<PAGE>   1

                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                 For the Fiscal Period Ended December 31, 1996
                          Commission File No.33-93644

                         DAY INTERNATIONAL GROUP, INC.
             (Exact name of registrant as specified in its charter)

                      Delaware                       31-1436349
                      --------                       ----------
           (State of Incorporation)        (IRS Employer Identification No.)

                   333 West First Street, Dayton, Ohio 45402
                   -----------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number, including area code:            (513) 224-4000

Securities Registered Pursuant to Section 12 (b) of the Act:    None

Securities Registered Pursuant to Section 12 (g) of the Act:    None

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 the 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]

<TABLE>
<S>                                                        <C>
At the close of business on March 21, 1997:
        Number of shares of Common Stock outstanding       51,555.5
        Aggregate market value of the Company's voting
         stock held by non-affiliates                            $0
</TABLE>

DOCUMENTS INCORPORATED BY REFERENCE - None.


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Except as otherwise stated, the information contained in this report is given as
of December 31, 1996, the end of the Registrant's last fiscal year.

SAFE HARBOR STATEMENT

Certain information contained in this report, particularly information regarding
future economic performance and finances, plans and objectives of management,
is forward-looking. In some cases, information regarding certain important
factors that could cause actual results to differ materially from any such
forward-looking statement appear together with such statement. In addition, the
following factors, in addition to other possible factors not listed, could
affect the Company's actual results and cause such results to differ materially
from those expressed in forward-looking statements. These factors include the
effects of leverage, including the limitations imposed by the Company's various
debt instruments; risk related to significant operations in foreign countries;
competition in the Company's markets; the impact of environmental regulations;
cyclicality of the Company's customer base; the potential for technological
obsolescence; and other factors set forth under the caption "Risk Factors"
below.


                                     PART I
                                     ------

ITEM 1. BUSINESS

GENERAL

Day International Group, Inc. ("Day" or the "Company") is one of the world's
leading producers of precision engineered rubber products, specializing in the
design and customization of components used by a broad customer base in the
printing and textile industries. Day's printing business ("Printing") is one of
the world's largest designers, manufacturers and marketers of high-quality
printing blankets for use in the offset printing industry. The Company estimates
that in 1996 it held the number one market share in printing blankets in the
United States and worldwide with approximately a 37% share and a 26% share in
each market, respectively. The Company believes that its textile business
("Textiles") is the largest U.S. manufacturer and marketer of precision
engineered rubber cots, aprons and other fabricated rubber components sold to
textile yarn spinners worldwide. Based on data complied by the American Textile
Manufacturers Institute, the Company estimates that in 1996 its share of the
U.S. market for cots and aprons was approximately 62%. The Company has
continuously improved its operations through technological innovation and has
reported increased sales every year since 1982.

On December 31, 1996, Day acquired certain of the net assets of the David M
Company ("David M"), a division of Flint Ink Corporation for $11.3 million.
David M manufactures a complete line of printing blankets used in offset
printing applications in its Longwood, Florida facility. David M will operate as
a division of Day and will continue manufacturing in the Florida facility. The
acquisition of David M complements Day's existing markets and product lines. Day
intends to maintain David M's brand name and product lines and will continue to
utilize David M's existing sales force and distribution network. The acquisition
of David M increases Day's share of the domestic and worldwide printing blanket
markets to approximately 43% and 30%, respectively.

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The printing blanket, a highly engineered product manufactured to narrow
tolerances and precise specifications, is composed of multiple layers of fabric,
rubber and adhesives which determine performance features and overall quality,
including image resolution, consistency, durability and ink and chemical
compatibility. Printing blankets accept ink from cylindrical printing plates and
transfer it to a broad range of paper stocks and other substrates. The
performance characteristics of the printing blanket are critical to the quality
of the printing job, as printing blankets are required to perform consistently
over a broad range of press speeds and printing pressures with a wide variety of
papers and inks. Due to the importance of the printing blanket in determining
the overall quality of the printing job, and because the cost of the printing
blanket typically represents less than 1% of the cost of the printed page, the
price of the blanket is a secondary factor in the end user's purchase decision.
The Company has long-standing relationships with a large number of end users,
including R.R. Donnelley & Sons Co., World Color Press, Inc., Quebecor Printing
Inc. and Treasure Chest Advertising Company, Inc. (Big Flower Press, Inc.). In
1996, Printing contributed approximately 76% of the Company's sales.

Offset printing technology is a printing method that transfers a high-quality
image from a plate to a rubber printing blanket and then to paper. Offset
technology is utilized primarily in long-run, high-speed applications such as
the printing of magazines, annual reports, catalogs, direct mail and newspapers.

The Company also manufactures highly engineered rubber rollers known as cots and
flexible belts known as aprons for utilization in yarn spinning machinery. Cots
and aprons are used to draw and twist fibers into yarn. Industry reports
characterize the U.S. as the largest and most technologically advanced producer
of textile products in the world. As a result of technological improvements in
automated high-speed spinning frames, customers are demanding cots and aprons of
higher quality and greater flexibility to meet their specialized needs and are
willing to pay a premium for cots and aprons that meet these standards. The
Company is known throughout the world as a leader in technological innovation
and quality and is the only domestic manufacturer of a full line of cots and
aprons and related products. The Company has long-standing relationships with a
large number of customers, including Burlington Industries Inc., Springs
Industries, Inc. and fiberglass producers such as PPG Industries Inc. and
Owens-Corning Fiberglas Corp. In 1996, Textiles contributed approximately 24% of
the Company's sales.

The Company's domestic and international sales forces have developed strong
customer relationships and possess technical expertise, which enables them to
promote the quality and benefits of the Company's products. In Printing, the
Company's sales force calls on end users as well as value-added distributors
known as converters who typically purchase rolls of uncut printing blankets from
the Company and then cut, finish and package the blankets prior to sale and
delivery to dealers or end users. By educating end users as to the superior
performance characteristics of the Company's products and by providing
exceptional technical service, the Company has been able to create "pull
through" demand for its products from end users who typically place orders
through converters. In Textiles, the Company's sales force markets its products
directly to textile mills in the U.S. and Europe, and the Company utilizes
independent sales agents to market its products in Latin America and the Pacific
Rim.

Business Strategy

The Company believes that competition in the printing and textile industries is
based primarily on quality, performance and service. Accordingly, throughout its
businesses, the Company emphasizes superior customer service and technological
innovation through state-of-the-art research and development. The

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Company's strategy is to strengthen its position as one of the world's leading
producers and designers of precision engineered rubber components for the
printing and textile industries. Specifically, the Company's strategy centers
upon:

Superior Product Performance and Leading Market Share. Due to the superior
performance characteristics of its products, the Company believes that it holds
the number one domestic and worldwide market position in printing blankets and a
leading market position in cots and aprons and other textile components.
Accordingly, the Company's products enjoy significant brand name recognition.
The Company's strategy has been to utilize its technical expertise to develop
high-performance products which command premium prices in the marketplace.

Product Innovation and Proprietary Technology. The Company historically has been
at the forefront of technological advances and is committed to maintaining its
position as an industry leader through continued product innovation. Over the
last several years, a number of developments have been successfully undertaken
to improve the surface and compressible layers of the printing blanket,
resulting in enhanced image resolution, improved durability and printing
consistency. For example, in 1993, the Company and Heidelberg Harris, the
world's leading manufacturer of printing presses, introduced a unique tubular
printing sleeve for Heidelberg Harris new M-3000 high-speed press. The Company
also introduced a complete new line of newspaper printing blankets and lined
soft cots.

Customer Service. The Company believes that the effective implementation of its
integrated approach to marketing, sales and distribution distinguishes it from
its competitors. The Company's Printing sales force works directly with end
users to identify those printing blankets which best suit each end user's
particular needs. The sales force also works in partnership with end users in
formulating solutions to complex printing problems which can only be addressed
by a thorough understanding of the chemical interaction between the printing
blanket, paper and ink.

Operating Discipline. The Company prides itself on providing high-quality
products while maintaining its position as a low-cost producer. The Company
plans to further improve its profitability through continued productivity gains
developed by process-focused teams at each of its facilities. The Company
expects that additional process and manufacturing improvements will continue to
lower its costs and to strengthen its competitive position. To encourage
productivity improvements, the Company ties a portion of each associate's total
compensation to a performance bonus.

Pursuit of Growth Opportunities. The Company is aggressively pursuing growth
opportunities in its core businesses as evidenced by its acquisition of David M.
The Company also believes that planned product introductions and improvements
should enable it to increase its worldwide and domestic market shares. Finally,
the Company plans to continue its penetration of international markets, with a
particular focus on Europe and the Pacific Rim.

PRINTING

INDUSTRY

In an effort to maintain offset printing's technological advantages, press
manufacturers have continually invested in research and development to introduce
improved presses that lower printing costs by operating

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at faster run speeds, offering enhanced flexibility and reducing setup time.
Additionally, many of the advancements made in the pre-press area have
complemented this trend. The Heidelberg Harris M-3000 press is an example of the
next generation of offset printing presses that increase the maximum web speed
to 3,000 feet of paper per minute versus the industry norm of 2,000 feet of
paper per minute. Industry reports forecast alternative technologies to provide
some short-run print jobs with enhanced quality and increased flexibility, but
few rival the print quality, flexibility, price and speed of offset technology.

In addition to lowering costs, offset printers are constantly striving to
improve the quality of their printed product. The cost of the printing blanket
represents less than 1% of the overall cost of the printed page, but is critical
to the quality of the product and the efficiency of the printing press. The
factors most critical to the printer are the image resolution, which is
achievable with a particular printing blanket, the consistency of the printing
output over long printing runs, the number of images which can be printed by the
printing blanket over its useful life relative to its cost and the ability of
the printing blanket to operate within prescribed parameters utilizing a variety
of papers, inks and chemicals.

PRODUCTS

The Company offers a full line of high-quality, name brand printing blankets to
both web-fed (continuous roll) and sheet-fed (individual sheet) printers. The
Company's printing blankets are used to print newspapers, magazines, business
forms, packaging and other printed material. As a result of the superior
quality, reliability and value of the Company's printing blankets and the
customer service it provides, the Company is able to command premium prices for
its products.

The Company's leading printing blankets are the dayGraphica 9500(R), Patriot
3000(R), Discovery 3500(R), Accu-Dot 8500(R) and Newsmaker(TM) lines which
produce high-quality images, particularly on high-speed printing presses.
Introduced in 1986 and utilizing improved surface characteristics resulting in
enhanced print quality, the dayGraphica(R) line still represents a unique
technology and is favored in many applications. The Patriot 3000(TM) and the
Discovery 3500(R) address customer demands for a more versatile and durable
product adaptable to changes in the chemicals used in the printing process and
constitute a significant portion of the Company's sales. The Accu-Dot(R) line is
a line of general purpose printing blankets. Newsmaker(TM) is a complete line of
blankets developed and sold specifically for newspaper printing.

The Company believes that it is one of the leading innovators of product and
process technology in the printing blanket industry. The Company maintains
high-quality products by integrating ideas from its research and development
staff with input from its sales force, printers, distributors and
process-focused work teams. Given the exacting specifications such as dot
uniformity and fidelity, chemical compatibility, product life and start-up time
that a printing blanket must meet, the Company believes that it is well-
positioned to continue market penetration as a result of its product development
capabilities.

In addition to its traditional line of printing blankets, the Company is one of
two global licensees to manufacture tubular, seamless printing sleeves for
Heidelberg Harris, the world's leading manufacturer of printing presses. The
Heidelberg Harris M-3000 press represents the next generation of high-speed
presses with a maximum web speed of 3,000 feet of paper per minute versus the
industry norm of 2,000 feet of paper per minute. The Company has the leading
share of this market.

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Printing also manufactures and sells two lines of specialty products consisting
of pre-inked porous rolls for use in business machines, automated bank teller
machines, ticket machines and credit card imprinters and cast urethane mats used
by the box board corrugating industry as a backing material in cutting
operations.

SALES AND DISTRIBUTION

The Company's sales forces call directly on all of the leading end users in
their markets and promote the quality and technical features of the Company's
products to pressroom foremen, purchasing agents, plant managers and press
operators who then order the Company's products from an authorized distributor
(converter or dealer).

The Company distributes the majority of its products through domestic and
international distributors who buy printing blanket rolls. These distributors
cut, fabricate and ship blankets to customer orders, maintain inventory and
carry receivables. The sales force works closely with the distributors through
joint calling efforts on end users and training programs. The Company believes
that it has one of the most effective networks of converters and dealers in the
industry.

TEXTILES

INDUSTRY

Yarn spinning machinery uses a combination of rollers (cots) and flexible belts
(aprons) to draw and twist fibers into yarn in a process known as drafting.
Large spinning mills (mills with over 50,000 spindles) require 200,000 cots and
aprons (2 cots and 2 aprons per spindle) to equip the spinning frames. Yarn
manufacturers require a wide range of cot and apron sizes and constructions to
handle cotton, synthetic and blended fibers. Cots and aprons are differentiated
by mill conditions, machine types and original equipment manufacturer ("OEM")
specifications. The type and quality of cots and aprons impact yarn quality,
while product life and performance is impacted by surface finish, lap resistance
and the ability to withstand ozone exposure, fiber chemicals, wear and physical
deformation.

The industry has undergone significant changes in recent years with
technological improvements in machinery resulting in productivity improvements
at the textile mill level. In the U.S., a significant amount of ring spinning
and shuttle loom capacity has been replaced by fully automated open-end, air-jet
and high-speed spinning frames and looms. Automated high-speed spinning frames
produce 40% more yarn per spindle than traditional spinning frames. As more
high-quality yarn is produced at higher speeds, the consumption of cots and
aprons per position increases correspondingly. As a result of these increasing
demands, cots and aprons must be of higher quality and therefore command a
premium price compared to traditional ring spinning cots and aprons.

PRODUCTS

As the only domestic manufacturer of a full line of cots and aprons, the Company
offers its customers both general purpose and specialty cots and aprons
recognized in the marketplace under the DAYtex(R) brand. General purpose cots
and aprons include a full line of products designed for "short staple" fibers
(such as cotton) and "long staple" fibers (such as wool) while specialty cots
and aprons include glass-

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forming aprons, carpet cots and drawing cots. The Company provides
high-quality, precision engineered products that deliver superior value to its
customers.

The Company is currently developing and testing several new products including a
high-speed spinning apron. The Company's technology has been used to develop
specialty lines of aprons including glass-forming aprons, which are used to
make glass fiber from liquid glass, and texturizing aprons, which are used to
finish certain types of synthetic threads. Textiles also makes bolsters, "rub"
aprons and rubber shrinkage blankets for use in pre-shrinking processes, such as
that used for denim, as well as rubber-covered industrial rollers for textile
and other industrial applications. In addition, the Company also sells custom
rubber compounds to several wire coaters in Europe.

SALES AND DISTRIBUTION

The sales force markets its products directly to end users, primarily textile
mills, and OEMs, calling on virtually every textile mill in the U.S. and Europe.
The Company believes that its sales professionals differentiate themselves from
the competition by their ability to work directly with customers to solve
problems on the mill floor, providing the Company with knowledge of industry
trends, which in turn creates opportunities for product development.

The Company will continue to capitalize on the shift towards higher value-added,
higher-margin products and plans to emphasize its full line of products and U.S.
manufacturing presence to domestic textile producers. Internationally, the
Company will continue to focus on the Pacific Rim and Latin America through the
use of independent sales agents.

RAW MATERIALS

Rubber polymers and woven fabrics are major components in the Company's
products. Various woven fabrics, which are combined with rubber and other
materials, represented over 40% of all raw materials purchases during 1996 and
1995. Raw material purchases accounted for approximately half of all costs of
goods sold for the Company's products during the same period. The Company
purchases its raw material requirements from a number of suppliers on a purchase
order basis.

TECHNOLOGY

The Company continues to believe that research and development is key to
maintaining its leading market position. In 1996, technology expenditures were
approximately 2% of the Company's sales.

In addition to its extensive patent and trademark portfolio, the Company also
licenses certain intellectual property rights from third parties and owns a wide
array of unpatented proprietary technology. In the aggregate, these patents,
patent applications, trademarks and licenses are of material importance to the
Company's business.

COMPETITION

The Company competes with a number of firms in the printing and textile
components industries, with the main factors being quality, performance and
service. While the Company competes with a number of

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manufacturers of offset printing blankets, its primary competitors are Reeves
Industries, Inc. and Polyfibron Technologies, Inc. which, together with the
Company, accounted for in excess of 70% of the U.S. market and approximately 60%
of the worldwide market in 1996, based on Company estimates. Each of these firms
has a comparable worldwide geographic distribution network. The Company also
competes against a limited number of smaller manufacturers.

In Textiles, the Company's principal competitor is Armstrong World Industries
Inc. The Company also competes with other smaller manufacturers, such as
Premtec, Inc., Hokushin Corporation, Yamauchi USA Corp. and Berkol Ag.

INTERNATIONAL OPERATIONS

The Company's principal international manufacturing facility is located in
Dundee, Scotland which produces products for both Printing and Textiles. The
Company also has a manufacturing facility in Lerma, Mexico that produces
Printing products for local use and export to the U.S. The Company also
maintains sales and distribution facilities in France, Germany, Hong Kong and
Italy.

ENVIRONMENTAL MATTERS

The Company's facilities in the United States are subject to federal, state and
local environmental requirements, including those governing discharges to the
air and water, the handling and disposal of solid and hazardous wastes, and the
remediation of contamination associated with releases of hazardous substances.
The Dundee, Scotland facility is subject to United Kingdom and local
environmental requirements, as well as the environmental requirements
promulgated by the European Community. The Lerma, Mexico facility is subject to
Mexican environmental requirements.

The Company believes that it is currently in compliance with environmental
requirements except as would not be expected to have a material adverse effect
on the Company. Nevertheless, the Company's operations involve the handling of
toluene and other hazardous substances and, as is the case with manufacturers in
general, if a release of hazardous substances occurs on or from the Company's
facilities, the Company may be held liable and may be required to pay the cost
of remedying the condition. The amount of any such liability could be material.

The Company has made, and will continue to make, expenditures to comply with
current and future environmental requirements. Environmental requirements are
becoming increasingly stringent, and therefore the Company's expenditures for
environmental compliance may increase in the future.

