31, 2003.(b)
    
    The Company acquired NDI as of November 24, 2003. The statement of operations data includes
the results of this acquisition from the date of acquisition.(c)
    
    The Company acquired Duco International as of October 12, 2006. The statement of
operations data includes the results of this acquisition from the date of acquisition. 18




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2006
    
    
    December 31, 2005
    
    
    December 31, 2004(Dollars in millions)Net sales
    
    $
    348.1
    
    
    
    100.0
    %
    
    $
    310.2
    
    
    
    100.0
    %
    
    $
    305.4
    
    
    
    100.0
    %Cost of goods sold
    
    
    216.6
    
    
    
    62.2
    
    
    
    193.2
    
    
    
    62.3
    
    
    
    192.6
    
    
    
    63.1Gross profit
    
    
    131.5
    
    
    
    37.8
    
    
    
    117.0
    
    
    
    37.7
    
    
    
    112.8
    
    
    
    36.9SG&A
    
    
    74.5
    
    
    
    21.4
    
    
    
    68.7
    
    
    
    22.1
    
    
    
    68.2
    
    
    
    22.3Management fees and expenses
    
    
    1.0
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    0.3Operating profit
    
    $
    56.0
    
    
    
    16.1
    %
    
    $
    47.3
    
    
    
    15.3
    %
    
    $
    43.6
    
    
    
    14.3
    %
 Comparison of Results of Operations
 Year Ended December 31, 2006, compared to Year Ended December 31, 2005
      19




---



##### Table of Contents



Year Ended December 31, 2005, compared to Year Ended December 31, 2004
      20




---



##### Table of Contents



American Jobs Creation Act of 2004
 Risks Associated with International Operations
  
 Interest Rate Exposure
 
 21




---



##### Table of Contents



Commodity Exposure
  Liquidity and Capital Resources
      Environmental Expenditures
   22




---



##### Table of Contents



Critical Accounting Policies
  Accounts Receivable Allowances
 Inventory Valuation
 Recoverability of Long-lived Assets
 Retirement and Other Postretirement Benefits
 23




---



##### Table of Contents



Realization of Deferred Tax Assets
  Contractual Obligations
  Less than
    
    
    2 - 3
    
    
    4 - 5
    
    
    AfterTotal
    
    
    one year
    
    
    years
    
    
    years
    
    
    five years(Dollars in thousands)Contractual Obligation:Long-term debt
    
    $
    357,896
    
    
    $
    3,599
    
    
    $
    7,199
    
    
    $
    7,199
    
    
    $
    339,899Redeemable preferred stock
    
    
    55,342
    
    
    
    
    
    
    
    55,342Capital lease obligation
    
    
    2,541
    
    
    
    808
    
    
    
    1,049
    
    
    
    331
    
    
    
    354Operating leases
    
    
    11,048
    
    
    
    3,127
    
    
    
    3,736
    
    
    
    2,065
    
    
    
    2,119Total
    
    $
    426,827
    
    
    $
    7,534
    
    
    $
    67,326
    
    
    $
    9,595
    
    
    $
    342,372
 24




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  25




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    27Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    28Consolidated Statements of Operations for the years ended December 31,
2006, 2005 and 2004
    
    
    30Consolidated Statements of Stockholders Equity (Deficit) for the
years ended December 31, 2006, 2005 and 2004
    
    
    31Consolidated Statements of Cash Flows for the years ended December 31,
2006, 2005 and 2004
    
    
    32Notes to Consolidated Financial Statements
    
    
    33
 26




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 27




---



##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
(Amounts in thousands, except share and per share amounts)
 ASSETS
    
    2006
    
    
    2005CURRENT ASSETS:Cash and cash equivalents
    
    $
    574
    
    
    $
    9,595Accounts receivable:Trade (less allowance for doubtful accounts)(Note C)
    
    
    54,047
    
    
    
    40,771Other
    
    
    1,760
    
    
    
    698Inventories (Note D)
    
    
    51,534
    
    
    
    41,119Prepaid expenses and other current assets
    
    
    7,823
    
    
    
    3,583Deferred tax assets (Note I)
    
    
    15,334
    
    
    
    18,445Assets of
discontinued operations (Note R)
    
    
    
    
    
    
    15,438Total current assets
    
    
    131,072
    
    
    
    129,649PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    4,360
    
    
    
    4,098Buildings and improvements
    
    
    28,632
    
    
    
    26,770Machinery and equipment
    
    
    103,320
    
    
    
    77,845Construction in progress
    
    
    4,081
    
    
    
    3,727140,393
    
    
    
    110,842Less accumulated depreciation
    
    
    (67,550
    )
    
    
    (54,441
    )72,843
    
    
    
    56,895OTHER ASSETS:Goodwill (Note E)
    
    
    163,294
    
    
    
    136,988Intangible assets (Note E)
    
    
    14,361
    
    
    
    17,904Deferred tax assets (Note I)
    
    
    14,427
    
    
    
    11,144Other assets
    
    
    11,310
    
    
    
    8,181Assets of discontinued operations (Note R)
    
    
    
    
    
    
    23,697203,392
    
    
    
    197,914TOTAL ASSETS
    
    $
    407,307
    
    
    $
    385,562
  28




---



##### Table of Contents



LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    2006
    
    
    2005CURRENT LIABILITIES:Accounts payable
    
    $
    20,832
    
    
    $
    6,744Accrued associate-related costs
    
    
    14,262
    
    
    
    10,988Other accrued expenses
    
    
    5,407
    
    
    
    5,824Income taxes payable
    
    
    3,447
    
    
    
    489Interest payable
    
    
    8,619
    
    
    
    2,560Current maturities of long-term debt and capital lease (Note F)
    
    
    4,407
    
    
    
    12,604Liabilities
of discontinued operations (Note R)
    
    
    
    
    
    
    6,460Total current liabilities
    
    
    56,974
    
    
    
    45,669LONG-TERM AND SUBORDINATED LONG-TERM
DEBT (Note F)
    
    
    356,030
    
    
    
    386,702DEFERRED TAX LIABILITIES (Note I)
    
    
    27,772
    
    
    
    24,168OTHER LONG-TERM LIABILITIES (Notes L, M and N)
    
    
    24,824
    
    
    
    23,213REDEEMABLE PREFERRED STOCK (Note G)
    
    
    55,342
    
    
    
    48,657Liabilities of discontinued operations (Note R)
    
    
    
    
    
    
    8,407STOCKHOLDERS EQUITY (DEFICIT) (Note L):Common Shares, $.01 per share par value, 100,000
shares authorized, 24,823 and 24,823 shares issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    1,375Contra-equity associated with the assumption of
majority shareholders bridge loan
    
    
    (68,673
    )
    
    
    (68,673
    )Accumulated deficit
    
    
    (57,765
    )
    
    
    (81,391
    )Accumulated other comprehensive income (loss) (Note H)
    
    
    11,427
    
    
    
    (1,191
    )Total stockholders equity (deficit)
    
    
    (113,635
    )
    
    
    (151,254
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    407,307
    
    
    $
    385,562
  29




---



##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In thousands)
 2006
    
    
    2005
    
    
    2004NET SALES
    
    $
    348,134
    
    
    $
    310,242
    
    
    $
    305,447COST OF GOODS SOLD
    
    
    216,625
    
    
    
    193,258
    
    
    
    192,688GROSS PROFIT
    
    
    131,509
    
    
    
    116,984
    
    
    
    112,759SELLING, GENERAL AND ADMINISTRATIVE
    
    
    74,500
    
    
    
    68,732
    
    
    
    68,181AMORTIZATION OF INTANGIBLES
    
    
    33
    
    
    
    30
    
    
    
    32MANAGEMENT FEES (Note K)
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000OPERATING PROFIT
    
    
    55,976
    
    
    
    47,222
    
    
    
    43,546OTHER EXPENSES (INCOME):Interest expense:Long-term debt (including amortization
of deferred financing costs and discount
of $1,826, $1,826, and $1,775, in 2006,
2005 and 2004 and loss on extinguishment
of debt of $8,378 in 2005, and gain on interest rate swap of $5,981)
    
    
    29,579
    
    
    
    31,222
    
    
    