Solvent air emissions at the Company's Dundee, Scotland facility currently
exceed U.K. limits, and the Company will be required to initiate a plan for air
controls in 1997 to comply with additional air emission requirements promulgated
by the European Community. The Company believes that capital expenditures for
such control equipment will be between $0.6 and $0.7 million

ASSOCIATES

Currently, the Company employs approximately 958 associates worldwide, of which
approximately 615 are employed in the U.S. The Company's associates in Dundee,
Scotland are represented by a labor union

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which has entered into a collective bargaining agreement with the Company, which
agreement expires in November 1997. The Company's associates in Mexico are
covered by a statutory labor agreement. None of the Company's U.S. associates
are covered by a collective bargaining agreement. To encourage productivity
improvements, a portion of each associate's total compensation is tied to a
performance bonus. The Company considers its associate relations to be good.

                                  RISK FACTORS

Current and prospective investors should carefully consider the following
factors in addition to the other information set forth in this Report related to
investing in the Notes.

LEVERAGE

The Company is highly leveraged. At December 31, 1996, the Company's
indebtedness was $152.9 million and its stockholders' equity was $52.7 million.
In addition, subject to the restrictions in the Credit Agreement and the Notes,
the Company and its subsidiaries may incur additional indebtedness (including
additional Senior Indebtedness, as defined in the Notes) from time to time to
finance acquisitions or capital expenditures or for other purposes.

The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) a substantial portion of the Company's cash
flow from operations must be dedicated to debt service and will not be available
for other purposes; (ii) the Company's ability to obtain additional debt
financing in the future for working capital, capital expenditures, research and
development or acquisitions may be limited; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in its
industries and economic conditions generally.

The Company's ability to pay principal and interest on the Notes and to satisfy
its other debt obligations will depend upon its future operating performance,
which will be affected by prevailing economic conditions and financial, business
and other factors, certain of which are beyond its control, as well as the
availability of revolving credit borrowings under the Credit Agreement or a
successor facility. The Company anticipates that its operating cash flow,
together with borrowing under the Credit Agreement, will be sufficient to meet
its operating expenses and to service its debt requirements as they become due.
However, the Company may be required to refinance a portion of the principal of
the Notes prior to their maturity and, if the Company is unable to service its
indebtedness, it will be forced to take actions such as reducing or delaying
capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There is no assurance that
any of these remedies can be effected on satisfactory terms, if at all.

SUBORDINATION OF NOTES

The Notes are subordinated in right of payment to all Senior Indebtedness of the
Company. In addition, the Guarantee is subordinated to all Guarantor Senior
Indebtedness, including the guarantee of indebtedness under the Credit
Agreement. The Notes and the Guarantee are also effectively subordinated to all
of the indebtedness of the non-Guarantor subsidiaries of the Guarantor, and such
non-Guarantor subsidiaries are not obligated or otherwise required to make funds
available, whether through dividends, other distributions or otherwise, to the
Guarantor or the Company for repayment of the Notes. In 1996,

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the Company's UK subsidiary ("Day U.K") entered into credit facilities with a UK
bank that will provide a $1.6 million line of credit and two five year term
loans totaling $4.8 million as part of the Credit Agreement. As long as these
borrowings are outstanding, Day U.K. will be subject to restrictions on its
ability to pay dividends and make other distributions to the Guarantor. See Note
D of "Notes to Consolidated Financial Statements" of the Company for the year
ended December 31, 1996 and the period June 7, 1995 through December 31, 1995 in
Item 8 of this Report.

In addition, in the event of bankruptcy, liquidation or reorganization of the
Company or the Guarantor, the assets of the Company and the Guarantor will be
available to pay obligations on the Notes only after all Senior Indebtedness has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Securities then outstanding. The aggregate
principal amount of Senior Indebtedness of the Company, as of December 31, 1996,
was $52.9 million. Additional Senior Indebtedness may be incurred by the Company
from time to time, subject to certain restrictions.

RISK OF CANCELLATION OF GUARANTEE UPON FRAUDULENT CONVEYANCE

The Guarantor guarantees the due and punctual payment of principal of; premium,
if any, and interest on the Notes and the performance of the other obligations
of the Company under the Notes. The Guarantee is a general unsecured obligation
of the Guarantor and is subordinated in right of payment to all Guarantor Senior
Indebtedness, including the Guarantor's guarantee of indebtedness under the
Credit Agreement.

It is possible that creditors of the Guarantor may challenge the Guarantee as a
fraudulent conveyance under relevant federal and state statutes, and, under
certain circumstances (including a finding that the Guarantor was insolvent at
the time the Guarantee was issued), a court could hold that the obligations of
the Guarantor under the Guarantee may be voided or are subordinate to other
obligations of the Guarantor. In addition, it is possible that the amount for
which the Guarantor is liable under the Guarantee may be limited. The measure of
insolvency for purposes of the foregoing may vary depending upon the law of the
jurisdiction that is being applied. Generally, however, a company would be
considered insolvent if the sum of its debts is greater than all of its property
at a fair valuation or if the present fair salable value of its assets is less
than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and mature. The Notes provides that the
obligations of the Guarantor under the Guarantee will be limited to amounts
which will not result in the Guarantee being a fraudulent conveyance under
applicable law.

RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS

The Notes restrict, among other things, the Company's and its subsidiaries'
ability to incur additional indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur indebtedness that is subordinate in
right of payment to any Senior Indebtedness and senior in right of payment to
the Notes, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of substantially all of the assets of the
Company. In addition, the Credit Agreement contains other and more restrictive
covenants and prohibits the Company and its subsidiaries from prepaying other
indebtedness (including the Notes). The Credit Agreement also requires the
Company to maintain specified financial ratios and satisfy certain financial
condition tests. The Company's ability to meet those financial ratios and tests
can be affected by events beyond its control, and there can be no assurance that
the Company will meet those tests. A breach

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of any of these covenants could result in a default under the Credit Agreement
and/or the Notes. Upon the occurrence of an event of default under the Credit
Agreement, the lenders could elect to declare all amounts outstanding under the
Credit Agreement, together with accrued interest, to be immediately due and
payable. If the Company were unable to repay those amounts, the lenders could
proceed against the collateral granted to them to secure that indebtedness. If
the Senior Indebtedness were to be accelerated, there can be no assurance that
the assets of the Company would be sufficient to repay in full that indebtedness
and the other indebtedness of the Company, including the Notes. Substantially
all the assets of the Company and its domestic subsidiaries are pledged as
security under the Credit Agreement.

RISKS OF SIGNIFICANT OPERATIONS IN FOREIGN COUNTRIES

The Company manufactures and markets its products worldwide through several
foreign subsidiaries and independent agents. The Company's worldwide operations
are subject to the risks normally associated with foreign operations, including,
but not limited to, the disruption of markets, changes in export or import laws,
restrictions on currency exchanges, and the modification or introduction of
other governmental policies with potentially adverse effects.

Approximately 28% of the Company's 1996 sales were derived from products sold
outside the U.S. in currencies other than the U.S. dollar. The U.S. dollar value
of these revenues varies with currency exchange rate fluctuations, and the
Company may be exposed to gains or losses based upon such fluctuations.
Significant increases in the value of the U.S. dollar relative to certain
foreign currencies could have an adverse effect on the Company's ability to meet
interest and principal obligations on its U.S. dollar-denominated debt.

IMPACT OF ENVIRONMENTAL REGULATION

The Company is subject to a broad range of federal, state, local and foreign
environmental requirements, including 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.
There can be no assurances that the Company will not incur significant costs in
the future to comply with such requirements. New rules to be promulgated under
the federal Clean Air Act by the year 2000 may require the Company to make
capital expenditures. The Company estimates that such capital expenditures could
be approximately $2 million in or after the year 2001. The Company's operations
involve the handling of toluene and other hazardous substances, and, as is
generally the case with manufacturers, if a release of hazardous substances
occurs on or from the Company's facilities, the Company may be held liable and
may be required to pay the cost of remedying the condition. The amount of any
such liability could be material. Pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), and/or similar state laws,
the Company was named a potentially responsible party ("PRP") at the Verona Well
Field, Michigan site and entered into a consent decree to settle that liability.
The Company's former parent was named a PRP at four other waste disposal sites,
has settled its liability by consent decree at all four of the sites without
liability to the Company. Groundwater contamination exists at the Company's
Three Rivers, Michigan facility. The Company's former parent and its parent have
agreed to complete the ongoing remedial and corrective actions and/or to
indemnify, subject to certain limitations, the Company for the costs associated
with these and certain other environmental matters. If both of these parties
fail to fulfill their indemnification obligations, the Company may be deemed
liable for such costs of environmental remediation and/or penalties, which could
be material.

                                       11

<PAGE>   12

CYCLICAL INDUSTRY CUSTOMER BASE

Many of the end users of the Company's products typically experience cyclical
fluctuations in revenues and earnings. Accordingly, there can be no assurance
that the Company will not experience declining revenues in the future.

PROSPECT OF TECHNOLOGICAL OBSOLESCENCE

If new technologies that could effectively compete with offset printing in the
high-speed, long-run segment of the printing industry are developed and widely
adopted, the Company's printing business could be adversely affected. There can
be no assurance that demand for offset printing presses will remain strong or
will continue to grow in the future. Most alternative printing technologies have
the potential to compete with offset printing in the future with respect to some
short-run print jobs by providing enhanced quality and increased flexibility.

RISK OF INABILITY TO FUND A CHANGE OF CONTROL OFFER

Upon a Change of Control as defined in the Notes (such as, for example, the
acquisition of a majority of the outstanding voting stock of the Company by a
third party), the Company is required to offer to purchase all outstanding
Securities at 101% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages (as defined in the Notes), if any, to the date
of purchase. The source of funds for any such purchase will be the Company's
available cash or cash generated from operating or other sources, including
borrowing, sales of assets, sales of equity or funds provided by a new
controlling person. However, there can be no assurance that sufficient funds
will be available at the time of any Change of Control to make any required
repurchases of Notes tendered, or that, if applicable, restrictions in the
Credit Agreement will allow the Company to make such required repurchases. The
effect of such requirements may make it more difficult or delay attempts by
others to obtain control of the Company.

LACK OF ESTABLISHED PUBLIC TRADING MARKET

The Notes are currently owned by a relatively small number of beneficial owners.
The Company does not intend to list the Notes on any national securities
exchange or to seek the admission thereof to trading in the National Association
of Securities Dealers Automated Quotation System. The initial purchasers of the
Notes currently make a market in the Notes, but they are not obligated to do so
and may discontinue such market making at any time. In addition, such market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act. Accordingly, no assurance can be given that an active public
or other market will develop for the Notes or as to the liquidity of the trading
market for the Notes. If a trading market does not develop or is not maintained,
holders of the Notes may experience difficulty in reselling the Notes or may be
unable to sell them at all. If a market for the Notes develops, any such market
may be discontinued at any time.

If a public trading market develops for the Notes, future trading prices of such
securities will depend on many factors, including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Notes may trade at a discount from their principal amount.

                                       12

<PAGE>   13


DEPENDENCE ON GOODWILL AND INTANGIBLE ASSETS

At December 31, 1996, approximately 61% of the total assets of the Company are
goodwill and intangible assets. As a result, in the event of a liquidation or
insolvency of the Company, available funds may not be sufficient to repay
indebtedness, including the Notes.

ITEM 2. PROPERTIES

The Company operates five state-of-the-art, strategically located manufacturing
facilities in Asheville, North Carolina; Three Rivers, Michigan; Lerma, Mexico;
Dundee, Scotland; and the recently acquired Longwood, Florida facility and
believes that all of the Company's global sales can be sourced through these
facilities. The Company has recently upgraded and consolidated its manufacturing
operations, all of which are ISO 9002 certified. The Company also owns or leases
warehouse and sales office facilities in the U.S., Europe, Mexico and Hong Kong.
The size and location of each of the Company's significant facilities is
summarized below:

<TABLE>
<CAPTION>

                                               Owned/
        Location            Size (Sq. Ft.)     Leased
        --------            --------------     ------
<S>                            <C>             <C>
Manufacturing:
        Asheville, NC           240,580         Owned
        Dundee, Scotland        101,000         Owned
        Lerma, Mexico            45,000         Owned
        Three Rivers, MI         57,943         Owned
        Longwood, FL             43,568         Owned

Warehouse/Sales Office:
        Dayton, OH               11,700         Leased
        Elk Grove, IL             5,000         Leased
        Greenville, SC           10,100         Owned
        Hong Kong                 3,100         Leased
        Milan, Italy (Erba)         600         Leased
        Nashville, TN             5,000         Leased
        Paris, France            12,771         Leased
        Reutlingen, Germany       4,037         Leased
        Stockport, England        5,200         Owned
</TABLE>



ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in various legal proceedings arising
in the ordinary course of business. None of the matters in which the Company is
currently involved, either individually or in the aggregate, is expected to have
a material adverse effect on the Company's business, results of operations, cash
flows or financial condition.

The Company's former parent and Day International, Inc. are parties to consent
decrees with respect to certain environmental matters. See "Environmental
Matters" in Item 1 of this Report.

                                       13

<PAGE>   14


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

     None.

                                    PART II
                                    -------

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

As of March 21, 1997, there were 34 holders of record of shares of common stock,
par value $.01 per share, of the Company (the "Common Stock"). Sale or transfer
of the Common Stock is subject to the terms of a Stockholders Agreement which
all stockholders have signed. There is no established trading market for the
Common Stock. The Company has never paid or declared a cash dividend on the
Common Stock.

                                       14



<PAGE>   15


ITEM 6. SELECTED FINANCIAL DATA

The following selected historical financial data were derived from, and should
be read in conjunction with the historical consolidated financial statements of
the Company. The financial data for the years ended December 31, 1992, 1993,
1994, and the 157 days ended June 6, 1995, represent results of operations of
the Company prior to the Acquisition ("Predecessor"), and the financial data for
the 208 days ended December 31, 1995 and the year ended December 31, 1996,
represent the results of operations of the Company subsequent to the
Acquisition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and accompanying notes
thereto included elsewhere in this Report.

<TABLE>
<CAPTION>
                                                     Predecessor                                   Company
                                                     -----------                                   -------
                                                                               157 Days     208 Days
                                                                                Ended        Ended
                                                                               June 6,    December 31,
                                          1992         1993         1994         1995         1995         1996
                                          ----         ----         ----         ----         ----         ----
<S>                                    <C>          <C>          <C>          <C>          <C>          <C>
OPERATING DATA:
 Net sales                             $ 107,140    $ 107,724    $ 120,288    $  55,454    $  73,103    $ 136,814
 Costs of goods sold                      64,027       65,342       70,996       33,935       47,503       84,602
                                       ---------    ---------    ---------    ---------    ---------    ---------
 Gross profit                             43,113       42,382       49,292       21,519       25,600       52,212
 Selling, general and
  administrative expenses                 22,122       21,366       22,741       11,257       13,340       24,577
 Amortization of intangibles               5,250        5,261        5,212        2,258        3,688        6,474
                                       ---------    ---------    ---------    ---------    ---------    ---------
Operating income                          15,741       15,755       21,339        8,004        8,572       21,161
Interest expense                                                                               9,130       15,373
Amortization of deferred
 financing fees                                                                                  567        1,000
Other (income) expense (b)                  (425)        (222)        (453)        (577)         952         (219)
                                            ----         ----         ----         ----          ---         ----
Income (loss) before income taxes
 and effect of changes in accounting      16,166       15,977       21,792        8,581       (2,077)       5,007
Provision (benefit) for income taxes       7,216        7,149        9,205        3,488         (850)       2,000
                                           -----        -----        -----        -----         ----        -----
Income (loss) before effect of
 changes in accounting                     8,950        8,828       12,587        5,093       (1,227)       3,007
Effect of changes in accounting (a)        1,167
                                       ---------    ---------    ---------    ---------    ---------    ---------
Net income (loss)                      $   7,783    $   8,828    $  12,587    $   5,093    $  (1,227)   $   3,007
                                       =========    =========    =========    =========    =========    =========

BALANCE SHEET DATA:
Fixed assets, net of accumulated
 depreciation and amortization         $  27,845    $  26,415    $  25,162    $  24,677    $  44,496    $  45,289
Total assets                             146,488      144,119      144,252      139,537      228,823      237,886
Long-Term Debt                                                                                51,250       52,116
Subordinated Long-Term Debt                                                                  100,000      100,000
Stockholders' equity                     117,915      118,324      117,128      114,780       49,861       52,734
</TABLE>


(a)    Effective January 1, 1992, the Company adopted SFAS No. 109, "Accounting
       for Income Taxes" and SFAS No.106, "Employers' Accounting for
       postretirement Benefits Other than Pensions." See Note 1 of the notes to
       Financial Statements.

(b)    Includes a bridge commitment fee, which resulted in a non-recurring
       expense of $1.0 million for the 208 days ended December 31, 1995.





                                       15


<PAGE>   16

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

BASIS OF PRESENTATION

The following table sets forth, for the periods shown, net sales, cost of
goods sold, gross profit, selling, general and administrative expense
("SG&A"), amortization of intangibles and operating income in millions of
dollars and as a percentage of net sales.

<TABLE>
<CAPTION>
                                    Year Ended                                                      Year Ended
                                    ----------          157 Days Ended      208 Days Ended          ----------
                                 December 31, 1994       June 6, 1995      December 31, 1995    December 31, 1996
                                 -----------------       ------------      -----------------    -----------------
                                    $          %         $          %         $          %          $          %
                                    -          -         -          -         -          -          -          -
<S>                             <C>          <C>      <C>         <C>      <C>         <C>      <C>          <C>
Net sales .................     $  120.3     100.0%   $  55.4     100.0%   $  73.1     100.0%   $  136.8     100.0%
Cost of goods sold ........         71.0      59.0       33.9      61.2       47.5      65.0        84.6      61.8
                                    ----      ----       ----      ----       ----      ----        ----      ----
Gross profit ..............         49.3      41.0       21.5      38.8       25.6      35.0        52.2      38.2
SG&A ......................         22.7      18.9       11.2      20.2       13.3      18.2        24.6      18.0
Amortization of intangibles          5.2       4.3        2.3       4.2        3.7       5.0         6.5       4.7
                                     ---       ---        ---       ---        ---       ---         ---       ---
Operating income ..........     $   21.3      17.7%   $   8.0      14.4%   $   8.6      11.8%   $   21.2      15.5%
                                ========      ====    =======      ====    =======      ====    ========      ====
</TABLE>



COMPARISON OF RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1995

Net sales increased to $136.8 million for the year ended December 31, 1996 from
$128.5 million for the comparable period in 1995, an increase of $8.3 million or
6.5%. The Company's net sales were adversely impacted by changes in foreign
currency translation rates, which amounted to $1.2 million. Printing's sales
increased to $103.6 million for the year ended December 31, 1996 from $95.2
million for the comparable period in 1995, an increase of $8.4 million or 8.8%,
as a result of increased sales from new products, such as the NewsMaker(TM)
series for the newspaper market, higher sales of tubular sleeves and increased
demand for the Company's existing products in the U.S., Latin America and the
Pacific Rim and a modest price increase. Foreign currency translation rate
changes adversely impacted Printing sales by $1.0. Textiles' sales remained
relatively constant at $33.2 million for the year ended December 31, 1996
compared to $33.3 million in 1995. Changes in foreign currency translation rates
reduced Textiles' sales by $0.2 million. Domestic sales increases offset reduced
European sales with export sales to Latin America and the Pacific Rim remaining
relatively constant.

Gross profit increased to $52.2 million for the year ended December 31, 1996
from $47.1 million in 1995, an increase of $5.1 million or 10.8%. As a
percentage of net sales, gross profit increased to 38.2% for the year ended
December 31, 1996 from 36.7% for the comparable period in 1995. Gross profit in
1996 increased by $3.3 million or 6.7% as a result of increased volume and
productivity enhancements through process improvements and a modest price
increase, offset by changes in foreign currency translation rates, higher costs
of material and labor and a shift in sales to markets with typically lower
margins. Also, gross profit in 1995 was adversely impacted by $2.3 million for
sales of finished goods inventory which were purchased at market values as a
result of the Acquisition. SG&A remained virtually constant at $24.6

                                       16

<PAGE>   17


million for the year ended December 31, 1996 compared with $24.5 million for
1995. Stand alone costs related to the acquisition were $0.5 million higher in
1996 and changes in currency translation rates reduced SG&A costs by $0.2
million in 1996. As a percentage of net sales, SG&A decreased to 18.0% from
19.1%.

Amortization of intangibles increased to $6.5 million for the year ended
December 31, 1996 from $6.0 million in 1995, an increase of $0.5 million as a
result of purchase accounting from the Acquisition.

Operating income increased to $21.2 million for the year ended December 31, 1996
from $16.6 million for the comparable period in 1995, an increase of $4.6
million or 27.7%, of which $2.3 million relates to the higher costs of goods
sold in 1995 resulting from the sale of finished goods inventory which were
purchased at market values as a result of the Acquisition. The remaining $2.3
million increase in operating income results from increased sales volumes and
productivity enhancements offset by additional amortization and depreciation and
stand alone costs primarily as a result of the Acquisition. As a percentage of
net sales, operating income increased to 15.5% for the year ended December 31,
1996 from 12.9% for the comparable period in 1995.

Not included in the above table, other (income) expense in 1995 includes a $1.0
million bridge loan fee.

TWELVE MONTHS ENDED DECEMBER 31, 1995 COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1994

Net sales increased to $128.5 million for the twelve months ended December 31,
1995 from $120.3 million for the comparable period in 1994, an increase of $8.2
million or 6.8%. The Company's net sales were favorably impacted by changes in
foreign currency translation rates, which amounted to $1.6 million, or 19.5%, of
the increase in revenues. Printing's sales increased to $95.2 million for the
twelve months ended December 31, 1995 from $88.9 million for the comparable
period in 1994, an increase of $6.3 million or 6.7%, as a result of increased
sales from new products, such as the NewsMaker(TM) series for the newspaper
market, higher sales of tubular sleeves and increased demand for the Company's
existing products in Europe. Also, foreign currency translation rate changes
contributed $0.6 million of the increase. Textiles' sales increased to $33.3
million for the twelve months ended December 31, 1995 from $31.4 million for
comparable period in 1994, an increase of $1.9 million or 6.1%. Approximately
$1.0 million of this increase is related to foreign currency translation rates
with the remainder attributable to increased exports to Latin America and the
Pacific Rim and further market share gains in Europe.

Gross profit decreased to $47.1 million for the twelve months ended December 31,
1995 from $49.3 million for the comparable period in 1994, a decrease of $2.2
million or 4.5%. As a percentage of net sales, gross profit decreased to 36.7%
for the twelve months ended December 31, 1995 from 41.0% for the comparable
period in 1994. Gross profit increased by $1.6 million or 3.2% as a result of
increased volume and productivity enhancements such as the new continuous
spreading and automated cot finishing equipment, offset by changes in foreign
currency translation rates, a shift in sales mix and higher material and labor
costs. Gross profit was also adversely impacted by $2.3 million for sales of
finished goods inventory which were purchased at market values as a result of
the Acquisition, and by $1.5 million as a result of higher depreciation,
primarily as a result of the Acquisition.

SG&A increased to $24.5 million for the twelve months ended December 31, 1995
from $22.7 million for the comparable period in 1994, an increase of $1.8
million or 7.9%, primarily as a result of higher sales



                                       17
<PAGE>   18


volumes and stand alone costs of $0.6 million as a result of the Acquisition.
The Company's expenses were affected by changes in currency translation rates,
which amounted to $0.7 million, or 38.9%, of the increase in SG&A. As a
percentage of net sales, SG&A increased to 19.1% from 18.9%.

Amortization of intangibles increased to $6.0 million for the twelve months
ended December 31, 1995 from $5.2 million for the comparable period in 1994, an
increase of $0.8 million as a result of purchase accounting from the
Acquisition.

Operating income decreased to $16.6 million for the twelve months ended December
31, 1995 from $21.3 million for the comparable period in 1994, a decrease of
$4.7 million or 22.1%. Operating income decreased by $5.2 million as a result of
higher cost of goods sold, additional amortization and depreciation and stand
alone costs primarily as a result of the Acquisition. As a percentage of net
sales, operating income decreased to 12.9% for the twelve months ended December
31, 1995 from 17.7% for the comparable period in 1994. Operating income,
excluding the Acquisition related costs, increased $.5 million or 2.3% to $21.8
million for the twelve months ended December 31, 1995.

RISKS ASSOCIATED WITH FOREIGN OPERATIONS

The Company conducts a significant amount of business and has operating and
sales facilities in countries outside the United States. As a result, the
Company is subject to business risks inherent in non-U.S. activities, including
political uncertainty, import and export limitations, exchange controls and
currency fluctuations. The Company believes risks related to its foreign
operations are mitigated due to the political and economic stability of the
countries in which its largest foreign operations are located, the stand-alone
nature of the operations, the Company's net asset exposure, forward foreign
exchange contract practices and pricing flexibility. Thus, while changes in
foreign currency values do affect earnings, the longer term economic effect of
these changes should not have a material adverse effect on the Company's
financial condition, results of operations or liquidity. Foreign currency gains
and losses, included in other income-net, were a $0.1 million loss in 1996, a
$0.3 million gain in 1995 and a $0.1 million gain in 1994.

Certain of the Company's international subsidiaries make purchases in foreign
currencies, mainly intercompany transactions. As a result, they are subject to
transaction exposures that arise from foreign exchange movements between the
date that the foreign currency transaction is recorded and the date it is
consummated. The Company has entered into forward foreign exchange contracts to
protect it against such foreign exchange movements. The contract value of these
foreign exchange contracts was $1,762,000 and $1,550,000 at December 31, 1996
and December 31, 1995, respectively. These contracts generally expire within
three to six months. These contracts are through internationally recognized
financial institutions with high credit ratings; however, the Company is exposed
to credit-related losses in the event of non-performance by counterparties to
the forward contracts.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically generated funds from its operations and its working
capital requirements have not exhibited seasonal fluctuations. Utilizing
converters to distribute the majority of its products, the Company is able to
maintain relatively minimal levels of working capital as the converters carry
large amounts of inventory and finance receivables. Under the Company's US
Credit Agreement which expires


                                       18
<PAGE>   19


in 2002, the Company has a $30 million term loan at December 31, 1996 along with
a $47 million revolving line of credit, of which $18.5 million was outstanding
at December 31, 1996. Under the Company's UK Credit Agreement which also expires
in 2002, the Company has two term loans totaling $4.8 million at December 31,
1996 along with a $1.6 million revolving line of credit, none of which was
outstanding at December 31, 1996. In addition, in conjunction with the
Acquisition, the Company issued $100 million of Senior Subordinated Notes
("Notes") which become due in 2005. The Company believes it has adequate
financing from these facilities along with cash flows from operating activities
to support its operations.

Cash Flow From Operating Activities. Cash flows from operations for year ended
December 31, 1996 and the year ended December 31, 1995 were $18.1 million and
$15.3 million, respectively. Cash flows from operations in 1996 were unfavorably
impacted by a $0.2 million working capital increase and $7.5 million of
additional cash paid for interest. For the year ended December 31, 1995, cash
flows from operations were unfavorably impacted by a $0.8 million working
capital increase and $8.0 million of cash paid for interest partially offset by
increased depreciation and amortization of $5.2 million, as a result of the
Acquisition.

Cash Flows From Investing Activities. The Company's expenditures for plant,
property and equipment were $5.2 million in 1996 compared to $3.6 million in
1995 and 1994. The Company believes that historical capital spending levels are
sufficient to maintain its leading market position. The Company expects to fund
its annual capital expenditures of $4.0 million to $7.0 million over the next
several years from cash flow from operations. On December 31, 1996 the Company
acquired certain net assets of the David M Company, a division of Flint Ink
Corporation, for $11.3 million in cash which was funded out of the Company's
existing US Credit Agreement.

Cash Flows From Financing Activities. Concurrent with the Acquisition, the
Company entered into a US Credit Agreement with certain banks. The US Credit
Agreement has a maximum borrowing capacity of $77 million and is secured by the
assets of the Company and its domestic subsidiaries, as well as 65% of the stock
of each foreign subsidiary. As of December 31, 1996, the Company had
approximately $22.0 million of availability under the US Credit Agreement. The
Company does not have any scheduled repayment requirements until 1999. In 1996,
the Company entered into a UK Credit Agreement with a UK bank. The UK Credit
Agreement provides for two term loans totaling $4.8 million and a $1.6 million
line of credit. Scheduled repayments on the term loans are due in quarterly
payments of $201 with a final payment of $684 due in 2002. The entire $1.6
million line of credit was available at December 31, 1996. The Company believes
that it will generate sufficient cash flow from operations to meet debt service,
working capital and capital expenditure requirements, although no assurance can
be given that it will be able to do so.

ENVIRONMENTAL MATTERS

The Company will incur expenditures as a result of environmental laws and
regulations. The Company estimates that in 1997 it will spend approximately $1.0
million in capital expenditures for solvent recovery, wastewater treatment, air
monitoring and related projects to comply with environmental requirements.
Environmental requirements are becoming increasingly stringent, and therefore
the Company's expenditures for environmental compliance may increase in the
future.


                                       19
<PAGE>   20


New rules to be promulgated under the 1990 amendments to the federal Clean Air
Act governing emissions of hazardous air pollutants may require implementation
of additional air emission control measures at the Company's Three Rivers,
Michigan and Asheville, North Carolina facilities. Because the applicable
requirements are not scheduled to be promulgated until 2000, it is difficult to
estimate the costs of any additional controls that might be required with any
certainty. The Company currently believes that the total capital expenditures to
install additional control equipment at these facilities are not likely to
exceed $2 million and would be incurred between 2001 and 2003.

Solvent air emissions at the Company's Dundee, Scotland facility currently
exceed U.K. limits, and the Company will be required to initiate a plan for air
controls in 1997 to comply with additional air emission requirements promulgated
by the European Community. The Company believes that capital expenditures for
such control equipment will be between $0.6 million and $0.7 million.

On July 25, 1988, the Michigan Department of Natural Resources ("MDNR") and the
Company's former parent, entered into a consent decree with respect to certain
conditions of groundwater contamination at and emanating from the Company's
Three Rivers, Michigan facility. The Company is not a party to the consent
decree. The contamination is believed to be the result of leaks from underground
tanks at the facility that were removed in 1984. Pursuant to the consent decree,
the Company's former parent installed a groundwater extraction and treatment
system at the facility in 1989. The consent order requires that the Company's
former parent continue to operate the system until certain cleanup levels have
been achieved; such cleanup is currently expected to take seven to ten more
years, at a cost of approximately $0.1 million per year. MDNR has recently
raised certain concerns regarding the effectiveness of the system. As a result,
the Company's former parent may have to make modifications to the system or take
further action to identify and address sources of the contamination in onsite
soils. As of December 31, 1996, the Company has recorded accruals of
approximately $1.1 million to reflect future costs associated with this clean-up
and, based on the reports of its independent consultant, the Company believes
that such accruals are adequate. The Company has been indemnified with respect
to these costs and expects to receive reimbursement after amounts are expended.
If however, the Company's former parent fails to fulfill its indemnification
obligations, the Company may be deemed liable for these costs and the costs
could be material. This risk is mitigated in part, because substantial capital
costs have already been expended to install the groundwater extraction and
treatment system.

Like many manufacturers, the Company's facilities generate wastes that contain
hazardous substances. As a result of the disposal of such wastes prior to the
Acquisition, the Company's former parent was named a "potentially responsible
party" pursuant to CERCLA and/or similar state laws at the following waste
disposal sites: the Seaboard Chemical Corporation Site, North Carolina; the
Wayne Reclamation Site, Indiana; the Liquid Disposal, Inc. Site, Michigan; and
the Thermo Chem Site, Michigan. Similarly, the Company was named a PRP at the
Verona Well Field Site, Michigan. The Company's former parent or the Company
entered into consent decrees that settled its liability at these sites, subject
to standard reopener provisions as are found in consent decrees under CERCLA.
The Company expects that no expenditures will be made by the Company with
respect to these matters. The Company's former parent have agreed to retain
ongoing responsibility for and indemnify the Company with respect to these waste
disposal locations. Claims under this offsite disposal indemnity are not subject
to time or dollar limitations. Because the liability scheme under CERCLA is
retroactive, the Company may receive notices of potential CBRCLA liability in
the future, and such liability could be material.


                                       20
<PAGE>   21


Subject to certain limitations, the Company's former parent and its parent have
agreed to indemnify the Company for certain other environmental compliance and
liability issues associated with the Company's business. These matters include
certain exceedances of sewer discharge permit limits at the Asheville, North
Carolina facility, certain remedial actions previously completed by Day
International, Inc. at the Asheville, North Carolina facility, and liabilities
associated with an underground toluene tank at the Lerma, Mexico facility which
has been removed and disposed of. There can be no assurances the Company's
former parent or its parent will have the ability to indemnify the Company for
all the environmental conditions for which they have retained responsibility
when requested by the Company. If the Company's former parent or its parent are
unable to honor their indemnification obligations, the Company would likely be
responsible for such matters and the cost of addressing such matters could be
material. The Company does not maintain insurance coverage for environmental
matters.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                              <C>
DAY INTERNATIONAL GROUP, INC.
Year ended December 31, 1996 and the
  period from June 7, 1995 through December 31, 1995:

        Independent Auditors' Report                             22
        Consolidated Balance Sheets                              23-24
        Consolidated Statements of Operations                    25
        Consolidated Statements of Stockholders' Equity          26
        Consolidated Statements of Cash Flows                    27
        Notes to Consolidated Financial Statements               28-43

DAY INTERNATIONAL, INC.

Period from January 1, 1995 through June 6, 1995:

        Independent Auditors' Report                             44
        Consolidated Balance Sheet                               45-46
        Consolidated Statement of Income                         47
        Consolidated Statement of Cash Flows                     48
        Notes to Consolidated Financial Statements               49-58

Year ended December 31, 1994:

        Report of Independent Accountants                        59
        Consolidated Statement of Income                         60
        Consolidated Statement of Cash Flows                     61
        Notes to Consolidated Financial Statements               62-68
</TABLE>

                                       21


<PAGE>   22


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Day International Group, Inc.

We have audited the accompanying consolidated balance sheets of Day
International Group, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1996 and the period from June 7, 1995
(date of acquisition) through December 31, 1995. Our audit also included the
financial statement schedule listed in the Index at Item 14(a)2 for the year
ended December 31, 1996 and the period ended December 31, 1995. 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 generally accepted auditing
standards. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Day International Group, Inc. at
December 31, 1996 and 1995, and the results of their operations and their cash
flows for the year ended December 31, 1996 and the period from June 7, 1995
through December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.




DELOITTE & TOUCHE LLP

February 21, 1997
Dayton, Ohio



                                       22
<PAGE>   23


DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS                                                                   1996           1995
<S>                                                                   <C>            <C>
CURRENT ASSETS:
 Cash and cash equivalents                                            $   5,433      $   3,769
 Accounts receivable:
  Trade (less allowance for doubtful accounts of $982 and $1,248)        16,788         15,054
  Other                                                                     383            553
 Inventories (Note C)                                                    16,355         15,237
 Prepaid expenses and other current assets                                3,630            866
 Deferred tax assets (Note E)                                             3,389          1,975
                                                                          -----          -----
        Total current assets                                             45,978         37,454

PROPERTY, PLANT AND EQUIPMENT (Note A):
 Land                                                                     2,025          2,327
 Buildings                                                               10,183         13,953
 Machinery and equipment                                                 34,692         27,718
 Construction in progress                                                 5,098          2,420
                                                                          -----          -----
                                                                         51,998         46,418
 Less accumulated depreciation                                           (6,709)        (1,922)
                                                                         ------         ------
                                                                         45,289         44,496

OTHER ASSETS:
 Goodwill and other intangible assets (Note B)                          145,018        145,446
 Note receivable (Note K)                                                 1,155          1,079
 Other assets                                                               446            348
                                                                            ---            ---
                                                                        146,619        146,873
                                                                        -------        -------
TOTAL ASSETS                                                          $ 237,886      $ 228,823
                                                                      =========      =========
</TABLE>

See notes to consolidated financial statements.