    21,985Redeemable preferred stock (including
amortization of discount and issuance
costs of $127, $185, and $188 in 2006,
2005 and 2004) (Note G)
    
    
    6,685
    
    
    
    24,813
    
    
    
    23,156Gain on expired stock options
    
    
    (1,105
    )
    
    
    (6,640
    )Other expense (income)net
    
    
    8,853
    
    
    
    (2,259
    )
    
    
    (504
    )INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    11,964
    
    
    
    86
    
    
    
    (1,091
    )INCOME TAX EXPENSE (Note I)
    
    
    9,872
    
    
    
    9,970
    
    
    
    14,569INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    2,092
    
    
    
    (9,884
    )
    
    
    (15,660
    )DISCONTINUED OPERATIONS:INCOME FROM DISCONTINUED OPERATIONS
(Including net gain on disposal of $19,102 in 2006)
    
    
    21,846
    
    
    
    6,259
    
    
    
    9,470INCOME TAX EXPENSE
    
    
    312
    
    
    
    2,565
    
    
    
    3,831INCOME FROM DISCONTINUED OPERATIONS
    
    
    21,534
    
    
    
    3,694
    
    
    
    5,639NET INCOME (LOSS)
    
    $
    23,626
    
    
    $
    (6,190
    )
    
    $
    (10,021
    )
  30




---



##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Dollar amounts in thousands)
 AccumulatedOther
    
    
    Additional
    
    
    ComprehensiveCommon Shares
    
    
    Contra
    
    
    Accumulated
    
    
    Comprehensive
    
    
    paid-in
    
    
    IncomeShares
    
    
    Amount
    
    
    Equity
    
    
    Deficit
    
    
    Income (Loss)
    
    

Capital
    
    
    (Loss)December 31, 2003
    
    
    23,298
    
    
    $
    1
    
    
    $
    (68,772
    )
    
    $
    (65,180
    )
    
    
    
    
    
    
    
    
    
    $
    6,277Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,021
    )
    
    
    
    
    
    
    
    
    
    $
    (10,021
    )Stock option exercise
    
    
    25
    
    
    
    
    
    
    
    99Minimum pension liability
adjustment (net of tax of $406)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    
    
    
    
    (193
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,577
    
    
    
    
    
    
    
    1,577Unrealized loss on cash flow
hedges (net of tax of $157)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    
    
    
    
    194December 31, 2004
    
    
    23,323
    
    
    
    1
    
    
    
    (68,673
    )
    
    
    (75,201
    )
    
    
    7,855
    
    
    
    
    
    
    $
    (8,393
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,190
    )
    
    
    
    
    
    
    
    
    
    $
    (6,190
    )Class C Common Shares
issued
    
    
    1,500Minimum pension liability
adjustment (net of tax of $282)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    (190
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,696
    )
    
    
    
    
    
    
    (7,696
    )Unrealized loss on cash flow
hedges (net of tax of $741)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,160
    )
    
    
    
    
    
    
    (1,160
    )December 31, 2005
    
    
    24,823
    
    
    
    1
    
    
    
    (68,673
    )
    
    
    (81,391
    )
    
    
    (1,191
    )
    
    
    
    
    
    $
    (15,236
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,626
    
    
    
    
    
    
    
    
    
    
    $
    23,626Minimum pension liability
adjustment (net of tax of $1,046)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,504
    
    
    
    
    
    
    
    1,504Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,484
    
    
    
    
    
    
    
    9,484Stock
Options Issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,375Unrealized gain on cash flow
hedges (net of tax of $1,041)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,630
    
    
    
    
    
    
    
    1,630December 31, 2006
    
    
    24,823
    
    
    $
    1
    
    
    $
    (68,673
    )
    
    $
    (57,765
    )
    
    $
    11,427
    
    
    $
    1,375
    
    
    $
    36,244
  31




---



##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In thousands)
 2006
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    23,626
    
    
    $
    (6,190
    )
    
    $
    (10,021
    )Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:Depreciation
    
    
    10,708
    
    
    
    10,782
    
    
    
    10,501Amortization of goodwill and intangibles
    
    
    1,876
    
    
    
    4,124
    
    
    
    4,984Gain on the sale of discontinued operations
    
    
    (19,102
    )Gain on unwinding the interest rate swap
    
    
    (5,981
    )Interest expense:Redeemable preferred stock dividends
    
    
    6,685
    
    
    
    24,813
    
    
    
    23,156Loss on extinguishment of debt
    
    
    
    
    
    
    8,378Deferred income taxes
    
    
    8,268
    
    
    
    3,436
    
    
    
    9,105Foreign currency loss (gain)
    
    
    8,663
    
    
    
    (5,986
    )
    
    
    (1,690
    )Undistributed earnings of investees
    
    
    (815
    )
    
    
    (609
    )
    
    
    (325
    )Non-cash loss related to stock options
    
    
    270
    
    
    
    (6,640
    )Non-cash (gain) loss on disposal of fixed assets
    
    
    (198
    )
    
    
    (34
    )
    
    
    (28
    )Change in assets and liabilities:Accounts receivable
    
    
    (7,613
    )
    
    
    1,261
    
    
    
    (5,816
    )Inventories
    
    
    (4,750
    )
    
    
    (3,129
    )
    
    
    (146
    )Prepaid expenses and other current assets
    
    
    (2,699
    )
    
    
    (938
    )
    
    
    684Accounts payable and accrued expenses
    
    
    16,386
    
    
    
    (1,662
    )
    
    
    9,313Net cash provided by operating activities
    
    
    30,324
    
    
    
    27,606
    
    
    
    39,717CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for acquisitions
    
    
    (37,063
    )
    
    
    (379
    )
    
    
    (1,346
    )Capital expenditures
    
    
    (10,921
    )
    
    
    (7,478
    )
    
    
    (10,433
    )Proceeds from sale of discontinued operations
    
    
    50,081Proceeds from sale of property
    
    
    1,337
    
    
    
    
    
    
    
    2,085Net cash (used in) provided by investing activities
    
    
    3,434
    
    
    
    (7,857
    )
    
    
    (9,694
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    25Proceeds from issuance of debt
    
    
    
    
    
    
    390,000Redemption of preferred shares
    
    
    
    
    
    
    (149,518
    )Payment of deferred financing fees
    
    
    
    
    
    
    (10,506
    )
    
    
    (633
    )Proceeds from unwinding interest rate swap
    
    
    5,981Payments on long-term debt
    
    
    (48,511
    )
    
    
    (239,938
    )
    
    
    (30,057
    )Net (payments on) proceeds from revolving credit facility
    
    
    
    
    
    
    (1,025
    
    
    
    575Net cash used in financing activities
    
    
    (42,530
    )
    
    
    (10,987
    )
    
    
    (30,090
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (249
    )
    
    
    (164
    )
    
    
    184CASH AND CASH EQUIVALENTS:Net (decrease) increase in cash and cash equivalents
    
    
    (9,021
    )
    
    
    8,598
    
    
    
    117Cash and cash equivalents at beginning of period
    
    
    9,595
    
    
    
    843
    
    
    
    726Cash and cash equivalents at end of period
    
    $
    574
    
    
    $
    9,441
    
    
    $
    843
  32




---



##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Dollar amounts in thousands)
 A. NATURE OF OPERATIONS, BASIS OF PRESENTATION
     B. SIGNIFICANT ACCOUNTING PRINCIPLES
 Principles of Consolidation
 Cash and Cash Equivalents
 Inventories
 Property, Plant and Equipment
 Goodwill and Other Intangibles
 33




---



##### Table of Contents



Stock-Based Compensation Accounting for
Stock-Based Compensation
   2005
    
    
    2004Net lossas reported
    
    $
    (6,190
    )
    
    $
    (10,021
    )Lessstock-based compensation expense
determined using fair value based method
in SFAS No. 123
    
    
    (736
    )
    
    
    (719
    )Pro forma net loss
    
    $
    (6,926
    )
    
    $
    (10,740
    )
 Revenue Recognition
 Foreign Currency Translation
 34




---



##### Table of Contents



Concentration of Credit Risk
 Foreign Exchange Contracts
 Interest Rate Swap Agreement 
 Fair Value of Financial Instruments 1 4 1 2 1 2
 Research and Development
 35




---



##### Table of Contents



Distribution
 Advertising
 Management Estimates
 C. ACCOUNTS RECEIVABLE
  2006
    
    
    2005
    
    
    2004Balance at beginning of year
    
    $
    2,692
    
    
    $
    3,269
    
    
    $
    2,982Provision for doubtful accounts
    
    
    (388
    )
    
    
    (45
    )
    
    
    961Write-off of uncollectible accounts
    
    
    (467
    )
    
    
    (350
    )
    
    
    (808
    )Acquisitions
    
    
    22Currency translation
    
    
    721
    
    
    
    (182
    )
    
    
    134Balance at end of year
    
    $
    2,580
    
    
    $
    2,692
    
    
    $
    3,269
 D. INVENTORIES
  2006
    
    
    2005Finished goods
    
    $
    22,678
    
    
    $
    20,139Work in process
    
    
    6,160
    
    
    
    3,235Raw materials
    
    
    22,696
    
    
    
    17,745$
    51,534
    
    
    $
    41,119
 E. GOODWILL AND INTANGIBLE ASSETS
  Balance at December 31, 2003
    
    $
    137,356Acquisitions
    
    
    269Purchase adjustments
    
    
    (361
    )Foreign currency exchange
    
    
    956Balance at December 31, 2004
    
    
    138,220Acquisitions
    
    
    425Foreign currency exchange
    
    
    (1,657
    )Balance at December 31, 2005
    
    
    136,988Acquisitions
    
    
    23,092Purchase adjustments
    
    
    1,606Foreign currency exchange
    
    
    1,608Balance at December 31, 2006
    
    $
    163,294
 36




---



##### Table of Contents



Weighted-Average2006
    
    
    2005
    
    
    LifeIntangible Assets:Gross Carrying Amount:Deferred financing costs
    
    $
    10,962
    
    
    $
    11,058
    
    
    9 yearsPrinting technology
    
    
    27,946
    
    
    
    27,946
    
    
    11 yearsUnpatented technology
    
    
    8,322
    
    
    
    8,322
    
    
    20 yearsOther
    
    
    585
    
    
    
    585
    
    
    5 yearsTotal intangibles
    
    
    47,815
    
    
    
    47,911
    
    
    14 yearsAccumulated Amortization:Deferred financing costs
    
    
    (1,971
    )
    
    
    (128
    )Printing technology
    
    
    (26,494
    )
    
    
    (25,480
    )Unpatented technology
    
    
    (4,522
    )
    
    
    (4,131
    )Other
    
    
    (468
    )
    
    
    (268
    )Total accumulated amortization
    
    
    (33,455
    )
    
    
    (30,007
    )Net book value
    
    $
    14,361
    
    
    $
    17,904
  F. LONG-TERM AND SUBORDINATED LONG-TERM DEBT
  2006
    
    
    2005New Credit Agreements:First Lien Credit and Guaranty AgreementU.S. term loan
    
    $
    176,611
    
    
    
    204,488Euro term loan (face amount of 59,466)
    
    
    67,722
    
    
    
    70,407Second Lien Credit and Guaranty Agreement
Term loan
    
    
    113,563
    
    
    
    114,71291/2% Senior Subordinated Notes (face amount $8,450)
    
    
    
    
    
    
    8,584Capital lease obligation (Note P)
    
    
    2,541
    
    
    
    1,115360,437
    
    
    
    399,306LessCurrent maturities of long-term debt and capital lease
    
    
    (4,407
    )
    
    
    (12,604
    )$
    356,030
    
    
    $
    386,702
  37




---



##### Table of Contents



 1 2
 1 4
 CREDIT AGREEMENTS
       38




---



##### Table of Contents



91/2% SENIOR SUBORDINATED NOTES
 1 2
  G. REDEEMABLE PREFERRED STOCK
 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
 39




---



##### Table of Contents



121/4% SENIOR EXCHANGEABLE PREFERRED STOCK
 1 4
  1 4
 18% CONVERTIBLE CUMULATIVE PREFERRED STOCK
  1 4
 40




---



##### Table of Contents



H. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  2006
    
    
    2005Foreign currency translation adjustments
    
    $
    10,810
    
    
    $
    1,327Minimum pension liabilities
    
    
    102
    
    
    
    (1,403
    )Unrealized gain on cash flow hedges
    
    
    515
    
    
    
    (1,115
    )$
    11,427
    
    
    $
    (1,191
    )
 I. INCOME TAXES
  2006
    
    
    2005Deferred tax assets:Accounts receivable reserves
    
    $
    1,327
    
    
    $
    1,289Inventory reserves
    
    
    1,391
    
    
    
    1,108Other reserves
    
    
    2,573
    
    
    
    3,604AMT credit and Foreign Tax credit carryforward
    
    
    5,708
    
    
    
    1,201Net operating loss carryforwards
    
    
    10,887
    
    
    
    16,746Stock option compensation
    
    
    469
    
    
    
    411Pension benefits
    
    
    351
    
    
    
    1,778Unrealized foreign exchange losses
    
    
    2,042
    
    
    
    Other postretirement benefits
    
    
    5,013
    
    
    
    4,140Total deferred tax assets
    
    
    29,761
    
    
    
    29,589Deferred tax liabilities:Unrealized Foreign Exchange Gain
    
    
    
    
    
    
    (592
    )Depreciation
    
    
    (5,845
    )
    
    
    (5,591
    )Amortization
    
    
    (21,927
    )
    
    
    (17,786
    )Total deferred tax liabilities
    
    
    (27,772
    )
    
    
    (24,168
    )Net deferred tax assets
    
    $
    1,989
    
    
    $
    5,421Included in the balance sheets:Current assets
    
    $
    15,334
    
    
    $
    18,445Noncurrent assets
    
    
    14,427
    
    
    
    11,144Noncurrent liability
    
    
    (27,772
    )
    
    
    (24,168
    )Net deferred tax assets
    
    $
    1,989
    
    
    $
    5,421
  41




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Current:United States:Federal alternative minimum
    
    $
    383
    
    
    $
    
    
    
    $
    500State and local
    
    
    132
    
    
    
    293
    
    
    
    351International
    
    
    8,488
    
    
    
    7,301
    
    
    
    8,9049,003
    
    
    
    7,594
    
    
    
    9,755Deferred
    
    
    3,268
    
    
    
    3,918
    
    
    
    8,39612,271
    
    
    
    11,512
    
    
    
    18,151Allocated to discontinued operations
    
    
    (312
    )
    
    
    (2,565
    )
    
    
    (3,831
    )Allocation to other comprehensive income
    
    
    (2,087
    )
    
    
    1,023
    
    
    
    249$
    9,872
    
    
    $
    9,970
    
    
    $
    14,569
  2006
    
    
    2005
    
    
    2004Tax provision (benefit) at the United States federal statutory rate
    
    $
    4,187
    
    
    $
    29
    
    
    $
    (371
    )International tax rate differential
    
    
    (2,194
    )
    
    
    (301
    )
    
    
    (24
    )State and local taxes, net of federal
income tax effect
    
    
    37
    
    
    
    604
    
    
    
    582Foreign source income taxable in the United States
    
    
    5,183
    
    
    
    721
    
    
    
    6,421Non-deductible preferred stock dividends included in net loss
    
    
    2,340
    
    
    
    8,582
    
    
    
    7,873Non-deductible expenses
    
    
    256
    
    
    
    181
    
    
    
    187Other
    
    
    63
    
    
    
    154
    
    
    
    (99
    )$
    9,872
    
    
    $
    9,970
    
    
    $
    14,569
  J. BUSINESS SEGMENTS
  42




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Net sales:United States
    
    $
    170,971
    
    
    $
    158,805
    
    
    $
    165,152Germany
    
    
    52,539
    
    
    
    46,995
    
    
    
    42,020United Kingdom
    
    
    61,308
    
    
    
    47,081
    
    
    
    44,523Other international
    
    
    88,225
    
    
    
    76,173
    
    
    
    72,291Total International
    
    
    202,072
    
    
    
    170,249
    
    
    
    158,834Inter-area
    
    
    (24,909
    )
    
    
    (18,812
    )
    