                                       23

<PAGE>   24

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY                                           1996           1995

<S>                                                                         <C>            <C>
CURRENT LIABILITIES:
 Accounts payable                                                           $   7,453      $   5,882
 Accrued associate related costs                                                7,929          6,996
 Other accrued expenses                                                         6,075          4,118
 Interest payable                                                               1,068          1,212
 Current maturities of long-term debt (Note D)                                    803
                                                                                  ---          -----
    Total current liabilities                                                  23,328         18,208

LONG-TERM AND SUBORDINATED LONG-TERM DEBT (Note D)                            152,116        151,250
DEFERRED TAX LIABILITIES (Note E)                                               3,513          2,202
OTHER LONG-TERM LIABILITIES (Notes J and K)                                     6,195          7,302
COMMITMENTS AND CONTINGENCIES (Note K)
                                                                                -----          -----
    Total liabilities                                                         185,152        178,962

STOCKHOLDERS' EQUITY (Note H):
 Preferred Shares, $.0 1 per share par value, 10,000 shares authorized,
  none outstanding
 Common Shares, $.0l per share par value, 100,000 shares authorized,
   51,555 shares - 1996 and 51,600 shares - 1995 issued and outstanding             1              1
 Additional paid-in-capital                                                    51,531         51,599
 Retained earnings (Accumulated deficit)                                        1,780         (1,227)
 Foreign currency translation adjustment                                         (578)          (512)
                                                                                 ----           ----
    Total stockholders' equity                                                 52,734         49,861
                                                                               ------         ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $ 237,886      $ 228,823
                                                                            =========      =========
</TABLE>


                                       24


<PAGE>   25


DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,1996 AND PERIOD FROM
JUNE 7,1995 THROUGH DECEMBER 31,1995 (IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                             1996            1995

<S>                                                       <C>            <C>
NET SALES                                                 $ 136,814      $  73,103

COST OF GOODS SOLD (including inventory fair value
 adjustments of $2,287 in 1995)                              84,602         47,503
                                                          ---------      ---------
GROSS PROFIT                                                 52,212         25,600

SELLING, GENERAL AND ADMINISTRATIVE                          23,657         12,885

AMORTIZATION OF INTANGIBLES                                   6,474          3,688

MANAGEMENT FEES (Note G)                                        920            455
                                                          ---------      ---------

OPERATING PROFIT                                             21,161          8,572

OTHER EXPENSES:

 Interest Expense (including amortization of deferred
  financing costs of$1,000 in 1996 and $567 in 1995)         16,373          9,697
 Other (income) expense - net (Note D)                         (219)           952
                                                          ---------      ---------
                                                             16,154         10,649
                                                          ---------      ---------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)                   5,007         (2,077)

INCOME TAXES (BENEFIT) (Note E)                               2,000           (850)
                                                          ---------      ---------
NET INCOME (LOSS)                                         $   3,007      $  (1,227)
                                                          =========      =========
</TABLE>


See notes to consolidated financial statements.

                                       25


<PAGE>   26


DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 AND PERIOD FROM
JUNE 7,1995 THROUGH DECEMBER 31,1995 (DOLLAR AMOUNTS IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Retained      Foreign
                                    Common Shares        Additional   Earnings/     Currency
                                  -------------------      Paid-In  (Accumulated  Translation
                                  Shares       Amount      Capital     Deficit)    Adjustment

<S>                               <C>         <C>          <C>         <C>
Sale of common shares             51,600      $     1      $51,599     $            $
Net loss                                                                (1,227)
Foreign currency translation
 adjustment                                                                            (512)
                                  ------      -------      -------     -------      -------
December 31, 1995                 51,600            1       51,599      (1,227)        (512)

Sale of common shares                 73                        73
Purchase of common shares           (118)                     (141)
Net income                                                               3,007
Foreign currency translation
 adjustment                                                                             (66)
                                  ------      -------      -------     -------      -------
December 31, 1996                 51,555      $     1      $51,531     $ 1,780      $  (578)
                                  ======      =======      =======     =======      =======
</TABLE>


See notes to consolidated financial statements.

                                       26


<PAGE>   27



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,1996 AND PERIOD FROM
JUNE 7, 1995 THROUGH DECEMBER 31, 1995 (IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                1996           1995

<S>                                                                          <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net Income (Loss)                                                           $   3,007      $  (1,227)
Adjustments to reconcile net income (loss) to net cash provided by
  operating activities:
  Depreciation                                                                   4,384          2,415
  Amortization of goodwill and intangibles                                      10,724          8,310
  Deferred income taxes                                                            146         (1,247)
 Change in assets and liabilities, net of effect of David M acquisition:
  Accounts receivable                                                             (125)           280
  Inventories                                                                      909          1,512
  Prepaid expenses and other current assets                                        236            472
  Accounts payable and other accrued expenses                                   (1,218)         4,400
                                                                             ---------      ---------
     Net cash provided by operating activities                                  18,063         14,915
                                                                             ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Cash paid for Day International, Inc., net of cash acquired                                 (203,993)
 Cash paid for net assets of David M                                           (11,285)
 Capital expenditures                                                           (5,221)        (2,082)
 Other                                                                          (1,107)
                                                                             ---------      ---------
     Net cash used in investing activities                                     (17,613)      (206,075)
                                                                             ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Sale of common shares                                                              73         51,600
 Purchase of common shares                                                        (141)
 Proceeds from term loan                                                                       30,000
 Net proceeds from revolving credit facility                                     1,241         21,250
 Issuance of senior subordinated notes                                                        100,000
 Payment of financing costs                                                                    (7,802)
                                                                             ---------      ---------
     Net cash provided by financing activities                                   1,173        195,048
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                             41           (119)
                                                                             ---------      ---------
CASH AND CASH EQUIVALENTS:
 Net increase in cash and cash equivalents                                       1,664          3,769
 Cash and cash equivalents at beginning of period                                3,769
                                                                             ---------      ---------
 Cash and cash equivalents at end of period                                  $   5,433      $   3,769
                                                                             =========      =========
CASH PAID FOR:
 Income Taxes                                                                $   1,620      $     892
                                                                             =========      =========
 Interest                                                                    $  15,517      $   7,963
                                                                             =========      =========
</TABLE>

See notes to consolidated financial statements.

                                       27


<PAGE>   28

DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31,1996 AND PERIOD FROM JUNE 7, 1995
THROUGH DECEMBER 31, 1995 (DOLLAR AMOUNTS IN THOUSANDS)
-------------------------------------------------------------------------------

A.  NATURE OF OPERATIONS AND BASIS OF PRESENTATION

    Day International Group, Inc. and subsidiaries ("Day" or "the Company") is a
    designer and manufacturer of precision engineered rubber components for the
    printing and textile industries. Day's printing components business is a
    designer, manufacturer and marketer of high-quality printing blankets used
    in the offset printing industry. Day's textile components business is a
    manufacturer and marketer of precision engineered rubber cots and aprons
    sold to textile yarn spinners and other engineered rubber products sold to
    diverse markets. Sales are made through Day's organization, distributors and
    representatives.

    In connection with the Stock Purchase Agreement dated April 11, 1995, as
    amended, among Day International Group, Inc., M.A. Hanna Company, and
    Cadillac Plastics Group, Inc., the Share Purchase Agreement dated April 11,
    1995, as amended, among Day International Group, Inc. and Cadillac Plastics
    Limited, and an Asset Purchase Agreement dated April 11, 1995, as amended,
    among Day International Group, Inc. and Day International (Canada) Limited
    (collectively, the "Acquisition Agreement") Day acquired the stock or net
    assets, as appropriate, from M.A. Manna and its subsidiaries, related to the
    precision engineered rubber components business, effective June 6, 1995 for
    $211.8 million in cash (net of cash acquired of $2.5 million). The
    acquisition has been accounted for as a purchase in accordance with
    Accounting Principles Board Opinion No.16. The purchase price has been
    allocated to the net assets acquired based on their fair market values as
    follows:

<TABLE>
<S>                                                                         <C>
        Current assets                                                      $  36,685
        Property, plant and equipment                                          44,990
        Other assets                                                            1,624
        Goodwill and other intangible assets                                  151,469
        Current liabilities                                                   (16,128)
        Postretirement benefits and other long-term liabilities                (6,845)
                                                                            ---------
        Total Purchase Price                                                $ 211,795
                                                                            =========
</TABLE>

    The preliminary purchase price allocation for property, plant and equipment
    at December 31, 1995 was reduced in 1996 by approximately $6.6 million when
    the final appraisals on the domestic land and buildings were completed.

    On December 31, 1996, the Company acquired certain net assets of the
    David M division of Flint Ink Corporation for $11.3 million in cash. The
    acquisition has been accounted for as a purchase in accordance with
    Accounting Principles Board Opinion No.16. Pro form a results of operations
    have not been presented because the results of this acquisition were not
    significant.

                                       28


<PAGE>   29



B.  SIGNIFICANT ACCOUNTING PRINCIPLES

    PRINCIPLE OF CONSOLIDATION - The consolidated financial statements include
    the accounts of the Company and its domestic and foreign subsidiaries. All
    significant intercompany transactions and balances have been eliminated.

    CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all highly
    liquid investments with an original purchased maturity of three months or
    less.

    INVENTORIES are stated at the lower of cost or market using the first-in,
    first-out (FIFO) method.

    PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
    cost. Depreciation is computed using the straight-line method over their
    estimated useful lives. Buildings are depreciated over 25 years and
    machinery and equipment are depreciated between 5 and 10 years.

    LONG-LIVED ASSETS - In March 1995, the Financial Accounting Standards Board
    issued Statement of Financial Accounting Standards No.121, 'Accounting for
    the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
    Of." This statement requires that long-lived assets and certain intangibles
    be reviewed for impairment whenever events or circumstances indicate that
    the carrying value of an asset may not be recoverable. This statement also
    requires that long-lived assets and certain intangible assets to be disposed
    of be reported at the lower of their carrying amount or fair value less
    costs to sell. The adoption of this statement had no impact on the financial
    statements of the Company.

    GOODWILL AND OTHER INTANGIBLES - Goodwill represents the excess of cost over
    the fair value of the net assets acquired and is being amortized on the
    straight line basis over 40 years. The Company assesses the recoverability
    of goodwill and other intangibles by determining whether the amortization of
    the respective balances over their remaining lives can be recovered through
    projected undiscounted cash flows.

    Deferred financing costs of $6,235 at December 31, 1996 (net of accumulated
    amortization of$l,567) are being amortized using an effective interest rate
    method over the lives of the related debt.

    Goodwill and other intangibles are being amortized using the straight line
    method, as follows:

<TABLE>
<CAPTION>
                                                               LIFE

<S>                               <C>                      <C>
    Goodwill                          $ 104,380             40    years
    Employment agreements                 6,803            1.7    years
    Deferred financing costs              7,802            5 to 7 years
    Printing technology                  27,946           11.5    years
    Textile compound formulas             5,247             30    years
    Unpatented technology                 9,529             20    years
                                       --------
    Total intangibles                   161,707

    Less accumulated amortization       (16,689)
                                      ---------

                                      $ 145,018
                                      =========
</TABLE>



                                       29


<PAGE>   30


    REVENUE RECOGNITION - Day recognizes revenue when the product is shipped.
    Reserves for product returns, based upon historical experience, are also
    recognized upon shipment.

    FOREIGN CURRENCY TRANSLATION - The functional currency is the local currency
    of Day's respective international subsidiaries. Accordingly, foreign
    currency assets and liabilities are translated into U.S. dollars at the
    period end exchange rates. Foreign currency revenues and expenses are
    translated at the average exchange rates for the period. Translation gains
    and losses are recorded in the accumulated translation adjustment account in
    shareholders' equity. Transaction gains and losses are recorded in the
    consolidated statement of operations for the period.

    CONCENTRATION OF CREDIT RISK - A majority of Day's textile operations U.S.
    sales are concentrated in the southeastern part of the U.S. Day's printing
    and textile receivables are from a diverse group of customers in the
    printing and textile industry and such receivables are generally unsecured.
    Day maintains a reserve for potential losses.

    Certain of Day's international subsidiaries make purchases in foreign
    currencies. As a result, they are subject to transaction exposures that
    arise from foreign exchange movements between the date that the foreign
    currency transaction is recorded and the date it is consummated. Day has
    entered into forward foreign exchange contracts to protect itself against
    such foreign currency movements. The contract value, which approximates
    market, of these foreign exchange contracts was $1,762 and $1,550 at
    December 31, 1996 and 1995, respectively.

    Day is exposed to credit-related losses in the event of nonperformance by
    counterparties to the forward contracts. No counterparties are expected to
    fail to meet their obligations given their credit ratings, therefore Day
    does not obtain collateral for these instruments.

    FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of the Company's
    long-term debt which consists of a variable rate Credit Agreement and
    11 1/8% Senior Subordinated Debt approximates fair value. The carrying
    amounts of all other current assets and liabilities as reported in the
    consolidated balance sheets at December 31, 1996 and 1995, which qualify
    as financial instruments, approximated fair value.

    MANAGEMENT ESTIMATES - The preparation of the financial statements in
    conformity with generally accepted accounting principles requires management
    to make estimates and assumptions that affect the reported amounts of assets
    and liabilities and disclosures at the date of the financial statements and
    the reported amounts of revenues and expenses during the reporting period.
    Actual results could differ from these estimates.

C.  INVENTORIES

    Inventories as of December 31, 1996 and 1995 consists of:

<TABLE>
<CAPTION>
                                                       1996                1995

<S>                                                  <C>                 <C>
      Finished Goods                                 $ 9,118             $ 7,661
      Work In Progress                                 4,115               4,732
      Raw Materials                                    3,122               2,844
                                                     -------             -------

                                                     $16,355             $15,237
                                                     =======             =======
</TABLE>


                                       30


<PAGE>   31



D.  LONG-TERM AND SUBORDINATED LONG-TERM DEBT

    Long-term and subordinated long-term debt as of December 31, 1996 and 1995
    consists of:


<TABLE>
<CAPTION>
                                                    1996           1995
<S>                                               <C>          <C>
US Credit Agreement                               $ 48,500     $  51,250
UK Credit Agreement                                  4,419
11-1/8% Senior Subordinated Notes                  100,000       100,000
                                                 ---------      --------
                                                   152,919       151,250
  Less: Current maturities of long-term debt          (803)
                                                 ---------      --------
                                                 $ 152,116      $151,250
                                                 =========      ========
</TABLE>

    The US Credit Agreement consists of a $47,000 revolving line of credit and a
    $30,000 term loan with a group of banks. The revolving line of credit
    includes a $12,500 letter of credit subfacility ($6,474 of letters of credit
    were outstanding at December 31, 1996) and a $2,000 swingline loan
    subfacility. The maximum amounts available under the revolving line of
    credit are reduced by $7,000 in June 1997, $10,000 in June 1998 and $10,000
    in June 1999 adjusted by a factor of excess cash flows, as defined in the
    Credit Agreement. At December 31, 1996, interest on $10,500 of the revolving
    line of credit was based on the banks' base rate plus 1.00% (9.25% at
    December 31, 1996) and interest on $8,000 of the revolving line of credit
    was based on the LIBOR rate plus 2.25% (7.75% at December31, 1996). At
    December 31, 1996, $22,026 was available under the Credit Agreement. The
    Credit Agreement requires a commitment fee of 1/2% a year on the unused
    portion of the revolving line of credit. The term loan is a seven year loan
    with quarterly principle payments of $2,500 beginning September, 1999 with
    the final installment due June 2002. Interest on the term loan is based on
    the banks' base rate plus 1.50% (9.75% at December 31, 1996) or the LIBOR
    rate plus 2.75% ( 8.37% at December 31, 1996). At December 31, 1996,
    interest on the term loan was based on the LIBOR rate. Interest rates on
    LIBOR borrowings are fixed for one, two, three or six month periods at the
    Company's discretion. The weighted average interest rate on the Credit
    Agreement for the year ended December 31, 1996 and 1995 was 8.46% and 8.86%,
    respectively.

    The 11-1/8% Senior Subordinated Notes are due June 1, 2005 with interest
    payable semi-annually.

    The US Credit Agreement and the Senior Subordinated Notes contain various
    financial and other covenants which place limits on, among other things,
    asset sales, dividends and distributions of the Company's or its
    subsidiaries' capital stock, the purchase, redemption, acquisition of
    capital stock of the Company or its affiliates or any subsidiaries, and the
    incurrence of certain additional indebtedness. The Company's wholly-owned
    subsidiary, Day International, Inc., has guaranteed the Credit Agreement and
    the Senior Subordinated Notes and pledged all its assets, except its
    investments in its foreign subsidiaries, as collateral on these agreements.

    In 1996, the Company's UK subsidiary entered into credit facilities with a
    UK bank that provides a $1,601 line of credit and two five year term loans
    totaling $4,821. Interest on the line of credit is at the bank's base rate
    plus 1% (7.00% at December 31, 1996) payable monthly. Principal payments on
    the term loans are due in equal quarterly installments of $201 with a final
    payment of $684 due in May 2002. Interest on the term loans is at either the
    bank's base rate plus 1% (7.00% at December 31, 1996) or the LIBOR rate plus
    1% (6.63% at December 31, 1996) payable monthly. At December 31, 1996,
    $1,601 was available under the UK Credit Agreement. All borrowings are
    secured by guarantees from the Company's US subsidiary


                                       31


<PAGE>   32


    and by letters of credit obtained under the overall Credit Agreement. The
    credit facilities also contain certain financial covenants related to the UK
    subsidiary.

    In conjunction with the acquisition, the Company entered into an agreement
    that would provide temporary financing in the event the Senior Subordinated
    Notes were not in place by the closing date. This temporary financing was
    ultimately not required. As a result, fees and related costs associated with
    this temporary financing of $1,019 were charged to other expense in the
    period June 7, 1995 through December 31, 1995.