    
    (18,539
    )$
    348,134
    
    
    $
    310,242
    
    
    $
    305,447Long-lived assets:United States
    
    $
    159,641
    
    
    $
    154,046
    
    
    $
    153,541Germany
    
    
    29,594
    
    
    
    25,544
    
    
    
    26,344United Kingdom
    
    
    49,144
    
    
    
    21,656
    
    
    
    23,784Other international
    
    
    12,119
    
    
    
    11,645
    
    
    
    11,917Total international
    
    
    90,857
    
    
    
    58,867
    
    
    
    62,045$
    250,498
    
    
    $
    212,891
    
    
    $
    215,385
  K. RELATED PARTY TRANSACTIONS
  L. STOCKHOLDERS EQUITY AND STOCK BASED COMPENSATION PLAN
 1998 Stock Option Plan
  43




---



##### Table of Contents



2006 Stock Option Plan
   Day Stock Option Plan
   2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    7,822
    
    
    $
    3,223
    
    
    
    10,165
    
    
    $
    3,223
    
    
    
    10,290
    
    
    $
    1,970Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    1,000Granted
    
    
    1,775Forfeited
    
    
    (385
    )
    
    
    1,000
    
    
    
    (2,343
    )
    
    
    1,000
    
    
    
    (100
    )
    
    
    4,030Outstanding at end of year
    
    
    9,212
    
    
    
    3,889
    
    
    
    7,822
    
    
    
    3,889
    
    
    
    10,165
    
    
    
    3,223Exercisable at end of year
    
    
    1,553
    
    
    
    3,414
    
    
    
    1,642
    
    
    
    3,414
    
    
    
    3,985
    
    
    
    1,995
 44




---



##### Table of Contents



M. RETIREMENT PLANS
     2006
    
    
    2005Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    9,841
    
    
    $
    19,490Service cost
    
    
    111
    
    
    
    366Interest cost
    
    
    59
    
    
    
    399Actuarial (gains) losses
    
    
    (41
    )
    
    
    1,264Benefits paid
    
    
    (75
    )
    
    
    (91
    )Transfers
    
    
    
    
    
    
    (10,361
    )Plan Curtailment
    
    
    (8,172
    )
    
    
    Foreign currency exchange
    
    
    (3
    )
    
    
    (1,226
    )Benefit obligation at end of year
    
    
    1,720
    
    
    
    9,841Change in plan assets:Fair value of plan assets at the beginning of the year
    
    
    
    
    
    
    7,534Actual return on plan assets
    
    
    
    
    
    
    Employer contribution
    
    
    
    
    
    
    91Benefits paid
    
    
    
    
    
    
    (91
    )Transfers
    
    
    
    
    
    
    (7,534
    )Fair value of plan assets at end of year
    
    
    0
    
    
    
    0Funded status
    
    
    (1,720
    )
    
    
    (9,841
    )Unrecognized net actuarial (gain) loss
    
    
    226
    
    
    
    2,554Additional minimum liabilityincluded
in accumulated other comprehensive income (loss)
    
    
    174
    
    
    
    (2,377
    )(Accrued) pension costs
    
    $
    (1,320
    )
    
    $
    (9,664
    )
 45




---



##### Table of Contents



2006
    
    
    2005Included in the balance sheets:Other long-term liabilities
    
    
    (1,320
    )
    
    
    (9,664
    )(Accrued) pension costs
    
    $
    (1,320
    )
    
    $
    (9,664
    )Accumulated benefit obligation
    
    $
    1,320
    
    
    $
    9,664Weighted-average assumptions:Discount rate
    
    
    4.25
    %
    
    
    4.25
    %Long-term rate of increase in compensation
    
    
    2.00
    %
    
    
    2.86
    %Long-term rate of return on plan assets
    
    
    0
    %
    
    
    0
    %Post-retirement pension increase (cost-of-living adjustment)
    
    
    1.50
    %
    
    
    1.00
    %
   2006
    
    
    2005
    
    
    2004Defined benefit plans:Service cost
    
    $
    111
    
    
    $
    366
    
    
    $
    390Interest cost
    
    
    59
    
    
    
    399
    
    
    
    787Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    (341
    )Actuarial loss recognized
    
    
    2
    
    
    
    34
    
    
    
    888Net periodic pension cost
    
    
    172
    
    
    
    799
    
    
    
    1,724Defined contribution plans
    
    
    2,837
    
    
    
    3,171
    
    
    
    3,335Total pension expense
    
    $
    3,009
    
    
    $
    3,970
    
    
    $
    5,059Weighted-average assumptions:Discount rate
    
    
    4.25
    %
    
    
    4.50
    %
    
    
    5.25
    %Compensation increase
    
    
    2.00
    %
    
    
    2.86
    %
    
    
    3.00
    %Long-term rate of return on plan assets
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    5.00
    %
  N. OTHER POSTRETIREMENT BENEFITS
   46




---



##### Table of Contents



2006
    
    
    2005Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    15,988
    
    
    $
    15,744Service cost
    
    
    1,250
    
    
    
    1,321Interest cost
    
    
    947
    
    
    
    1,013Participant contributions
    
    
    322
    
    
    
    388Actuarial (gains) losses
    
    
    (3,908
    )
    
    
    (1,714
    )Curtailment
    
    
    (793
    )Benefits paid
    
    
    (652
    )
    
    
    (764
    )Benefit obligation at end of year
    
    
    13,154
    
    
    
    15,988Unrecognized prior service gain
    
    
    2,578
    
    
    
    3,746Unrecognized net actuarial gain (loss)
    
    
    667
    
    
    
    (4,183
    )Accrued postretirement benefit obligation
    
    $
    16,399
    
    
    $
    15,551Discount rate used in determining the benefit obligation at year end
    
    
    5.95
    %
    
    
    6.0
    %
    2006
    
    
    2005
    
    
    2004Service cost
    
    $
    1,250
    
    
    $
    1,321
    
    
    $
    1,101Interest cost
    
    
    947
    
    
    
    1,013
    
    
    
    849Prior service gain recognized
    
    
    (786
    )
    
    
    (834
    )
    
    
    (641
    )Actuarial loss recognized
    
    
    149
    
    
    
    449
    
    
    
    234Net periodic postretirement benefit costs
    
    $
    1,560
    
    
    $
    1,949
    
    
    $
    1,543Discount rate used in determining the interest cost
    
    
    6.0
    %
    
    
    5.75
    %
    
    
    6.25
    %
 Medicare Prescription Drug, Improvement and
Modernization Act of 2003
 47




---



##### Table of Contents



O. COMMITMENTS AND CONTINGENCIES
 LEASE COMMITMENTS
  2006
    
    
    2005Land and buildings
    
    $
    1,786
    
    
    $
    1,596Machinery & Equipment
    
    
    5,445Accumulated depreciation
    
    
    (2,797
    )
    
    
    (494
    )$
    4,434
    
    
    $
    1,102
  Capital
    
    
    OperatingLease
    
    
    Leases2007
    
    $
    956
    
    
    $
    3,1282008
    
    
    744
    
    
    
    2,0792009
    
    
    447
    
    
    
    1,6572010
    
    
    196
    
    
    
    1,1652011
    
    
    196
    
    
    
    900Thereafter
    
    
    376
    
    
    
    2,119$
    2,915
    
    
    $
    11,048Amount representing interest
    
    
    (374
    )Present value of minimum lease payments (including current portion of $807)
    
    $
    2,541
 CONTINGENCIES
  P. SUPPLEMENTAL CASH FLOW DISCLOSURES
 2006
    
    
    2005
    
    
    2004CASH PAID FOR:Income taxes
    
    $
    9,194
    
    
    $
    8,335
    
    
    $
    9,938Interest
    
    $
    28,361
    
    
    $
    17,616
    
    
    $
    20,230
 48




---



##### Table of Contents



Q. RECENTLY ISSUED ACCOUNTING STANDARDS
    R. DISCONTINUED OPERATIONS
  49




---



##### Table of Contents



2006
    
    2005
    
    2004Net sales
    
    $
    25,448
    
    
    $
    45,473
    
    
    $
    49,034Pre-tax income
    
    
    26,055
    
    
    
    6,612
    
    
    