E.  INCOME TAXES

    Significant components of deferred tax assets (liabilities) as of
    December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                             1996         1995
<S>                                        <C>          <C>
Domestic:
 Current:
  Accounts receivable reserves             $   489      $   508
  Inventory reserves                           533          530
  Other reserves                               638          632
  Net operating loss carryforward            1,284
  AMT credit carryforward                      200
                                           -------      -------
                                             3,144        1,670
                                           -------      -------
 Long-term:
  Depreciation                              (1,477)        (225)
  Amortization                                (531)          38
  Other postretirement benefits                250           76
                                           -------      -------
                                            (1,758)        (111)
                                           -------      -------
Total domestic deferred tax assets           1,386        1,559
                                           -------      -------

Foreign:
 Current:
  Inventories                                 (177)        (130)
  Other                                        422          435
                                           -------      -------
                                               245          305
 Long-term:
  Plant and equipment                       (1,873)      (2,091)
  Pension                                      118
                                           -------      -------
                                            (1,755)      (2,091)
                                           -------      -------

Total foreign deferred tax liabilities      (1,510)      (1,786)
                                           -------      -------
Net deferred tax liabilities               $  (124)     $  (227)
                                           =======      =======
</TABLE>



                                       32


<PAGE>   33


    Income tax expense (benefit) consists of the following for the year ended
    December 31, 1996 and the period from June 7, 1995 through
    December 31, 1995:

<TABLE>
<CAPTION>
                                                         1996              1995
<S>                                                   <C>               <C>
    Current:
    Domestic:
        Federal                                       $                 $   209
        State and local                                   583                50
        Foreign                                         1,251               138
                                                      -------           -------
                                                        1,834               397
                                                      -------           -------
    Deferred:
    Domestic:
        Federal                                           324            (1,359)
        State and local                                    48              (200)
        Foreign                                          (206)              312
                                                      -------           -------

                                                          166            (1,247)
                                                      -------           -------
                                                      $ 2,000           $  (850)
                                                      =======           =======
</TABLE>

    The foreign deferred tax expense primarily results from differences in
    accounting for fixed assets and from the utilization of net operating loss
    carryforwards.

    The income tax expense (benefit) differs from the statutory rate for the
    year ended December 31, 1996 and period June 7, 1995 through December 31,
    1995 as a result of the following: 1996 1995

<TABLE>
<S>                                                          <C>        <C>
    Provision at the federal statutory rate                  $ 1,702    $  (707)
    Foreign tax rate differential                               (169)       (63)
    State and local taxes, net of federal income tax effect      417        (99)
    Non-deductible expenses                                       57        118
    Other                                                         (7)       (99)
                                                             -------    -------
                                                             $ 2,000    $  (850)
                                                             =======    =======
</TABLE>

    Income (loss) before income taxes includes $ 3,571 and $1,510 of income from
    international operations for the year ended December 31, 1996 and period
    June 7, 1995 through December 31, 1995, respectively. Day has not provided
    deferred taxes on the undistributed earnings of foreign subsidiaries because
    the earnings are deemed permanently reinvested. US net operating loss
    carryforwards of approximately $3,300 expire through 2011.

                                       33
<PAGE>   34

F.  BUSINESS OPERATIONS

    Net sales and income (loss) before income taxes (benefit) for the year ended
    December 31, 1996 and the period from June 7, 1995 through December 31, 1995
    and identifiable assets as of December 31, 1996 and 1995 by geographic area
    are as follows:

<TABLE>
<CAPTION>
                                                       1996
                                     -----------------------------------------
                                                      Income
                                                      (Loss)
                                                      Before
                                                      Income      Identifiable
                                     Net Sales         Taxes         Assets
                                     ---------         -----         ------
<S>                                  <C>            <C>            <C>
    Domestic                         $  83,819      $  (3,461)     $ 195,792
    Europe                              33,664          2,025         30,454
    Other International                 24,288          6,443         11,640
    Interarea                           (4,957)
                                     ---------      ---------      ---------
                                     $ 136,814      $   5,007      $ 237,886
                                     =========      =========      =========
</TABLE>


<TABLE>
<CAPTION>
                                                      1995
                                     -----------------------------------------
                                                     Income
                                                     (Loss)
                                                     Before
                                                     Income      Identifiable
                                     Net Sales        Taxes         Assets
                                     ---------      ---------      ---------
<S>                                  <C>            <C>            <C>
    Domestic                         $  46,537      $  (5,260)     $ 186,024
    Europe                              18,289            478         30,415
    Other International                 11,231          2,705         12,384
    Interarea                           (2,954)
                                     ---------      ---------      ---------
                                     $  73,103      $  (2,077)     $ 228,823
                                     =========      =========      =========
</TABLE>


    Sales between geographic areas are generally priced to recover cost plus an
    appropriate mark-up for profit.

G.  RELATED PARTY TRANSACTIONS

    In accordance with a management services agreement, the Company is required
    to pay American Industrial Partners, an affiliate of the controlling
    shareholders of Day, an annual management fee of $800 plus expenses, payable
    semi-annually. The agreement expires in June, 2005 or if there is a change
    in control of the Company.

                                       34
<PAGE>   35

H.  STOCKHOLDERS' EQUITY AND STOCK BASED COMPENSATION PLAN

    The Company has a stock option plan permitting the grant of up to 3,730
    options to purchase common shares to officers and key employees. The options
    vest nine years from the grant date; however, vesting is accelerated if the
    Company achieves certain performance objectives and expire ten years from
    grant date. As of December 31, 1996, 2,605 options have been granted under
    the plan with an exercise price of $1,000 a share, 2,530 options expire in
    2005 and 75 options expire in 2006. The following table summarizes activity
    in the Company's stock option plan:

<TABLE>
<CAPTION>
                                              1996              1995
                                              ----              ----
                                                Excercise           Excercise
                                       Shares     Price     Shares    Price
                                       ------     -----     ------    -----
<S>                                     <C>      <C>        <C>      <C>
    Outstanding at beginning of period  2,730    $ 1,000
    Granted                                75    $ 1,000     2,730   $ 1,000

    Exercised                             (18)   $ 1,000
    Canceled                             (182)   $ 1,000
                                       ------    -------    ------   -------

    Outstanding at end of period        2,605    $ 1,000     2,730   $ 1,000
                                       ======    =======    ======   =======

    Exercisable at end of period          862                  283
                                       ======               ======
    Weighted-average fair value of
     options granted during the year
     using the Black-Scholes options-
     pricing model                               $   662             $   462
                                                 =======             =======
    Weighted-average assumptions used
     for grants:

        Expected dividend yield                       0%                  0%
        Expected life of options                 9 years             9 years
        Risk-free interest rate                       7%                  7%
</TABLE>

    The Company measures compensation cost for stock options issued to employees
    using the intrinsic value based method of accounting prescribed by
    Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock
    Issued to Employees." In October 1995, the Financial Accounting Standards
    Board issued SFAS No.123, "Accounting for Stock-Based Compensation," which
    the Company was required to adopt in 1996. Pursuant to the new standard,
    companies are encouraged, but not required, to adopt the fair value method
    of accounting for stock options and similar equity instruments. Had
    compensation costs been determined based on the fair value method of SFAS
    No.123 the Company's net earnings would have been reduced by $214 in 1996
    and $107 in 1995.

                                       35
<PAGE>   36

I.  RETIREMENT PLANS

    The Company has non-contributory defined benefit plans covering certain
    associates of its UK and German subsidiaries. Benefits under these plans are
    based primarily on years of service and qualifying compensation during the
    final years of employment. Plan assets include marketable equity securities.
    The Company's funding policy complies with the requirements of local laws
    and regulations.

    Day also sponsors defined contribution plans for certain of its associates,
    which provide for Company contributions of a specified percentage of each
    associate's total compensation.

    The funded status of the Company's defined benefit plans at December 31,
    1996 and 1995 is as follows:

<TABLE>
<S>                                                      <C>          <C>
      Actuarial present value of benefit obligations:
            Accumulated benefit obligations including
             vested benefits of $9,347 and $8,332         $  9,493    $  8,472
                                                          ========    ========
            Projected benefit obligation                  $ 10,636    $  9,365
            Plan assets at fair value                       10,652       8,994
                                                          --------    --------
            Plan assets (in excess of) less than
             projected benefits                               (16)        371

            Unrecognized net actuarial gain (loss)             438         (19)
                                                          --------    --------
            Accrued pension cost                          $    422    $    352
                                                          ========    ========
</TABLE>

    The projected benefit obligation was determined using an assumed discount
    rate of 7.5% and an assumed long-term rate of increase in compensation of
    5%. The assumed long-term rate of return on plan assets is 8.5%.

    A summary of the components of net periodic pension cost for the defined
    benefit plans and for the defined contribution plans for the year ended
    December 31, 1996 and the period from June 7, 1995 through December 31, 1995
    is as follows:

<TABLE>
<CAPTION>
                                               1996       1995
                                               ----       ----
<S>                                         <C>        <C>
    Defined benefit plans:
            Service cost                    $   433    $   256
            Interest cost                       701        381
            Actual return on plan assets     (1,006)      (810)
            Net amortization and deferral       265        418
                                            -------    -------
            Net periodic pension cost           393        245
            Defined contribution plans        1,247        690
                                            -------    -------
            Total pension expense           $ 1,640    $   935
                                            =======    =======
</TABLE>



                                       36
<PAGE>   37

J.  OTHER POSTRETIREMENT BENEFITS

    Day provides certain contributory health care and life insurance benefits
    for certain U.S. associates. Those associates may become eligible for these
    postretirement benefits if they retire on or after age 55 with at least ten
    years of service.

    The status of Day's plan at December 31, 1996 and 1995, which is unfunded,
    is as follows:

<TABLE>
<CAPTION>
                                                        1996       1995
                                                        ----       ----
<S>                                                  <C>        <C>
    Accumulated postretirement benefit obligation:
       Retirees                                      $   891    $   785
       Fully eligible active plan participants            87        101
       Other active plan participants                  2,756      2,431
                                                     -------    -------
                                                       3,734      3,317
       Unrecognized net loss                             (79)      (125)
                                                     -------    -------
       Accrued postretirement benefit obligation     $ 3,655    $ 3,192
                                                     =======    =======
</TABLE>

    Approximately $57 of accrued postretirement benefit obligation is included
    in accrued associate related costs at December 31, 1996 and 1995,
    respectively.

    The weighted-average assumed rate of increase in the per capita cost of
    covered benefits (i.e., health care cost rate trend) is assumed to be 10%
    and decreasing gradually to 5.25% in 2006 and remaining at that level
    thereafter. A one percentage point increase in the assumed health care cost
    trend rate would have increased the accumulated benefit obligation by $766
    at December 31, 1996 and the interest and service cost would have been $139
    higher for the year ended December 31, 1996.

    A discount rate of 7.5% was used in determining the accumulated obligation.

    Net periodic postretirement benefit costs include the following components
    for the year ended December 31, 1996 and the period from June 7, 1995
    through December 31, 1995:

<TABLE>
<CAPTION>
                                                    1996      1995
                                                    ----      ----
<S>                                                 <C>       <C>
    Service cost                                    $348      $206
    Interest cost                                    263       136
                                                    ----      ----
    Net periodic postretirement benefit costs       $611      $342
                                                    ====      ====
</TABLE>

                                       37

<PAGE>   38

K.  LEASE COMMITMENTS AND CONTINGENCIES

    The Company leases certain warehouses, transportation equipment and office
    equipment under operating leases with terms of 1 to 10 years. Rental expense
    for the year ended December 31, 1996 and the period from June 7, 1995
    through December 31, 1995 was $811 and $412, respectively. At December 31,
    1996, future minimum lease commitments for noncancelable operating leases
    are:

<TABLE>
<S>                                                    <C>
          1997                                         $  647
          1998                                            350
          1999                                             52
          2000                                             11
          2001                                              9
    Thereafter                                              9
                                                       ------
    Total                                              $1,078
                                                       ======
</TABLE>


    There are currently no environmental claims against the Company for the
    costs of environmental remediation measures taken or to be taken. The
    Company is operating under a consent decree related to its Michigan
    manufacturing facility for environmental matters which occurred prior to the
    acquisition. Independent environmental consultants have assessed the
    environmental matters. Based on this assessment and management's best
    estimates of the liability associated with these matters, reserves for such
    liabilities have been established and no insurance recoveries have been
    anticipated in determining the reserves. The Company's previous parent and
    its parent, M.A Hanna, have agreed to indemnify the Company for certain
    costs associated with these matters. At December 31, 1996, a $1,079
    indemnification receivable is recorded. Management believes that this
    receivable is fully realizable. In management's opinion, the aforementioned
    claims will be resolved without material adverse effect on the operations,
    financial position or cash flows of the Company.

    L. SUPPLEMENTAL CONSOLIDATING INFORMATION

    As described in Note A, in April 1995, the Company purchased Day from M.A.
    Hanna. The acquisition was financed through equity, term and revolving
    credit facilities and senior subordinated debt (the "Notes"). In connection
    with the Acquisition, Day International, Inc. ("Day International" or
    "Guarantor") became a wholly-owned subsidiary of the Company (which has no
    assets or operations other than its investment in Day international) and
    provided a full and unconditional guarantee of the Notes. The wholly-owned
    foreign subsidiaries of Day International are not guarantors with respect to
    the Notes and are not anticipated to have any credit arrangements senior to
    the Notes except for the UK Credit Agreement of the UK subsidiary as
    described in Note D. All of the assets of Day International and its parent,
    other than the assets of the wholly- owned foreign non guarantor
    subsidiaries, are pledged as collateral on the Notes. The only intercompany
    elimination's are the normal intercompany eliminations with regard to
    intercompany sales and the Company's investment in the wholly owned non
    guarantor subsidiaries. In 1996, intercompany notes were put in place
    through a dividend which effectively transfers the interest expense from Day
    International Group, Inc. to Day International, Inc. The following are the
    supplemental combined condensed balance sheets as of December 31, 1996 and
    1995, the supplemental combined condensed statements of operations and cash
    flows for the year ended December 31, 1996 and the period from June 7, 1995
    through December 31, 1995 with the investments in the subsidiaries accounted
    for using the equity method. Separate complete financial statements of the
    Guarantor are not presented because management has determined that they are
    not material to the investors.

                                       38

<PAGE>   39

Day International Group, Inc.
Supplemental Combining Condensed Balance Sheet
December 31,1996



<TABLE>
<CAPTION>

                                         DAY          DAY
                                    International  International    Non Guarantor
                                     Group, Inc.  Inc. (Guarantor)  Subsidiaries  Eliminations Consolidated
                                     -----------  ----------------  ------------  ------------ ------------
<S>                                    <C>           <C>            <C>           <C>           <C>
ASSETS
------
Cash & cash equivalents                $   2,757     $    (726)     $   3,402                   $   5,433
Accounts receivable- net                                 9,139          8,032                      17,171
Inventories                                             10,780          5,575                      16,355
Other assets                                             6,118            901                       7,019
                                       ------------------------------------------------------------------
 TOTAL CURRENT ASSETS                      2,757        25,311         17,910              -       45,978
Intercompany                             148,500           583                     $(149,083)           -
Property, plant and equipment - net                     36,112          9,177                      45,289
Investment in subsidiaries                62,410        19,218                       (81,628)           -
Intangible and other assets                            141,320          5,299                     146,619
                                       ------------------------------------------------------------------
TOTAL ASSETS                           $ 213,667     $ 222,544      $  32,386      $(230,711)   $ 237,886
                                       ==================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                     $   4,878      $   2,919      $    (344)   $   7,453
Current maturities of long-term debt                                      803                         803
Accrued associate related costs
  and other expenses                   $   1,068        10,703          3,301                      15,072
                                       ------------------------------------------------------------------
  TOTAL CURRENT LIABILITIES                1,068        15,581          7,023           (344)      23,328
Intercompany                              10,787       137,536            415       (148,738)           -
Long-term and
 subordinated long-term debt             148,500                        3,616                     152,116
Long-term post retirement
 benefits and other                                      6,921          2,787                       9,708
Total stockholders' equity                53,312        62,506         18,545        (81,629)      52,734
                                       ------------------------------------------------------------------
TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY                 $ 213,667     $ 222,544      $  32,386      $(230,711)   $ 237,886
                                       ==================================================================
</TABLE>

                                       39


<PAGE>   40

Day International Group, Inc.
Supplemental Combining Condensed Balance Sheet
December 31,1995
<TABLE>
<CAPTION>
                                         DAY            DAY
                                    International   International   Non Guarantor
                                     Group, Inc.   Inc. (Guarantor)  Subsidiaries  Eliminations Consolidated
                                     -----------   ----------------  ------------  ------------ ------------
<S>                                    <C>           <C>            <C>           <C>           <C>
ASSETS
------
Cash & cash equivalents                $     403     $      87      $   3,279                   $   3,769
Accounts receivable - net                                7,651          7,956                      15,607
Inventories                                              9,473          5,764                      15,237
Other assets                                  20         1,761          1,060                       2,841
                                       ------------------------------------------------------------------
 TOTAL CURRENT ASSETS                        423        18.972         18,059              -       37,454
Intercompany                                             7,697                    $   (7,697)           -
Property, plant and equipment - net                     35,510          8,986                      44,496
Investment in subsidiaries               210,684        17,193                      (227,877)           -
Intangible and other assets                            140,143          6,730                     146,873
                                       ------------------------------------------------------------------
TOTAL ASSETS                           $ 211,107     $ 219,515      $  33,775     $ (235,574)   $ 228,823
                                       ==================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable                       $      77     $   3,204      $   2,702     $     (101)   $   5,882
Accrued associate related costs
  and other expenses                       1,354         7,198          3,774                      12,326
                                       ------------------------------------------------------------------
  TOTAL CURRENT LIABILITIES                1,431        10,402          6,476           (101)      18,208
Intercompany                               8,053        (8,064)         7,607         (7,596)           -
Long-term and
 subordinated long-term debt             151,250                                                  151,250
Long-term post retirement
 benefits and other                                      6,493          3,011                       9,504
Total stockholders' equity                50,373       210,684         16,681       (227,877)      49,861
                                       ------------------------------------------------------------------
TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY                  $ 211,107     $ 219,515      $  33,775     $ (235,574)   $ 228,823
                                       ==================================================================
</TABLE>


                                       40

<PAGE>   41

Day International Group, Inc.
Supplemental Combining Condensed Statement of Operations
Year ended December 31,1996
<TABLE>
<CAPTION>
                                            DAY            DAY
                                     International, International, Non Guarantor
                                      Group, Inc.  Inc.(Guarantor) Subsidiaries Eliminations Consolidated
                                     -----------   ----------------  ------------  ------------ ------------
<S>                                    <C>           <C>            <C>           <C>           <C>
Net sales                              $       -     $ 101,284      $  35,530     $        -    $ 136,814
Cost of goods sold                                      60,838         23,764                      84,602
                                       ------------------------------------------------------------------
   Gross profit                                         40,446         11,766              -       52,212
Selling, general and administrative           36        15,904          7,717                      23,657
Amortization of intangibles                              6,291            183                       6,474
Management fees                                            920                                        920
                                       ------------------------------------------------------------------
        Operating income                     (36)       17,331          3,866              -       21,161