    7,182
  December 31, 2005Cash
    
    $
    28Accounts receivable
    
    
    4,420Inventories
    
    
    8,000Other current assets
    
    
    80Total
current assets
    
    
    12,528Property, plant and equipment
    
    
    9,948Intangible assets (net of amortization)
    
    
    8,487Other long term assets
    
    
    5,050Total
long term assets
    
    
    23,485TOTAL ASSETS
    
    $
    36,013Accounts payable
    
    $
    1,080Other current liabilities
    
    
    3,290Total
current liabilities
    
    
    4,370Other long term liabilities
    
    
    8,407TOTAL LIABILITIES
    
    $
    12,777
  2006
    
    2005
    
    2004Net sales
    
    $
    3,072
    
    
    $
    7,544
    
    
    $
    8,225Pre-tax income (loss)
    
    
    (4,209
    )
    
    
    (353
    )
    
    
    2,288
 50




---



##### Table of Contents



December 31, 2005Cash
    
    $
    (181
    )Accounts receivable
    
    
    1,035Inventories
    
    
    2,031Other current assets
    
    
    25Total current assets
    
    
    2,910Property, plant and equipment
    
    
    134Intangible assets (net of amortization)
    
    
    Other long term assets
    
    
    78Total long term assets
    
    
    212TOTAL ASSETS
    
    $
    3,122Accounts payable
    
    $
    246Other current liabilities
    
    
    1,844Other long term liabilities
    
    
    TOTAL LIABILITIES
    
    $
    2,090
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
  
 ITEM 9A. CONTROLS AND PROCEDURES
   
 ITEM 9B. OTHER INFORMATION
  
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  51




---



##### Table of Contents



Name
    
    Age
    
    PositionWilliam C. Ferguson
    
    
    76
    
    
    Chairman of the BoardSean W. Brophy
    
    
    38
    
    
    DirectorCarl J. Crosetto
    
    
    58
    
    
    DirectorMatthew C. Kaufman
    
    
    36
    
    
    DirectorPhilip Raygorodetsky
    
    
    33
    
    
    DirectorDuncan P. Varty
    
    
    62
    
    
    DirectorChristopher A. White
    
    
    41
    
    
    DirectorDennis R. Wolters
    
    
    60
    
    
    Chief Executive Officer, President and Director
 Name
    
    Age
    
    PositionDwaine R. Brooks
    
    
    64
    
    
    Vice President, Human ResourcesDavid B. Freimuth
    
    
    54
    
    
    Group Vice President and General Manager, Textiles and Flexographic Products since January 2004;
prior to that Senior Vice President, General Manager, Textile ProductsDermot J. Healy
    
    
    52
    
    
    Managing Director, EuropeThomas J. Koenig
    
    
    46
    
    
    Vice President and Chief Financial Officer and Assistant SecretaryStephen P. Noe
    
    
    50
    
    
    Group Vice President and General Manager, Image Transfer Group since November 2003; prior to that
Senior Vice President, General Manager, Transfer Media since July 2001; prior to that Senior Vice
President, Marketing & Sales, Transfer Media since January 2001Brent A. Stephen
    
    
    55
    
    
    Managing Director, Pacific Rim since January 2003; prior to that Vice President and Sales
Manager, Australia
   52




---



##### Table of Contents



1 4
  Audit Committee Financial Expert
  53




---



##### Table of Contents



Code of Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
  Elements of Executive Compensation
  Base Salary.
 Annual Incentive Bonus Plan.
   54




---



##### Table of Contents



Equity Awards.
    Other Compensation.
 Option Grant Practices
  Role of Executive Officers in Determining Executive Compensation
  55




---



##### Table of Contents



Change in Control Payments
  Compensation Committee Report
  William C. Ferguson, Chairman
    
    Philip RaygorodetskySean W. Brophy
    
    Christopher A. WhiteCarl J. Crosetto
    
    Dennis R. WoltersMatthew C. Kaufman
    
    Duncan P. Varty
 Summary Compensation Table
  Non-EquityOption
    
    Incentive Plan
    
    All OtherSalary
    
    Awards(1)
    
    Compensation(2)
    
    Compensation
    
    TotalName and Principal Position
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Dennis R. Wolters
    
    
    2006
    
    
    
    400,000
    
    
    
    549,945
    
    
    
    226,875
    
    
    
    61,955
    (3)
    
    
    1,238,775President and Chief
Executive OfficerDavid B. Freimuth
    
    
    2006
    
    
    
    229,500
    
    
    
    162,229
    
    
    
    63,934
    
    
    
    29,918
    (4)
    
    
    485,581Group Vice President and
General Manager, Textiles
and Flexographic ProductsDermot J. Healy
    
    
    2006
    
    
    
    263,719
    
    
    
    74,093
    
    
    
    82,378
    
    
    
    77,402
    (5)
    
    
    497,592Managing Director, EuropeThomas J. Koenig
    
    
    2006
    
    
    
    210,000
    
    
    
    46,578
    
    
    
    55,238
    
    
    
    26,326
    (6)
    
    
    338,142Vice President and Chief
Financial OfficerStephen P. Noe
    
    
    2006
    
    
    
    247,750
    
    
    
    48,924
    
    
    
    69,949
    
    
    
    28,602
    (7)
    
    
    395,225Group Vice President and
General Manager, Image
Transfer
 56




---



##### Table of Contents



Note:
    
    All amounts shown for non-U.S. named executive officers were
paid in U.K. pounds and converted to U.S. dollars at the
average exchange rate for the year.(1)
    
    Represents the dollar amount recognized for financial statement reporting purposes for the
fiscal year with respect to option and restricted stock unit (RSU) awards in accordance with
the modified prospective application method under SFAS No. 123(R) without regard to estimates
for forfeitures related to service-based vesting conditions. During 2006, 385 options and
RSUs with a weighted average exercise price of $1,161 were cancelled or expired. For
information regarding our valuation of option and RSU awards, see Note L to our consolidated
financial statements in Item 8.(2)
    
    Represents cash incentive awards earned under our Executive  Pay for Performance Plan.(3)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($14,050), company
contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($26,650), premiums for group term life insurance ($8,161), automobile allowance ($6,673), tax
and financial planning ($4,147), and club dues ($2,004).(4)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($14,050), company
contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($6,939), premiums for group term life insurance ($1,402), and automobile allowance ($7,527).(5)
    
    Represents company contributions to a U.K. individual retirement plan ($58,973), and
automobile allowance ($18,429).(6)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($14,050),
company contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($3,646), premiums for group term life insurance ($749), and automobile allowance ($7,881).(7)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($14,050),
company contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($8,850), premiums for group term life insurance ($1,542), and automobile allowance ($4,160). Employment Agreements
  57




---



##### Table of Contents



Grants of Plan-Based Awards
  All OtherOptionAwards:
    
    
    
    
    
    GrantEstimated Future Payouts Under
    
    Number of
    
    Exercise or
    
    Date FairNon-Equity
    
    Securities
    
    Base Price of
    
    Value ofIncentive Plan Awards(1)
    
    Underlying
    
    Option
    
    OptionGrant
    
    Threshold
    
    Target
    
    Maximum
    
    Options
    
    Awards
    
    Awards(4)Name
    
    Date
    
    ($)
    
    ($)
    
    ($)
    
    (#)
    
    ($/sh)
    
    ($)Dennis R. Wolters
    
    
    
    
    
    
    82,500
    
    
    
    330,000
    
    
    
    660,0006/26/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,200
    (2)
    
    
    1,000
    
    
    
    899,5228/9/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280
    (3)
    
    
    2,500
    
    
    
    404,911David B. Freimuth
    
    
    
    
    
    
    29,525
    
    
    
    118,100
    
    
    
    236,2006/26/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    (2)
    
    
    1,000
    
    
    
    149,9206/26/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    (2)
    
    
    1,200
    
    
    
    82,4568/9/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310
    (3)
    
    
    2,500
    
    
    
    136,676Dermot J. Healy
    
    
    
    
    
    
    
    
    
    
    [£44,700]6/26/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    (2)
    
    
    1,200
    
    
    
    149,9208/9/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    (3)
    
    
    2,500
    
    
    
    89,952Thomas J. Koenig
    
    
    
    
    
    
    17,850
    
    
    
    71,400
    
    
    
    142,8008/9/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185
    (3)
    