Other expenses (income):
 Equity in earnings of subsidiaries       (2,976)       (2,526)                        5,502            -
 Interest expense                              -        16,078            295                      16,373
 Other (income) expense                      (87)         (132)                                      (219)
                                       ------------------------------------------------------------------
    Income before income taxes             3,027         3,911          3,571         (5,502)       5,007
Income taxes                                  20           935          1,045                       2,000
                                       ------------------------------------------------------------------
    Net Income                         $   3,007     $   2,976      $   2,526     $   (5,502)   $   3,007
                                       ==================================================================
</TABLE>


Day International Group, Inc.
Supplemental Combining Condensed Statement of Operations
Period from June 7,1995 through December 31,1995

<TABLE>
<CAPTION>
                                          DAY            DAY
                                     International, International,  Non Guarantor
                                      Group, Inc.   Inc.(Guarantor) Subsidiaries  Eliminations Consolidated
                                      -----------   --------------- ------------  ------------ ------------
<S>                                    <C>           <C>            <C>           <C>           <C>
Net sales                              $       -     $  51,974      $  21,129     $        -    $  73,103
Cost of goods sold                                      33,357         14,146                      47,503
                                       ------------------------------------------------------------------
     Gross profit                              -        18,617          6,983              -       25,600
Selling, general and administrative          100         7,799          4,986                      12,885
Amortization of intangibles                              3,634             54                       3,688
Management fees                                            455                                        455
                                       ------------------------------------------------------------------
     Operating income                       (100)        6,729          1,943              -        8,572
Other expenses (income):
 Equity in earnings of subsidiaries       (4,267)       (1,133)                        5,400            -
 Interest expense                          9,130           567                                      9,697
 Other (income) expense                     (223)          815            360                         952
                                       ------------------------------------------------------------------
     Income (loss) before income
      taxes (benefit)                     (4,740)        6,480          1,583          (5,400)     (2,077)
Income taxes (benefit)                    (3,513)        2,213            450                        (850)
                                       ------------------------------------------------------------------
  Net Income (Loss)                    $  (1,227)    $   4,267      $   1,133     $    (5,400)  $  (1,227)
                                       ==================================================================
</TABLE>






                                       41

<PAGE>   42

Day International Group, Inc.
Supplemental Combining Condensed Statement of Cash Flows
Year ended December 31, 1996
<TABLE>
<CAPTION>                                DAY            DAY
                                    International  International,  Non Guarantor
                                      Group, Inc.  Inc.(Guarantor)  Subsidiaries  Eliminations  Consolidated
                                      -----------  ---------------  ------------  ------------  ------------
<S>                                    <C>           <C>            <C>           <C>           <C>
Operating Activities:
Net income                             $   3,007     $   2,976      $   2,526     $    (5,502)  $   3,007
Adjustments to reconcile net income
  to net cash provided by (used in)
  operating activities:
  Depreciation and amortization                         13,589          1,519                       15,108
  Equity in earnings of subsidiaries      (2,976)       (2,526)                         5,502            -
  Deferred income taxes and other                           88           (456)            514          146
  Change in operating assets
   and liabilities                          (343)          696            (57)           (494)        (198)
                                       ------------------------------------------------------------------
Net cash provided by (used in)
 operating activities                       (312)       14,823          3,532              20      18,063

Investing activities:
  Cash paid for David M                                (11,285)                                   (11,285)
  Capital expenditures                                  (3,968)        (1,253)                     (5,221)
Other                                                   (2,665)           921             637      (1,107)
                                       ------------------------------------------------------------------
Net cash used in investing activities          -       (17,918)          (332)            637     (17,613)

Financing Activities:
 Sale of common shares                        73                                                       73
 Purchase of common shares                  (141)                                                    (141)
 Net proceeds from revolving credit
   facility                               (2,750)                       3,991               -       1,241
                                       ------------------------------------------------------------------
Net cash provided by (used in)
  financing activities                    (2,818)            -          3,991               -       1,173
Intercompany transfers and dividends       5,484         2,282         (7,109)           (657)          -
Effects of exchange rates on cash                                          41                          41
                                       ------------------------------------------------------------------
Cash and Cash Equivalents:
 Net increase (decrease) in cash
  and cash equivalents                     2,354          (813)           123               -       1,664
 Cash and cash equivalents at
  beginning of period                        403            87          3,279                       3,769
                                       ------------------------------------------------------------------
 Cash and cash equivalents at
  end of period                        $   2,757     $    (726)     $   3,402     $         -   $   5,433
                                       ==================================================================
</TABLE>
                                       42
<PAGE>   43



Day International Group, Inc.
Supplemental Combining Condensed Statement of Cash Flows
Period from June 7, 1995 through December 31, 1995

<TABLE>
<CAPTION>

                                           DAY           DAY
                                     International  International, Non Guarantor
                                       Group, Inc. Inc.(Guarantor) Subsidiaries   Eliminations  Consolidated
                                     ------------- --------------  ------------   ------------  ------------
<S>                                    <C>           <C>            <C>           <C>           <C>
Operating Activities:
Net income (loss)                      $  (1,227)    $   4,267      $   1,133     $    (5,400)  $  (1,227)
Adjustments to reconcile net
  income (loss) to net
  cash provided by (used in)
  operating activities:
  Depreciation and amortization                          9,828            897                      10,725
  Equity in earnings of subsidiaries      (4,267)       (1,133)                         5,400           -
  Deferred income taxes and other         (3,514)        2,580           (313)                     (1,247)
  Change in operating assets
   and liabilities                         1,411         2,804          1,346           1,103       6,664
                                       ------------------------------------------------------------------
Net cash provided by (used in)
  operating activities                    (7,597)       18,346          3,063           1,103      14,915

Investing activities:
 Cash paid for Day International, Inc.  (203,564)                        (429)                   (203,993)
 Capital expenditures                                   (1,018)        (1,064)                     (2,082)
                                       ------------------------------------------------------------------
Net cash used in investing
 activities                             (203,564)       (1,018)        (1,493)              -    (206,075)

Financing Activities:
 Sale of common shares                    51,600                                                   51,600
 Proceeds from term loan                  30,000                                                   30,000
 Net proceeds from revolving credit
  facility                                21,250                                                   21,250
 Issuance of senior subordinated notes   100,000                                                  100,000
 Payment of financing costs               (7,802)                                                  (7,802)
                                       ------------------------------------------------------------------
Net cash provided by financing
 activities                              195,048             -              -               -     195,048
Intercompany transfers                    16,516       (17,241)         1,828          (1,103)          -
Effects of exchange rates on cash                                        (119)                       (119)
                                       ------------------------------------------------------------------
Cash and Cash Equivalents:
 Net increase in cash and
  cash equivalents                           403            87          3,279               -       3,769
                                       ------------------------------------------------------------------
 Cash and cash equivalents at
  end of period                        $     403     $      87      $   3,279     $         -   $   3,769
                                       ==================================================================

</TABLE>
                                       43
<PAGE>   44

INDEPENDENT AUDITORS' REPORT

Board of Directors

Day International, Inc. and subsidiaries:

We have audited the accompanying consolidated balance sheet of Day
International, Inc. (a wholly-owned subsidiary of M.A. Hanna Company) and
subsidiaries ("Day") as of June 6, 1995, and the related consolidated statements
of income and cash flows for the period January 1, 1995, through June 6, 1995.
Our audit also included the financial statement schedule listed in the Index at
Item 14(a)2 for the period ended June 6, 1995. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Day at June 6, 1995, and the
results of their operations and their cash flows for the period January 1, 1995,
through June 6, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

DELOITTE & TOUCHE LLP

August 17, 1995
Dayton, Ohio

                                       44

<PAGE>   45

DAY INTERNATIONAL, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF M.A. HANNA COMPANY)

CONSOLIDATED BALANCE SHEET
JUNE 6, 1995 (IN THOUSANDS)
--------------------------------------------------------------------------------

ASSETS

<TABLE>
<S>                                                                     <C>
CURRENT ASSETS:
     Cash and cash equivalents                                          $  4,894
     Accounts receivable:
          Trade (less allowance for doubtful accounts of $1,270)          15,658
          Other                                                              630
     Inventories:
          Finished goods                                                   8,690
          Work in process                                                  4,511
          Raw materials and supplies                                       3,822
     Notes receivable from and advances to affiliates (Note E)             6,619
     Prepaid expenses and other current assets                               807
     Deferred income taxes (Note C)                                        2,239
                                                                        --------
               Total current assets                                       47,870

PROPERTY, PLANT AND EQUIPMENT, AT COST:
     Land                                                                    720
     Buildings                                                            10,976
     Machinery and equipment                                              37,686
     Construction in progress                                              2,095
                                                                        --------
                                                                          51,477

     Less accumulated depreciation                                        26,800
                                                                        --------
                                                                          24,677

OTHER ASSETS:
     Goodwill and other intangibles (Note B)                              66,661
     Other                                                                   329
                                                                        --------
                                                                          66,990
                                                                        --------
                                                                        $139,537
                                                                        ========
</TABLE>

See notes to consolidated financial statements.

                                       45

<PAGE>   46

--------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDER'S EQUITY

<TABLE>
<S>                                                                    <C>
CURRENT LIABILITIES:
     Accounts payable                                                  $  6,438
     Accrued associate related costs                                      5,877
     Other accrued expenses                                               2,712
                                                                       --------
          Total current liabilities                                      15,027

Commitments and contingent liabilities (Notes I and J)

OTHER LIABILITIES:
     Other postretirement benefits (Note H)                               3,585
     Deferred income taxes (Note C)                                       4,191
     Other                                                                1,954
                                                                       --------
          Total other liabilities                                         9,730

STOCKHOLDER'S EQUITY (Notes E and F):
     Equity                                                             117,873
     Accumulated translation adjustment                                  (3,093)
                                                                       --------
                                                                        114,780
                                                                       --------
                                                                       $139,537
                                                                       ========
</TABLE>

                                       46

<PAGE>   47

DAY INTERNATIONAL, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF M.A. HANNA COMPANY)

CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD JANUARY 1, 1995 THROUGH JUNE 6, 1995 (IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<S>                                                                     <C>
NET SALES                                                               $55,454
COSTS AND EXPENSES:
     Cost of goods sold                                                  33,935
     Selling, general and administrative                                 11,257
     Amortization of intangibles                                          2,258
     Other income - net (Note K)                                           (577)
                                                                        -------
                                                                         46,873
                                                                        -------
INCOME BEFORE INCOME TAXES                                                8,581
INCOME TAXES (Note C)                                                     3,488
                                                                        -------
NET INCOME                                                              $ 5,093
                                                                        =======
</TABLE>

See notes to consolidated financial statements.

                                       47

<PAGE>   48

DAY INTERNATIONAL, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF M.A. HANNA COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 THROUGH JUNE 6, 1995 (IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<S>                                                                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                         $ 5,093
     Adjustments to reconcile net income to net cash
          provided by operating activities:
               Depreciation and amortization                              4,378
               Deferred income taxes                                     (1,613)
     Changes in assets and liabilities:
          Receivables                                                      (915)
          Inventories                                                    (2,212)
          Prepaid expenses and other current assets                        (697)
          Accounts payable, accruals and other                           (3,615)
                                                                        -------
                    Net cash provided by operating activities               419

CASH FLOWS USED IN INVESTING ACTIVITIES -
     Capital expenditures                                                (1,565)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Decrease in notes receivable and advances                            6,015
     Net change in equity                                                (5,483)
                                                                        -------
                    Net cash provided by financing activities               532

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                      31
                                                                        -------
CASH AND CASH EQUIVALENTS:
     Decrease                                                              (583)
     Beginning of year                                                    5,477
                                                                        -------
     End of year                                                        $ 4,894
                                                                        =======
CASH PAID DURING THE YEAR -
     Income taxes                                                       $   377
                                                                        =======
</TABLE>

See notes to consolidated financial statements.

                                       48

<PAGE>   49

DAY INTERNATIONAL, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF M.A. HANNA COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
PERIOD JANUARY 1, 1995 THROUGH JUNE 6,1995
--------------------------------------------------------------------------------

A. NATURE OF OPERATIONS AND BASIS OF PREPARATION

   Day International, Inc. and subsidiaries ("Day") is a designer and
   manufacturer of precision engineered rubber components for the printing and
   textile industries. Day's printing components business is a designer,
   manufacturer and marketer of high-quality printing blankets used in the
   offset printing industry. Day's textile components business is a manufacturer
   and marketer of precision engineered rubber cots and aprons sold to textile
   yarn spinners and other engineered rubber products sold to diverse markets.
   Sales are made through Day's organization, distributors and representatives.

   The consolidated financial statements of Day have been prepared in connection
   with the Stock Purchase Agreement dated April 11, 1995, as amended, among Day
   International Group, Inc., M.A. Hanna Company, and Cadillac Plastics Group,
   Inc., the Share Purchase Agreement dated April 11, 1995, as amended, between
   Day International Group, Inc. and Cadillac Plastics Limited, and an Asset
   Purchase Agreement dated April 11, 1995, as amended, between Day
   International Group, Inc. and Day International (Canada) Limited
   (collectively, the "Acquisition Agreement"). Pursuant to the terms of such
   agreement, M.A. Hanna Company has the right to propose adjustments to the
   final purchase price. Any adjustments proposed which are not resolved by Day
   International Group, Inc. and M.A. Hanna Company are to be resolved by the
   final, conclusive and binding determination of a third party.

   The consolidated financial statements of Day include the accounts of Day's
   U.S. operations; Day International (U.K.) Limited; Day International France,
   S.A.R.L.; Day International GmbH; Day International de Mexico, S.A. de C.V.;
   Day International Pty. Limited, and the printing and textile division of Day
   International (Canada) Limited.

B. SIGNIFICANT ACCOUNTING POLICIES

   CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all highly
   liquid investments with an original purchased maturity of three months or
   less.

   INVENTORIES are stated at the lower of cost or market, cost being determined
   on the first-in, first-out (FIFO) method.

   PROPERTY, PLANT AND EQUIPMENT - Depreciation is computed principally by the
   straight-line method at rates sufficient to depreciate the cost of the assets
   over their estimated productive lives. Buildings and machinery and equipment
   are depreciated over 25 years and between 5 and 10 years, respectively.

                                       49

<PAGE>   50

   GOODWILL AND OTHER INTANGIBLES - Goodwill and other intangibles are being
   amortized using the straight-line method over 40 years for goodwill and
   trademarks and 9 years for patents. Accumulated amortization was $40,741,000.
   The carrying value of goodwill and other intangibles is evaluated if
   circumstances indicate a possible impairment in value. If undiscounted cash
   flows over the remaining amortization period indicate that goodwill and other
   intangibles may not be recoverable, the carrying value of goodwill and other
   intangibles will be reduced by the estimated shortfall of cash flows on a
   discounted basis.

   INCOME TAXES - The tax provision for Day has been determined on a separate
   return basis. All income taxes paid and currently payable by Hanna on Day's
   behalf will be settled through the equity account of Day. Day recognizes
   taxes on differences between the financial reporting and tax basis of assets
   and liabilities using presently enacted tax rates and laws and provides for a
   valuation allowance on deferred assets, if required.

   FOREIGN CURRENCY TRANSLATION - The functional currency is the local currency
   of Day's respective international subsidiaries. Accordingly, foreign currency
   assets and liabilities are translated into U.S. dollars at the period-end
   exchange rate. Foreign currency revenues and expenses are translated at the
   average exchange rate for the period. Equity is translated at historical
   rates. Foreign currency translation gains and losses are recorded in the
   accumulated translation adjustment account in equity.

   CONCENTRATION OF CREDIT RISK - Approximately 85% of Day's textile operations
   U.S. sales were concentrated in the southeastern part of the U.S. Day's
   printing and textile receivables were from a diverse group of customers in
   the printing and textile industry and such receivables are generally
   unsecured. Day maintains an allowance for potential losses.

   Certain of Day's international subsidiaries make purchases in foreign
   currencies. As a result, they are subject to transaction exposure that arises
   from foreign exchange movements between the date that the foreign currency
   transaction is recorded and the date it is consummated. Day has entered into
   forward foreign exchange contracts to protect itself against such foreign
   exchange movements. The contract value of these foreign exchange contracts is
   $1,479,000 at June 6, 1995.

   Day is exposed to credit-related losses in the event of nonperformance by
   counterparties to the forward contracts. Day usually does not obtain
   collateral for these instruments.

   REVENUE RECOGNITION - Day recognizes revenue and reserves for product
   returns, based on historical experience, when product is shipped.

   CONSOLIDATION - All significant intercompany transactions have been
   eliminated in consolidation.

                                       50


<PAGE>   51

C. INCOME TAXES

   Significant components of Day's deferred tax assets (liabilities) as of June
   6, 1995 are as follows:

<TABLE>
<CAPTION>
                                                            (IN THOUSANDS)
<S>                                                             <C>
    Basis differences from purchase accounting                  $(3,846)
    Tax over book depreciation                                   (1,873)
                                                                -------
         Gross deferred tax liabilities                          (5,719)
    Receivable reserves                                             495
    Inventory reserves                                              471
    Accrued insurance                                               211
    Other postretirement benefits                                 1,421
    Other reserves and accruals                                   1,062
    Operating loss carryforwards                                    177
                                                                -------
    Gross deferred tax assets                                     3,837

    Deferred tax assets valuation allowance                         (70)
                                                                -------
    Net deferred tax liabilities                                $(1,952)
                                                                =======
</TABLE>

   For financial reporting purposes, a valuation allowance was recorded to
   offset the deferred tax asset of $70,000 related to operating loss
   carryforwards in Italy, which expire between 1995 and 1998. During the period
   January 1, 1995 through June 6, 1995, the valuation allowance was decreased
   by $7,000 due to utilization of this operating loss carryforward.

   The provision for income taxes consists of the following for the period
   January 1, 1995 through June 6, 1995.