    
    2,500
    
    
    
    138,676Stephen P. Noe
    
    
    
    
    
    
    29,813
    
    
    
    119,250
    
    
    
    238,5008/9/06
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215
    (3)
    
    
    2,500
    
    
    
    161,164
 
 (1)
    
    Awards under the Executive  Pay for Performance Plan. Threshold, target and maximum
represent 25%, 100% and 200% of target plan award, respectively.(2)
    
    Restricted stock units awarded under the 2006 Day International Group, Inc. Restricted Stock
Unit Plan.(3)
    
    Stock options granted under the Day International Group, Inc. 2006 Stock Option Plan.(4)
    
    Represents the grant date fair market value of each option award computed in accordance with
SFAS No. 123(R), including the incremental fair value as of June 26, 2006 of the RSUs that
replaced outstanding options under the Day Option Plan. Executive  Pay for Performance Plan Awards
  58




---



##### Table of Contents



Restricted Stock Unit Awards
   Stock Option Grants
  Outstanding Equity Awards at Fiscal 2006 Year-End
  59




---



##### Table of Contents



Option AwardsNumber of
    
    Number ofSecurities
    
    SecuritiesUnderlying
    
    UnderlyingUnexercised
    
    UnexercisedOptions or RSUs
    
    Options or RSUs
    
    Option Exercise or(#)
    
    (#)
    
    Base Price
    
    Option or RSUName
    
    Exercisable
    
    Unexercisable
    
    ($)
    
    Expiration DateDennis R. Wolters
    
    
    450
    
    
    
    2,400
    (1)
    
    
    4,030
    
    
    
    1/16/07
    
    
    
    200
    (2)
    
    
    4,030
    
    
    
    5/29/12
    
    
    
    1,200
    (3)
    
    
    1,000
    
    
    
    6/26/13
    
    
    
    280
    (4)
    
    
    2,500
    
    
    
    8/9/16David B. Freimuth
    
    
    124
    
    
    
    656
    (1)
    
    
    4,030
    
    
    
    1/16/07
    
    
    
    75
    (2)
    
    
    4,030
    
    
    
    5/29/12
    
    
    
    200
    (3)
    
    
    1,000
    
    
    
    6/26/13
    
    
    
    110
    (3)
    
    
    1,200
    
    
    
    6/26/13
    
    
    
    310
    (4)
    
    
    2,500
    
    
    
    8/9/16Dermot J. Healy
    
    
    53
    
    
    
    282
    (1)
    
    
    4,030
    
    
    
    1/16/07
    
    
    
    40
    (2)
    
    
    4,030
    
    
    
    5/29/12
    
    
    
    200
    (3)
    
    
    1,200
    
    
    
    6/26/13
    
    
    
    120
    (4)
    
    
    2,500
    
    
    
    8/9/16Thomas J. Koenig
    
    
    9
    
    
    
    51
    (1)
    
    
    4,030
    
    
    
    1/16/0760
    
    
    
    135
    (2)
    
    
    4,030
    
    
    
    5/29/12
    
    
    
    185
    (4)
    
    
    2,500
    
    
    
    8/9/16Stephen P. Noe
    
    
    100
    
    
    
    200
    (2)
    
    
    4,030
    
    
    
    5/29/12
    
    
    
    215
    (4)
    
    
    2,500
    
    
    
    8/9/16
 
 (1)
    
    Performance options, super performance options and exit options granted under the 1998 Stock
Option Plan.(2)
    
    Performance options granted under the 1998 Stock Option Plan. Performance options vest and
become exercisable in annual installments based upon achievement of annual EBITDA targets.(3)
    
    Restricted stock units which vest on a liquidity event occurring prior to June 26, 2013.(4)
    
    Options vest in four equal annual installments on the first four anniversaries of the grant
date. The grant date was August 9, 2006. Individual Retirement Plan
  Nonqualified Deferred Compensation
 60




---



##### Table of Contents



Executive
    
    
    
    
    
    
    
    
    
    
    
    
    
    AggregateContributions in
    
    Registrant
    
    Aggregate
    
    Aggregate
    
    Balance at LastLast Fiscal
    
    Contributions in
    
    Earnings in Last
    
    Withdraws/
    
    Fiscal YearYear(1)
    
    Last Fiscal Year(1)
    
    Fiscal Year
    
    Distributions
    
    End(2)Name
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Dennis R. Wolters
    
    
    12,000
    
    
    
    26,650
    
    
    
    16,819
    
    
    
    
    
    
    
    182,709David B. Freimuth
    
    
    29,343
    
    
    
    6,939
    
    
    
    11,459
    
    
    
    
    
    
    
    201,398Dermot J. Healy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thomas J. Koenig
    
    
    6,300
    
    
    
    3,646
    
    
    
    3,140
    
    
    
    
    
    
    
    53,316Stephen P. Noe
    
    
    24,775
    
    
    
    8,850
    
    
    
    9,698
    
    
    
    
    
    
    
    189,634
 
 (1)
    
    All amounts in these columns are reported as compensation for 2006 in the Summary
Compensation Table.(2)
    
    The following amounts in this column were reported as compensation to the named executive
officer in the Summary Compensation Table for previous years: Mr. Wolters $15,848, Mr.
Freimuth $2,575, Mr. Koenig $1,786 and Mr. Noe $5,246.  Potential Payments Upon Termination or Change in Control
  Employment Agreements.
 61




---



##### Table of Contents



Aggregate Cash PaymentsUpon TerminationName
    
    Without Cause or DisabilityDennis R. Wolters
    
    $
    730,000David B. Freimuth
    
    
    374,600Dermot J. Healy
    
    
    187,800Thomas J. Koenig
    
    
    281,400Stephen P. Noe
    
    
    367,000
   Equity Awards.
 Aggregate Value of AcceleratedName
    
    Option and RSU Awards(1)Dennis R. Wolters
    
    $
    7,250,849David B. Freimuth
    
    
    1,965,289Dermot J. Healy
    
    
    895,476Thomas J. Koenig
    
    
    Stephen P. Noe
    
    
    
 62




---



##### Table of Contents



(1)
    
    Based on the spread between the exercise price or base price of the option or RSU and the
fair market value of our common stock on December 31, 2006 as determined by our Board of
Directors. Nonqualified Deferred Compensation and Retirement Plans.
 Director Compensation for 2006
  Fees Earned or
    
    OptionPaid in Cash
    
    Awards(1)
    
    TotalName
    
    ($)
    
    ($)
    
    ($)William C. Ferguson
    
    
    100,000
    
    
    
    5,856
    
    
    
    105,856Sean W. Brophy
    
    
    25,000
    
    
    
    
    
    
    
    25,000Carl J. Crosetto
    
    
    
    
    
    
    
    
    
    
    Matthew C. Kaufman
    
    
    
    
    
    
    
    
    
    
    Philip Raygorodetsky
    
    
    
    
    
    
    
    
    
    
    Christopher A. White
    
    
    
    
    
    
    
    
    
    
    Duncan P. Varty
    
    
    25,000
    
    
    
    1,952
    
    
    
    26,952
 
 (1)
    
    Represents the dollar amount recognized for financial statement reporting purposes for the
fiscal year with respect to option awards in accordance with the modified prospective
application method under SFAS No. 123(R) without regard to estimates for forfeitures related
to service-based vesting conditions. For information regarding our valuation of option
awards, see Note L to our consolidated financial statements in Item 8.The grant date fair value of each option award computed in accordance with SFAS No. 123(R) for
each non-employee director is as follows: Mr. Ferguson $56,220 and Mr. Varty $18,740.The aggregate number of options outstanding for each non-employee director at December 31, 2006
was as follows: Mr. Ferguson 75 and Mr. Varty 25. 63




---



##### Table of Contents



Director Compensation Arrangements
    Compensation Committee Interlocks and Insider Participation
  64




---



##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 Equity Compensation Plan Information
 Number ofsecuritiesremainingavailable forNumber of
    
    
    
    
    
    
    future issuancesecurities to be
    
    
    
    
    
    
    under equityissued upon
    
    
    Weighted-average
    
    
    compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected inand rights
    
    
    and rights
    
    
    column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    
    
    
    $
    
    
    