<TABLE>
<CAPTION>
                                                            (in thousands)
<S>                                                            <C>
        Current:
             Federal                                            $ 3,664
             State                                                  600
             Foreign                                                788
                                                                -------
                                                                  5,052
        Deferred:
             Federal                                             (1,139)
             State                                                  (75)
             Foreign                                               (350)
                                                                -------
                                                                 (1,564)
                                                                -------
                                                                $ 3,488
                                                                =======
</TABLE>

                                       51

<PAGE>   52

   The provision for income taxes differs from the amount computed by applying
   U.S. statutory federal income tax rate for the period January 1, 1995 through
   June 6, 1995, are as follows:

<TABLE>
<CAPTION>
                                                             (in thousands)
<S>                                                             <C>
   Provision at statutory tax rate                              $ 2,396
   State income taxes                                               341
   Foreign                                                          438
   Goodwill amortization                                            325
   Other - net                                                      (12)
                                                                -------
                                                                $ 3,488
                                                                =======
</TABLE>

   Income before income taxes includes $1,730,000 for the period January 1, 1995
   through June 6, 1995 from international operations. Day has not provided
   deferred taxes on undistributed earnings of foreign subsidiaries because the
   earnings are deemed permanently reinvested, and the determination of
   liability is not practicable.

D. BUSINESS OPERATIONS

   Net sales and income before income taxes for the period January 1, 1995
   through June 6, 1995 and identifiable assets as of June 6, 1995 by geographic
   area are as follows (in thousands):

<TABLE>
<CAPTION>
                                                        INCOME
                                                        BEFORE
                                                        INCOME       IDENTIFIABLE
1995                                   NET SALES         TAXES          ASSETS
<S>                                    <C>             <C>            <C>
Domestic                               $ 33,316        $ 6,052        $ 88,763
Europe                                   15,808            646          24,465
Other international                       8,873          1,883          26,309
Interarea                                (2,543)
                                       --------        -------        --------
                                       $ 55,454        $ 8,581        $139,537
                                       ========        =======        ========
</TABLE>

   Sales between geographic areas are generally priced to recover cost plus an
   appropriate mark-up for profit.

E. RELATED PARTY TRANSACTIONS

   Direct third party expenses incurred by Hanna on behalf of Day, including
   legal costs and insurance premiums, have been charged to Day based on the
   fair value of the services performed. No allocation of Hanna's general
   corporate costs have been reflected in these consolidated financial
   statements since Day is managed as a stand-alone business, and management
   believes that any such amounts would not be material to Day's results of
   operations. While management believes that this is a reasonable method, the
   amounts that would have been or will be incurred on a separate company basis
   could differ from the estimated amounts due to economies of scale realized by
   Day and differences in management techniques and organization.

   In 1995, Day purchased compounded rubber products from Hanna affiliates in
   the amount of $.9 million.

   At June 6, 1995, Day International (Canada) Ltd. had a note receivable of
   $5.9 million from a Hanna affiliate, with an interest rate of 5%, due in
   December 1995.

                                       52

<PAGE>   53

F. STOCKHOLDER'S EQUITY

   Equity is affected by earnings and cash and non-cash transfers between Day
   and Hanna. Day cash receipts are transferred into Hanna bank accounts, and
   Day disbursements are funded from Hanna bank accounts on Day's behalf. Also,
   certain other transactions between Day and Hanna divisions, such as payroll,
   income and payroll taxes, fringe benefits, and direct charges for legal and
   other professional fees, are settled through Day's equity account. Day has
   historically generated a positive cash flow and Hanna has never charged any
   interest on its investment in Day. Therefore, in preparation of these
   consolidated financial statements, no debt or interest charges are reflected.
   The change in equity reflecting such activity for the period is summarized as
   follows (in thousands):

<TABLE>
<CAPTION>
                                                        1995
<S>                                                   <C>
   Balance, January 1                                 $118,263
   Net income                                            5,093
   Day cash receipts transferred to Hanna              (40,523)
   Day disbursements paid by Hanna                      30,776
   Domestic taxes transferred to Hanna                   4,264
                                                      --------
   Balance, June 6                                    $117,873
                                                      ========
</TABLE>

   The change in accumulated translation adjustment is as follows (in
   thousands):

<TABLE>
<CAPTION>
                                                         1995
<S>                                                    <C>
   Balance, January 1                                  $(1,135)
   Translation adjustment                               (1,958)
                                                       -------
   Balance, June 6                                     $(3,093)
                                                       =======
</TABLE>

G. PENSION

   Day has non-contributory defined benefit plans covering certain associates of
   Day International (U.K.) Limited and Day International GmbH. Benefits for
   these plans are based primarily on years of service and qualifying
   compensation during the final years of employment. Plan assets include
   marketable equity securities. Day's funding policy complies with the
   requirements of local laws and regulations.

   Day also sponsors defined contribution plans for certain of its associates,
   which provide for company contributions of a specified percentage of each
   associate's total compensation.

                                       53

<PAGE>   54

   The following sets forth the funded status of Day's defined benefit plans at
   June 6, 1995 (in thousands):

<TABLE>
<S>                                                                  <C>
   Actuarial present value of benefit obligations:
        Accumulated benefit obligations including
             vested benefits of $6,251                               $6,400
                                                                     ======
   Projected benefit obligation                                      $7,527
   Plan assets at fair value                                          6,630
                                                                     ------
   Projected benefits in excess of plan assets                          897

   Unrecognized net assets                                              322
   Unrecognized prior service cost                                     (361)
   Unrecognized net actuarial gains                                    (242)
                                                                     ------
   Accrued pension cost recognized in balance sheet                  $  616
                                                                     ======
</TABLE>

   The projected benefit obligation was determined using an assumed discount
   rate of 8.25% and an assumed long-term rate of increase in compensation of
   5%. The assumed long-term rate of return on plan assets is 8.5%.

   A summary of the components of net periodic pension cost for the defined
   benefit plans and the total contribution charged to expense for the defined
   contribution plans for the period January 1, 1995 through June 6, 1995 is as
   follows (in thousands):

<TABLE>
<S>                                                             <C>
   Defined benefit plans:
        Service cost                                            $ 194
        Interest cost and projected benefit obligation            234
        Return on plan assets                                      70
        Net amortization and deferral                            (370)
                                                                -----
        Net periodic pension cost                                 128
   Defined contribution plans                                     669
                                                                -----
                                                                $ 797
                                                                =====
</TABLE>

H. OTHER POSTRETIREMENT BENEFITS

   Day provides certain contributory health care and life insurance benefits for
   certain U.S. associates. Those associates may become eligible for these
   postretirement benefits if they retire on or after age 55 with at least ten
   years of service.

                                       54

<PAGE>   55

   The status of the Day's plan, which is unfunded at June 6, 1995 is as follows
   (in thousands):

<TABLE>
<S>                                                             <C>
   Accumulated postretirement benefit obligation:
        Retirees                                                $  962
        Fully eligible active plan participants                    118
        Other active plan participants                           2,175
                                                                ------
                                                                 3,255
   Unrecognized actuarial gain                                     384
                                                                ------
   Accrued postretirement benefit obligation                    $3,639
                                                                ======
</TABLE>

   Accrued postretirement benefit obligation of approximately $54,000 is
   included in the accompanying consolidated balance sheet caption accrued
   associate related costs.

   The weighted-average assumed rate of increase in the per capita cost of
   covered benefits (i.e., health care cost trend rate) is assumed to be 12.0%
   and, decreasing gradually to 6.25% in 2007 and remaining at that level
   thereafter. A one percentage point increase in the assumed health care cost
   trend rate would have increased the accumulated benefit obligation by
   $300,000 at June 6, 1995.

   A discount rate of 8.25% was used in determining the accumulated obligation.

   Net periodic postretirement benefit costs include the following components
   for the period January 1, 1995 through June 6, 1995 (in thousands):

<TABLE>
<S>                                                             <C>
   Service cost                                                 $153
   Interest cost                                                 119
   Amortization of unrecognized actuarial gain                    (5)
                                                                ----
                                                                $267
                                                                ====
</TABLE>

I. LEASE COMMITMENTS

   Rental expense under operating leases for certain warehouses, automobiles and
   office equipment was $300,000 for the period January 1, 1995 through June 6,
   1995. Certain of the Day's leases have options to renew, and there are no
   significant contingent rentals.

   As of June 6, 1995, future minimum lease commitments for noncancelable
   operating leases are (in thousands):

<TABLE>
<S>                                                           <C>
   1995 (June 7, through December 31, 1995)                   $  285
   1996                                                          442
   1997                                                          288
   1998                                                           55
   1999                                                           14
   Thereafter                                                     26
                                                              ------
                                                              $1,110
                                                              ======
</TABLE>

                                       55

<PAGE>   56
J. CONTINGENCIES

   Claims have been made against Day for the costs of environmental remediation
   measures taken or to be taken. Day has established total reserves for such
   liabilities of $1,298,000 which it believes are probable and reasonably
   estimable. In determination of the reserves, insurance recoveries have not
   been anticipated. In management's opinion, the aforementioned claims will be
   resolved without material adverse effect on the results of operations,
   financial position or cash flows of Day.

K. OTHER INCOME - NET

   Other income - net includes the following for the period January 1, 1995
   through June 6, 1995 (in thousands):

<TABLE>
<S>                                                   <C>
   Interest income                                    $(185)
   Foreign currency gain                               (140)
   Other                                               (252)
                                                      -----
                                                      $(577)
                                                      =====
</TABLE>

L. SUPPLEMENTAL CONSOLIDATING INFORMATION

   As described in Note A, in April 1995, the Company purchased Day from M.A.
   Hanna. The acquisition was financed through equity, term and revolving credit
   facilities and senior subordinated debt (the "Notes"). In connection with the
   Acquisition, Day became a wholly-owned subsidiary of the Company (which has
   no assets or operations other than its investment in Day) and provided a full
   and unconditional guarantee of the Notes. The wholly-owned foreign
   subsidiaries of Day are not guarantors with respect to the Notes and are not
   anticipated to have any credit arrangements senior to the Notes except for
   the UK Credit Agreement of the UK subsidiary as described in Note D. All of
   the assets of Day and its parent, other than the assets of the wholly-owned
   foreign non guarantor subsidiaries, are pledged as collateral on the Notes.
   The only intercompany elimination's are the normal intercompany eliminations
   with regard to intercompany sales and the Company's investment in the wholly
   owned non guarantor subsidiaries. The following are the supplemental combined
   condensed balance sheet as of June 6, 1995, the supplemental combined
   condensed statements of operations and cash flows for the period from January
   1, 1995 through June 6, 1995 with the investments in the subsidiaries
   accounted for using the equity method. Separate complete financial statements
   of the Guarantor are not presented because management has determined that
   they are not material to the investors.

                                       56

<PAGE>   57

Day International, Inc.
Supplemental Combining Condensed Balance Sheet
June 6, 1995

<TABLE>
<CAPTION>
                                                      DAY
                                                 International       Non Guarantor
                                                Inc. (Guarantor)      Subsidiaries     Eliminations     Consolidated
                                                ----------------     -------------     ------------     ------------
<S>                                                 <C>                 <C>            <C>             <C>
ASSETS
------
     Cash & cash equivalents                        $  1,105            $  3,789                       $  4,894
     Accounts receivable - net                         8,102               8,186                         16,288
     Inventories                                      10,152               6,871                         17,023
     Other assets                                      2,410                 996       $  6,259           9,665
                                                    -----------------------------------------------------------
          TOTAL CURRENT ASSETS                        21,769              19,842          6,259          47,870

     Intercompany                                     34,230               6,619        (40,849)             --
     Property, plant and equipment - net              20,382               4,295                         24,677
     Investment in subsidiaries                       18,171                            (18,171)             --
     Intangible and other assets                      66,937                 272           (219)         66,990
                                                    -----------------------------------------------------------
TOTAL ASSETS                                        $161,489            $ 31,028       $(52,980)       $139,537
                                                    ===========================================================

LIABILITIES AND STOCKHOLDER'S EQUITY
     Accounts payable                               $  3,637            $  3,041       $   (240)       $  6,438
     Accrued associate related costs
          and other expenses                           5,361               3,588           (360)          8,589
                                                    -----------------------------------------------------------
               TOTAL CURRENT LIABILITIES               8,998               6,629           (600)         15,027

     Intercompany                                                          5,535         (5,535)             --
     Long-term post retirement
          benefits and other                           9,256                 693           (219)          9,730
     Total stockholder's equity                      143,235              18,171        (46,626)        114,780
                                                    -----------------------------------------------------------

TOTAL LIABILITIES AND
     STOCKHOLDER'S EQUITY                           $161,489            $ 31,028       $(52,980)       $139,537
                                                    ===========================================================
</TABLE>

                                       57

<PAGE>   58

Day International, Inc.
Supplemental Combining Condensed Statement of Income
Period January 1, 1995 through June 6,1995



<TABLE>
<CAPTION>
                                                           DAY
                                                       International,     Non Guarantor
                                                      Inc. (Guarantor)     Subsidiaries   Eliminations    Consolidated
                                                      ----------------     ------------   ------------    ------------
<S>                                                      <C>                 <C>            <C>             <C>
Net sales                                                $ 39,690            $ 24,177       $ (8,413)       $ 55,454
Cost of goods sold                                         23,829              18,519         (8,413)         33,935
                                                         -----------------------------------------------------------
   Gross profit                                            15,861               5,658             --          21,519
Selling, general and administrative                         6,776               4,481                         11,257
Amortization of intangibles                                 2,258                                              2,258
                                                         -----------------------------------------------------------
    Operating income                                        6,827               1,177             --           8,004

Other expenses (income):
 Equity in earnings of subsidiaries                        (1,426)                             1,426              --
 Other (income) expense                                       110                (687)                          (577)
                                                         -----------------------------------------------------------
   Income before income taxes                               8,143               1,864         (1,426)          8,581
Income taxes                                                3,050                 438                          3,488
                                                         -----------------------------------------------------------
   Net Income                                            $  5,093            $  1,426       $ (1,426)       $  5,093
                                                         ===========================================================
</TABLE>

Day International, Inc.
Supplemental Combining Condensed Statement of Cash Flows
Period January 1, 1995 through June 6,1995


<TABLE>
<CAPTION>
                                                           DAY
                                                       International,     Non Guarantor
                                                      Inc. (Guarantor)     Subsidiaries   Eliminations    Consolidated
                                                      ----------------     ------------   ------------    ------------
<S>                                                      <C>                 <C>            <C>             <C>
Operating Activities:
Net Income                                               $  5,093            $  1,426       $ (1,426)       $  5,093

Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
  Depreciation and amortization                             4,021                 357                          4,378
  Equity in earnings of subsidiaries                       (1,426)                             1,426              --
  Deferred income taxes and other                          (1,265)               (348)                        (1,613)
  Change in operating assets and liabilities               (5,084)             (2,355)                        (7,439)
                                                         -----------------------------------------------------------

Net cash provided by (used in) operating activities         1,339                (920)            --             419

Investing activities:
  Capital expenditures                                     (1,213)               (352)                        (1,565)
                                                         -----------------------------------------------------------
Net cash used in investing activities                      (1,213)               (352)            --          (1,565)

Financing Activities:
  Net change in notes receivable and advances               5,890                 125                          6,015
  Net change in equity                                     (5,483)                                            (5,483)
                                                         -----------------------------------------------------------
Net cash provided by financing activities                     407                 125             --             532

Effects of exchange rates on cash                                                  31                             31
                                                         -----------------------------------------------------------

Cash and Cash Equivalents:
  Net increase (decrease) in cash and cash equivalents        533              (1,116)            --            (583)
  Cash and cash equivalents at beginning of period            572               4,905                          5,477
                                                         -----------------------------------------------------------
  Cash and cash equivalents at end of period             $  1,105            $  3,789       $     --        $  4,894
                                                         ===========================================================
</TABLE>

                                       58

<PAGE>   59

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholder of Day International, Inc.

In our opinion, the accompanying consolidated statements of income and cash
flows present fairly, in all material respects, the results of operations and
cash flows of Day International, Inc. (a wholly-owned subsidiary of M.A. Hanna
Company) and its subsidiaries (as described in Note 1 to these consolidated
financial statements) for the year ended December 31, 1994, in conformity with
generally accepted accounting principles, These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan an 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, assessing the accounting principles
used and significant estimates made by management. And evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Day International, Inc. for any period
subsequent to December 31, 1994.

PRICE WATERHOUSE LLP

Cleveland, Ohio
May 1, 1995

                                       59

<PAGE>   60

                            DAY INTERNATIONAL, INC.
                        CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                                      YEAR ENDED
                                                                   DECEMBER 31, 1994
                                                                   -----------------
                                                                    (IN THOUSANDS)
<S>                                                                   <C>
Net Sales                                                             $ 120,288

Costs and Expenses:
  Cost of goods sold                                                     70,996
  Selling, general and administrative expense                            22,741
  Amortization of intangibles                                             5,212
  Other income - net                                                       (453)
                                                                      ---------
                                                                         98,496
                                                                      ---------
Income before Income Taxes                                               21,792
  Income taxes                                                            9,205
                                                                      ---------

Net Income                                                            $  12,587
                                                                      =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       60

<PAGE>   61

                           DAY INTERNATIONAL, INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                                           1994
                                                                           ----
                                                                      (IN THOUSANDS)
<S>                                                                    <C>
Cash Provided from (Used for) Operations
  Net income                                                           $ 12,587
  Depreciation and amortization                                           9,937
  Deferred income taxes                                                  (1,697)
  Changes in operating assets and liabilities:
     Receivables                                                         (2,225)
     Inventories                                                         (1,291)
     Prepaid expenses                                                      (250)
     Trade payables and other accruals                                    2,811
  Other                                                                     463
                                                                       --------
       Net operating activities                                          20,335
Cash Provided from (Used for) Investing Activities
  Capital expenditures                                                   (3,564)
  Sale of short-term securities                                           4,305
  Other                                                                     814
                                                                       --------
       Net investing activities                                           1,555
Cash Provided from (Used for) Financing Activities
  Increase in notes receivable and advances                             (12,583)
  Payments received on notes receivable and advances                      1,153
  Day cash receipts transferred to Hanna                                 (89,171)
  Day disbursements paid by Hanna                                        65,139
  Domestic taxes transferred to Hanna                                    10,239
                                                                       --------
       Net financing activities                                         (25,223)
Effect of exchange rate changes on cash                                     253
                                                                       --------

Cash and Cash Equivalents
  Decrease                                                               (3,080)
  Beginning of year                                                       8,557
                                                                       --------
     End of year                                                       $  5,477
                                                                       ========
Cash Paid During Year
     Income taxes                                                      $  1,029
                                                                       ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       61

<PAGE>   62

                             DAY INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

l. Basis of Preparation and Significant Accounting Policies

(a) Basis of presentation and nature of operations

     Day International, Inc. ("Day") is a designer and manufacturer of precision
engineered rubber components for the printing and textile industries. Day's
printing components division is a designer, manufacturer and marketer of
high-quality printing blankets used in the offset printing industry. Day's
textile components division is a manufacturer and marketer of precision
engineered rubber cots and aprons sold to textile yarn spinners and other
engineered rubber products sold to diverse markets. Sales are made through Day's
organization, distributors and representatives.