    
    Equity compensation plans not approved by security holders (1)
    
    
    9,434
    
    
    
    3,742
    
    
    
    448Total
    
    
    9,434
    
    
    $
    3,742
    
    
    
    448
 
 (1)
    
    These plans consist of the Day Stock Option Plan, the 1998 Stock Option Plan and warrants
issued to individual directors as compensation for services performed. These plans were approved by
shareholders holding a majority of the Class A Voting Common Stock through their representation on
the Board of Directors. See Note L to the Consolidated Financial Statements for detailed
descriptions of these plans. Security Ownership
  65




---



##### Table of Contents



No. of Sharesof Stock
    
    
    % ofName of Beneficial Owner
    
    (a)(b)
    
    
    StockCommon Stock:Dennis R. Wolters
    
    
    808
    
    
    
    3.0David B. Freimuth
    
    
    262
    
    
    
    1.0Dermot J. Healy
    
    
    78
    
    
    
    0.3Thomas J. Koenig
    
    
    107
    
    
    
    0.4Stephen P. Noe
    
    
    144
    
    
    
    0.5Sean W. Brophy
    
    
    
    
    
    
    Carl J. Crosetto (c)
    
    
    74
    
    
    
    0.3William C. Ferguson
    
    
    148
    
    
    
    0.6Matthew C. Kaufman (c)
    
    
    
    
    
    
    Philip Raygorodetsky (c)
    
    
    
    
    
    
    Christopher A. White (d)
    
    
    
    
    
    
    Duncan P. Varty
    
    
    5
    
    
    
    0.0All Directors and Executive Officers as a Group (14 persons)
    
    
    1,712
    
    
    
    6.4Unione Italiana
    
    
    195
    
    
    
    0.7Towerbrook
    
    
    974
    
    
    
    3.0Cowen Investments I, LLC (d)
    
    
    3,865
    
    
    
    14.51221 Avenue of the Americas
New York, NY 10020Greenwich IV, LLC (c)
    
    
    19,156
    
    
    
    72.0GSC Partners
500 Campus Drive, Suite 220
Florham Park, NJ 07932
 
 (a)
    
    Beneficial ownership is determined in accordance with the rules of the Commission and
includes general voting power and/or investment power with respect to securities. The table
includes shares of Common Stock subject to options and warrants currently exercisable or
exercisable within 60 days of the date of this report. As of the date of this report, the
number of such shares is 1,574.3. Exercisable options included in the number of shares above
include 508 shares for Mr. Wolters, 162 shares for Mr. Freimuth, 78 shares for Mr. Healy, 93
shares for Mr. Koenig, 145 shares for Mr. Noe and 1,050 shares for all directors and executive
officers as a group. The shares listed for Mr. Crosetto and Mr. Ferguson represent vested
warrants to purchase shares of Common Stock.(b)
    
    Cowen Investments owns shares of Class B Non-Voting Common Stock. Class C Non Voting Shares
are owned by Quantum Industrial Partners, SFM Domestic Investments, TRV Employees Fund, The
Travelers Insurance Company, The Travelers Life & Annuity Company, Unione Italiana,
Towerbrook, Cowen Investments and GSC Partners. All other shares are shares of Class A Voting
Common Stock.(c)
    
    Greenwich IV, LLC is an affiliate of GSC Group. Messrs. Crosetto, Kaufman and
Raygorodetsky may be deemed to have indirect beneficial ownership of the 19,156 shares of
Common Stock beneficially owned by Greenwich IV, LLC by virtue of their affiliation with GSC
Group. Each of Messrs. Crosetto, Kaufman and Raygorodetsky disclaim any such beneficial
ownership. 66




---



##### Table of Contents



(d)
    
    Mr. White may be deemed to have indirect beneficial ownership of the 3,865 shares of Common
Stock by virtue of his affiliation with Cowen Investments. Mr. White disclaims any such
beneficial ownership. Stockholders Agreement
    
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  Review and Approval of Transactions with Related Persons
 67




---



##### Table of Contents



Director Independence
   
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Fees
  2006
    
    
    2005Audit fees
    
    $
    494
    
    
    $
    527Audit-related fees
    
    
    33
    
    
    
    3Tax fees
    
    
    316
    
    
    
    435Total
    
    $
    843
    
    
    $
    965
 68




---



##### Table of Contents



Policy on Pre-Approval of Services of the Independent Auditor
  
 Part IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1) Financial Statements
  Day International Group, Inc.
 69




---



##### Table of Contents



(a)(2) Financial Statement Schedules
  (b) Exhibits
  70




---



##### Table of Contents



Signatures
  Day International Group, Inc.
(Registrant)Date: March 30, 2007
    
    By:
    
    /s/ Dennis R WoltersDennis R. WoltersPresident and Chief Executive Officer
  Date: March 30, 2007
    
    By:
    
    /s/ Dennis R WoltersDennis R. WoltersPresident, Chief Executive Officer andDirector (Principal Executive Officer)Date: March 30, 2007
    
    By:
    
    /s/ Thomas J. KoenigThomas J. KoenigVice President and Chief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer)Date: March 30, 2007
    
    By:
    
    /s/ William C. FergusonWilliam C. FergusonDirectorDate: March 30, 2007
    
    By:
    
    /s/ Sean W. BrophySean W. BrophyDirector
 71




---



##### Table of Contents



Date: March 30, 2007
    
    By:
    
    /s/ Carl J. CrosettoCarl J. CrosettoDirectorDate: March 30, 2007
    
    By:
    
    /s/ Matthew C. KaufmanMatthew C. KaufmanDirectorDate: March 30, 2007
    
    By:
    
    /s/ Philip RaygorodetskyPhilip RaygorodetskyDirectorDate: March 30, 2007
    
    By:
    
    /s/ Christopher A. WhiteChristopher A. WhiteDirectorDate: March 30, 2007
    
    By:
    
    /s/ Duncan P. VartyDuncan P. VartyDirector
 72




---



##### Table of Contents



INDEX TO EXHIBITS
 (1) Underwriting Agreements
 1.1
    
    Purchase Agreement, dated as of March 13, 1998 between the Company and Societe
Generale Securities Corporation (incorporated by reference to Exhibit 1.1 to the
Amendment No. 1 to Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No.
333-51839))
 (3) Articles of Incorporation and By-Laws
 3.1
    
    Certificate of Incorporation of Day International Group, Inc. (Group), as
amended (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for
the year ended December 31, 2003)3.2
    
    Certificate of Amendment to the Certificate of Incorporation of Day
International Group, Inc., dated as of December 2, 2005 (incorporated by reference to
Exhibit 3.1 to Form 8-K dated December 8, 2005)3.3
    
    By-Laws of Group, as amended (incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K for the year ended December 31, 2003)
 (4) Instruments Defining Rights of Security Holders, including Indentures
 4.1
    
    Registration Rights Agreement, dated as of March 18, 1998, by and between the
Company and Societe Generale Securities Corporation (incorporated by reference to
Exhibit 4.4 to the Amendment No. 1 to Registration Statement on Form S-4/A filed on May
8, 1998 (Reg. No. 333-51839))4.2
    
    Certificate of Designation, dated March 18, 1998, of Powers, Preferences and
Relative, Participating, Optional and other Special Rights of 121/4% Senior Exchangeable
Preferred Stock due 2010 and Qualifications, Limitations and Restrictions thereof (the
Exchangeable Preferred Stock) (incorporated by reference to Exhibit 4.5.1 to the
Amendment No. 1 to Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No.
333-51839))4.3
    
    Form of Global Certificate for the Exchangeable Preferred Stock (incorporated
by reference to Exhibit 4.5.2 to the Amendment No. 1 to Registration Statement on Form
S-4/A filed on May 8, 1998 (Reg. No. 333-51839))4.4
    
    Certificate of Amendment to the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of the
Exchangeable Preferred Stock and Qualifications, Limitations and Restrictions Thereof,
dated as of December 2, 2005 (incorporated by reference to Exhibit 3.3 to Form 8-K
dated December 8, 2005)4.5
    
    Certificate of Amendment to the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of the
Exchangeable Preferred Stock and Qualifications, Limitations and Restrictions Thereof,
dated as of May 10, 2006 (incorporated by reference to Exhibit 3.1 to Form 8-K dated
May 11, 2006)
 73




---



##### Table of Contents



4.6
    
    Amended and Restated Stockholders Agreement, dated as of October 19, 1999,
among the Company and certain of its stockholders (incorporated by reference to Exhibit
4.5 to the Form 8-K dated October 28, 1999)4.7
    
    Amendment to the Amended and Restated Stockholders Agreement, dated as of
December 2, 2005, among Day International Group, Inc. and the stockholders thereto
(incorporated by reference to Exhibit 4.2 to Form 8-K dated December 8, 2005)
 (10) Material Contracts
 10.1
    
    Credit and Guaranty Agreement, dated as of December 5, 2005, among Day
International Group, Inc., Day International, Inc., certain subsidiaries of Day
International, Inc., various lenders party thereto and Goldman Sachs Credit Partners
L.P. as administrative and collateral agent (incorporated by reference to Exhibit 10.1
to Form 8-K dated December 8, 2005)10.2
    
    Deed of Trust, dated January 15, 1998, with respect to the North Carolina
property (incorporated by reference to Exhibit 4.12 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839)); as
amended October 19, 1999 (incorporated by reference to Exhibit 10.6.1 to the Form 8-K
dated September 22, 2003); as further amended June 29, 2001 (incorporated by reference
to Exhibit 10.6.2 to the Form 8-K dated September 22, 2003); and as modified September
16, 2003 (incorporated by reference to Exhibit 10.6.3 to the Form 8-K dated September
22, 2003) as modified December 5, 2005.10.3
    
    Mortgage and Security Agreement Dated January 16, 1998, with respect to the
Michigan Property (incorporated by reference to Exhibit 4.13 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839)); as
amended October 19, 1999 (incorporated by reference to Exhibit 10.7.1 to the Form 8-K
dated September 22, 2003); as further amended June 29, 2001 (incorporated by reference
to Exhibit 10.7.2 to the Form 8-K dated September 22, 2003); and as modified September
16, 2003 (incorporated by reference to Exhibit 10.7.3 to the Form 8-K dated September
22, 2003) as modified10.4
    
    Mortgage Agreement, dated October 19, 1999, with respect to the South Carolina
property (incorporated by reference to Exhibit 10.5.1 to the Form 8-K dated September
22, 2003); as amended June 29, 2001 (incorporated by reference to Exhibit 10.5.2 to the
Form 8-K dated September 22, 2003); and as modified September 16, 2003 (incorporated by
reference to Exhibit 10.5.3 to the Form 8-K dated September 22, 2003)10.5
    
    Deed of Trust, dated October 19, 1999, with respect to the Texas property
(incorporated by reference to Exhibit 10.8.1 to the Form 8-K dated September 22, 2003);
as modified September 16, 2003 (incorporated by reference to Exhibit 10.8.2 to the Form
8-K dated September 22, 2003) as modified10.6
    
    Mortgage Agreement, dated October 19, 1999, with respect to the Illinois
property (incorporated by reference to Exhibit 10.9.1 to the Form 8-K dated September
22, 2003); as amended June 29, 2001 (incorporated by reference to Exhibit 10.9.2 to the
Form 8-K dated September 22, 2003); and as modified September 16, 2003 (incorporated by
reference to Exhibit 10.9.3 to the Form 8-K dated September 22, 2003) as modified10.9
    
    Stock Purchase Agreement, dated as of December 18, 1997, by and among Greenwich
IV, LLC, GSD Acquisition Corp. and the Stockholders of Day International Group, Inc.
 74




---



##### Table of Contents



parties thereto (incorporated by reference to Exhibit 2.1 to the Form 8-K dated
January 16, 1998); as amended on January 16, 1998 (incorporated by reference to
Exhibit 2.2 to the Form 8-K dated January 16, 1998)
 10.10*
    
    Consulting Agreement between the Company and GSC Partners (incorporated by reference
to Exhibit 10.5.1 to the Amendment No. 2 to Registration Statement on Form S-4/A filed
on June 22, 1998 (Reg. No. 333-51839))10.11*
    
    Indemnification Agreement between the Company and GSC Partners (incorporated by
reference to Exhibit 10.5.2 to the Amendment No. 2 to Registration Statement on Form
S-4/A filed on June 22, 1998 (Reg. No. 333-51839))10.12*
    
    Consulting Agreement between the Company and SG Capital Partners Limited
(incorporated by reference to Exhibit 10.5.3 to the Amendment No. 2 to Registration
Statement on Form S-4/A filed on June 22, 1998 (Reg. No. 333-51839))10.13*
    
    Indemnification Agreement between the Company and SG Capital Partners Limited
(incorporated by reference to Exhibit 10.5.4 to the Amendment No. 2 to Registration
Statement on Form S-4/A filed on June 22, 1998 (Reg. No. 333-51839))10.14
    
    Purchase Agreement between Armstrong World Industries, Inc. and Armstrong
World Industries GmbH, as Sellers and Day International, Inc., as Buyer (incorporated
by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1999)10.15
    
    Purchase Agreement by and among Day International Group, Inc., Day
International, Inc., Day Germany Holdings GmbH, Saurer AG, Saurer GmbH & Co. KG,
Aktiengesellschaft Adolph Saurer and Accotex Inc. (formerly ATPG International, Inc.),
dated as of May 9, 2006 (incorporated by reference to Exhibit 10.1 to Form 8-K dated
October 17, 2006)10.16
    
    Purchase Agreement by and among Day International Group, Inc. and Duco
International dated October 11, 2006 (incorporated by reference to Exhibit 10.1 to Form
8-K dated October 17, 2006)10.17*
    
    Stock warrant to purchase shares of Common Stock of the Company, dated as of January
18, 1998, issued to Mr. William C. Ferguson (incorporated by reference to Exhibit 10.30
to the Annual Report on Form 10-K for the year ended December 31, 1998)10.18*
    
    Stock warrant to purchase shares of Common Stock of the Company, dated as of January
27, 2000, issued to Mr. William C. Ferguson (incorporated by reference to Exhibit 10.37
to the Annual Report on Form 10-K for the year ended December 31, 2000)10.19*
    
    Stock warrant to purchase shares of Common Stock of the Company, dated as of January
18, 2000, issued to Mr. Carl J. Crosetto (incorporated by reference to Exhibit 10.38 to
the Annual Report on Form 10-K for the year ended December 31, 2000)
 75




---



##### Table of Contents



10.18*
    
    Employment Agreement, dated January 16, 1998, between the Guarantor and Mr. Dennis R.
Wolters (incorporated by reference to Exhibit 10.4 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839))10.19*
    
    Employment Agreement, dated January 16, 1998, between Day International, Inc. and Mr.
David B. Freimuth (incorporated by reference to Exhibit 10.5 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839))10.20*
    
    Form of Executive Employment Agreement between Day International, Inc. and each of
Dermot J. Healy (dated September 9, 2005), Thomas J. Koenig (dated August 31, 2005) and
Stephen P. Noe (dated October 27, 2005)10.21*
    
    Day International Group, Inc. Stock Option Plan, dated as of July 6, 1995
(incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K for the
period ended December 31, 1995); as amended on September 19, 1996 (incorporated by
reference to Exhibit 10.17 to the Annual Report on Form 10-K for the year ended
December 31, 1996); and as further amended on January 16, 1998 (incorporated by
reference to Exhibit 10.2.3 to the Amendment No. 1 to Registration Statement on Form
S-4/A filed on May 8, 1998 (Reg. No. 333-51839))10.22*
    
    Day International, Inc. Supplemental Savings and Retirement Plan, dated as of March
1, 2001 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001)10.23*
    
    Day International Group, Inc. 2006 Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended September 30,
2006)10.24*
    
    2006 Day International Group, Inc. Restricted Stock Unit Plan (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006)
 (21) Subsidiaries of the Registrant
 (31) Rule 13a-14(a)/15d-14(a) Certifications
 31.1
    
    Chief Executive Officer Certification31.2
    
    Chief Financial Officer Certification
 (32) Section 1350 Certifications
 32.1
    
    Chief Executive Officer Certification32.2
    
    Chief Financial Officer Certification
 
 *
    
    - Management contract or compensatory plan or arrangement 76