     The consolidated financial statements of Day represent a combination of the
accounts of Day's U.S. operations; Day International (U.K.) Limited; Day
International France S.A.R.L; Day International GmbH; Day International de
Mexico, S.A. de C.V.; Day International Pty. Limited and the printing and
textile division of Day International (Canada) Limited Collectively, these
entities are wholly-owned subsidiaries of M.A. Hanna Company ("Hanna").

     All significant intercompany transactions have been eliminated in
consolidation.

(b) Significant accounting policies

     Inventories

     Inventories are states at the lower of cost or market, cost being
determined on the first-in, first-out (FIFO) method.

     Depreciation

     Depreciation is computed principally by the straight-line method at rates
sufficient to depreciate the cost of the assets over their estimated productive
lives. Buildings and machinery and equipment are depreciated over 25 years and
between 5 and 10 years, respectively.

     Goodwill and Other Intangibles

     Goodwill and other intangibles are being amortized using the straight-line
method over 40 years for goodwill and trademarks and nine years for patents and
other intangibles.

     Income Taxes

     The tax provision for Day has been determined on a separate return basis.

                                       62

<PAGE>   63

     Foreign Currency Translation

     The functional currency is the local currency of Day's respective
international subsidiaries. Foreign currency revenues and expenses are
translated at the average exchange rate for the period. Foreign currency
translation gains and losses are recorded in the accumulated translation
adjustment account.

     Revenue Recognition

     Day recognizes revenue and reserves for product returns, based upon
historical experience, when product is shipped. Sales returns are accounted for
as a reduction to sales and an increase in the reserves.

2. SUBSEQUENT EVENT

     In April 1995, Hanna announced it had entered into an agreement to sell its
printing and textile business to American Industrial partners ("AIP"). The
agreement is contingent upon AIP securing financing and regulatory and other
approvals. Hanna expects that this transaction will close in June 1995. These
financial statements represent Day's historic accounts and do not include any
adjustments that may be required by AIP connection with their purchase.

3. INCOME TAXES

     The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                             Year Ended
                                         December 31 , 1994
                                         ------------------
                                           (in thousands)
<S>                                          <C>
Current:
        Federal                              $  8,675
        State                                   1,564
        International                             663
                                             --------
                                               10,902

Deferred
        Federal                                (1,807)
        State                                    (332)
        International                             442
                                             --------
                                               (1,697)
                                             --------
                                             $  9,205
                                             ========
</TABLE>

     Day is included in the consolidated U.S. tax return of Hanna. Consolidated
current and deferred income tax expense was allocated to Day as if Day filed tax
returns on a separate return basis.

                                       63

<PAGE>   64

     The provision for income taxes differs from the amount computed by applying
the U.S. statutory federal income tax rate as follows:

<TABLE>
<CAPTION>
                                        Year Ended
                                     December 3l. 1994
                                     -----------------
                                       (in thousands)
        <S>                               <C>
        Provision at statutory tax rate   $7,627
        State income taxes                   803
        Goodwill amortization                640
        Other- net                           135
                                          ------
                                          $9,205
                                          ======
</TABLE>

4.  BUSINESS SEGMENTS

     The Company operates in one business segment - highly engineered, precisely
gauged polymer/fabric composite products - due to similarities in the design,
manufacturing, sales and management processes for the printing and textile
components of the business. Net sales by product line for the year ended
December 31, 1994 are as follows:

<TABLE>
<CAPTION>
                                         Year Ended
                                      December 31.1994
                                      ----------------
                                       (in thousands)
        <S>                              <C>
        Printing components              $ 88,914
        Textile components                 31,374
                                         --------
                                         $120,288
                                         ========
</TABLE>

Net sales and operating income by geographic area for 1994 are as follows:

<TABLE>
<CAPTION>
                                  Operating
                      Net Sales     Income

        <S>           <C>          <C>
        Domestic      $  78,876    $16,942
        Europe           27,930      1,454
        Other Internat   19,590      3,396
        Interarea        (6,108)
                      ---------    -------
                      $ 120,288    $21,792
                      =========    =======
</TABLE>

     Interarea sales are generally priced to recover cost plus an appropriate
mark-up for profit.

5.  RELATED PARTY TRANSACTIONS

     Direct expenses incurred by Hanna on behalf of Day, including legal costs
and insurance premiums, have been charged to Day based on the fair value of the
services performed. No allocation of Hanna's general corporate costs have been
reflected in these consolidated financial statements since Day is managed as a
stand-alone business , and management believes that any such amounts would not
be material to Day's results of operations. While management believes that this
is a reasonable method, the amounts that would have been or will be incurred on
a separate company basis could differ from the estimated amounts due to
economics of scale realized by Day and differences in management techniques and
organization.

     In 1994, Day purchased compounded rubber products from Hanna affiliates in
the amount of $1,162,000.

                                       64

<PAGE>   65

6.  PENSION AND OTHER POSTRETIREMENT BENEFITS

     Day has non-contributory defined benefit plans covering certain associates
at Day International (U.K.) Limited and Day International GmbH. Benefits for
these plans are based primarily on years of service and qualifying compensation
during the final years of employment. Plan assets include marketable equity
securities. Day's funding policy complies with the requirements of local laws
and regulations.

     Day also sponsors defined contribution plans for certain of its associates,
which provide for company contributions of a specified percentage of each
associate's total compensation.

     A summary of the components of net periodic pension cost for the defined
contribution plans follows:

<TABLE>
<CAPTION>
                                                       Year Ended
                                                    December 31, 1994
                                                    -----------------
                                                     (in thousands)
         <S>                                             <C>
         Defined benefit plans:
         Service cost                                    $ 448
         Interest cost on projected benefit obligation     539
         Return on plan assets                             161
         Net amortization and deferral                    (853)
                                                         -----
         Net periodic pension cost                         295
         Defined contribution plans                        603
                                                         -----
                                                         $ 898
                                                         =====
</TABLE>

     In addition to providing pension benefits, Day provides certain
contributory health care and life insurance benefits for retired U.S.
associates. Associates of the U.S. company may become eligible for these
postretirement benefits if they retire on or after age 55 with at least ten
years of service.

     Net periodic postretirement benefit cost includes the following components:

<TABLE>
<CAPTION>
                                                  Year Ended
                                               December 31, 1994
                                               -----------------
                                                (in thousands)
         <S>                                        <C>
         Service Cost                               $383
         Interest Cost                               229
                                                    ----
         Net periodic postretirement benefit cost   $612
                                                    ====
</TABLE>

     The weighted-average assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is assumed to be 12.0% and
decreasing gradually to 6.25% in 2007 and remaining at the level thereafter. A
one percentage point increase in the assumed health care cost trend rate would
have increased the aggregate service and interest costs components of net
periodic postretirement benefit costs for 1994 by $136,000.

7.  LEASE COMMITMENTS

     Rental expense under operating leases for certain warehouses,
transportation equipment and office equipment was $723,000 in 1994. Certain of
Day's leases have options to renew, and there are no significant contingent
rentals.

                                       65

<PAGE>   66

     At December 31, 1994, future minimum lease commitments for noncancelable
operating leases are:

<TABLE>
<CAPTION>
                                                                  Amount
                                                                  ------
                                                              (in thousands)
         <S>                                                       <C>
         1995                                                      $371
         1996                                                       226
         1997                                                       128
         1998                                                        12
         1999                                                         9
         Thereafter                                                  22
                                                                   ----
                                                                   $768
                                                                   ====
</TABLE>

8.  CONTINGENCIES

     In 1988, Cadillac Plastics Group ("Day's Parent") entered into a consent
decree, to which Day was not a party, with the Michigan Department of Natural
Resources with respect to certain groundwater contamination conditions at Day's
Three Rivers facility. The decree requires Day's Parent to continue to operate a
groundwater extraction and treatment system for seven to ten years, at an
approximate cost of $100,000 per year. In addition, claims have been made
against Day for other environmental matters including being names as one of many
"potentially responsible parties" under the "Superfund" statutes. Independent
environmental consultants have assessed the environmental matters. Based upon
this assessment and management's best estimate of the liability associated with
these matters, Day has accrued $1.2 million. In management's opinion, the
aforementioned claims will be resolved without a material adverse effect on the
results of operations, financial position or cash flows of Day. Day's Parent and
Hanna have agreed to indemnify Day for certain of the costs associated with
these matters.

9.  OTHER INCOME - NET

     Other income -- net includes the following:

<TABLE>
<CAPTION>
                                                               Year Ended
                                                            December 31, 1994
                                                            -----------------
                                                             (in thousands)
         <S>                                                     <C>
         Interest income                                         $(348)
         Foreign currency (gain) loss                             (129)
         Other                                                      24
                                                                 -----
                                                                 $(453)
                                                                 =====
</TABLE>

10. SUPPLEMENTAL COMBINED CONDENSED FINANCIAL STATEMENTS

     As described in Note 2, in April 1995, Hanna entered into an agreement to
sell the Company to AIP. The acquisition will be financed through equity, term
and revolving credit facilities and senior subordinated debt (the "Notes"). In
connection with the Acquisition, the Company will have no assets or operations
other than its investment in the Company) and will provide a full and
unconditional guarantee of the Notes. The wholly-owned foreign subsidiaries of
the Company will not be guarantors with respect to the Notes and are not
anticipated to have any credit arrangements senior to the Notes except for an
anticipated $6 million borrowing by the U.K. subsidiary under the Credit
Agreement. All of the assets of Company and its parent, other than the assets of
the wholly-owned foreign non-guarantor subsidiaries, are pledged as collateral
on the Notes. The only intercompany

                                       66

<PAGE>   67

eliminations are the normal intercompany eliminations with regard to
intercompany sales. The following are the supplemental combining statement of
income and cash flows for the year ended December 31, 1994. A separate complete
financial statement of the Company is not presented because management has
determined it is not material to the investors.

Day International, Inc.
Supplemental Combining Condensed Statement of Operations
For the year ended December 31,1994

<TABLE>
<CAPTION>
                                                DAY
                                            International,   Non Guarantor
                                           Inc. (Guarantor)  Subsidiaries     Eliminations     Consolidated
                                           ----------------  ------------     ------------     ------------
        <S>                                   <C>               <C>             <C>              <C>
        Net sales                             $ 90,302          $45,784         $(15,798)        $ 120,258
        Cost of goods sold                      52,568           34,226          (15,798)           70,996
                                              ------------------------------------------------------------
            Gross profit                        37,734           11,558               --            49,292

        Selling, general and administrative     14,841            7,900                             22,741
        Amortization of intangibles              5,212                                               5,212
                                              ------------------------------------------------------------
           Operating income                     17,681            3,658               --            21,339

        Other expenses (income):

         Equity in earning of subsidiaries      (3,018)                            3,018                --
         Other (income) expense                     12             (465)                              (453)
                                              ------------------------------------------------------------
           Income before income taxes           20,687            4,123           (3,018)           21,792
         Income taxes                            8,100            1,105                              9,205
                                              ------------------------------------------------------------
           Net Income                         $ 12,587          $ 3,018         $ (3,018)        $  12,587
                                              ============================================================
</TABLE>

                                       67

<PAGE>   68

Day International, Inc.
Supplemental Combining Condensed Statement of Cash Flows
Year Ended December 31, 1994

<TABLE>
<CAPTION>
                                                           DAY
                                                       International,   Non Guarantor
                                                       Inc (Guarantor)   Subsidiaries     Eliminations  Consolidated
                                                       ---------------   ------------     ------------  ------------
<S>                                                      <C>               <C>               <C>              <C>
Operating Activities:
Net Income                                               $ 12,587          $  3,018          $ (3,018)        $ 12,587
 Adjustments to reconcile net income to net
   cash provided by (used in) operating activities:
   Depreciation and amortization                            9,183               754                              9,937
   Equity in earning of subsidiaries                       (3,018)                              3,018               --
   Deferred income taxes and other                         (1,697)                                              (1,697)
   Change in operating assets and liabilities              (1,323)              831                               (492)
                                                         -------------------------------------------------------------
Net cash provided by operating activities                  15,732             4,603                --           20,335

Investing activities:
  Purchase of short term securities                                           4,305                              4,305
  Capital expenditures                                     (2,612)             (952)                            (3,564)
  Other                                                     1,017              (203)                               814
                                                         -------------------------------------------------------------
Net cash provided by (used in) investing activities        (1,595)            3,150                --            1,555

Financing Activities:
  Net change in notes receivable and advances                               (11,430)                           (11,430)
  Net change in equity                                    (13,793)                                             (13,793)
                                                         -------------------------------------------------------------
Net cash (used in) financing activities                   (13,793)          (11,430)               --          (25,223)

Effects of exchange rates on cash                                               253                                253
                                                         -------------------------------------------------------------
Cash and Cash Equivalents:
  Net increase (decrease) in cash and cash equivalents        344            (3,424)               --           (3,080)
  Cash and cash equivalents at beginning of period            228             8,329                              8,557
                                                         -------------------------------------------------------------
  Cash and cash equivalents at end of period             $    572          $  4,905          $     --         $  5,477
                                                         =============================================================
</TABLE>

                                       68

<PAGE>   69

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

         None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names, ages (as of March 21, 1997) and a brief account
of the business experience of each person who is a director or executive officer
of the Company and the Guarantor. Each person holds the same position at the
Company and the Guarantor.

<TABLE>
<CAPTION>
       Name             Age                   Position
       ----             ---                   --------
<S>                     <C>     <C>
Dennis R. Wolters ..... 50      Chief Executive Officer, President and Director
John R. Elia .......... 49      Vice President, Operations, Printing
David B. Freimuth ..... 44      Vice President and Chief Financial Officer
Burnell R. Roberts .... 69      Director
W. Richard Bingham .... 61      Director
Theodore C. Rogers .... 62      Director
Lawrence W. Ward, Jr .. 44      Director and Secretary
Robert L. Purdum ...... 61      Director and Chairman of the Board
</TABLE>

Dennis R. Wolters was named President of the Company in June 1990. Previously,
he was President of Printing from 1989 to June 1990, Executive Vice President of
Printing from 1986 to 1989 and Director of Business Development from 1983 to
1986.

John R. Elia was named Vice President of Operations for Printing in 1995 - Mr.
Elia also heads the quality improvement process and was the technical leader on
ISO 9000 certification. From 1992 to 1995 he was Vice President of Manufacturing
for Printing. Mr. Elia was director of Textile Manufacturing from 1990 until
1992.

David B. Freimuth was named Vice President and Chief Financial Officer in 1995.
He was named Controller of the Company in 1987 and since that time he has been
responsible for all accounting functions for the domestic and international
operations of the Company.

Bumell R. Roberts is the former Chairman and Chief Executive Officer of The Mead
Corporation ("Mead"), a paper products company. He was named President of Mead
in 1981 and served as Chairman and Chief Executive Officer from 1982 until 1992.
From 1992 until 1993, Mr. Roberts served as a director of Mead. Mr. Roberts
joined American Industrial Partners ("Partners") in 1993, and is (i) a limited
partner of American Industrial Partners, L.P. ("AIP-LP"), the general partner of
AIP I, (ii) a limited partner of American Industrial Partners II, L.P.
("AIPII-LP"), the general partner of AIP II, (iii) a stockholder of American
Industrial Partners Management Company, Inc. ("AIPMC"), the ultimate general
partner of AIP I, and (iv) a stockholder of American Industrial Partners
Corporation ("AIPCorp."),

                                       69

<PAGE>   70

the ultimate general partner of AIP II. Mr. Roberts is also a director of Armco
Inc. ("Armco"), Perkin- Elmer Corp., Sweetheart Holdings Inc. ("Sweetheart"),
DPL Inc., Universal Protective Packaging, Inc. and Rayonier, Inc.

W. Richard Bingham co-founded Partners and has been a director and officer of
the firm since 1989. He is also a general partner and a limited partner of
AIP-LP, a limited partner of AIPII-LP, and a stockholder, officer and director
of AIPMC and AIP Corp. Prior to co-founding Partners, Mr. Bingham was a Managing
Director of Shearson Lehman Brothers Inc. from 1984 until late 1987. Prior to
joining Shearson Lehman Brothers, Mr. Bingham was Director of the Corporate
Finance Department, member of the Board, and, most recently, head of Mergers and
Acquisitions at Lehman Brothers Kuhn Loeb Inc. Prior thereto, he directed
investment banking operations at Kuhn Loeb & Company where he was a Partner and
member of the Board and Executive Committee. Mr. Bingham is also a director of
Sweetheart, Easco Corporation ("Easco") and RBX Corporation ("RBX"). He formerly
served on the boards of Avis, Inc., ITT Life Insurance Corporation and Valero
Energy Corporation.

Theodore C. Rogers co-founded Partners and has been a director and officer of
the firm since 1989. He is also a general partner and a limited partner of
AIP-LP, a limited partner of AIPII-LP, and a stockholder, officer and director
of AIPMC and AIPCorp. From 1980 to 1987, he served as Chairman, President and
Chief Executive Officer of NL Industries, Inc., a petroleum service and chemical
company. Mr. Rogers is a former director of Allied Stores Corporation,
Allied-Signal Inc., Parsons Corporation, MCorp and Southwest Bancshares Inc. He
is currently a director of Easco, Sweetheart, RBX and Derby International.

Lawrence W. Ward, Jr. has been an employee of Partners since 1992. From 1989 to
1992, he was Vice President and Chief Financial Officer of Plantronics, Inc., a
telecommunications equipment company, and from 1980 to 1989, he held several
investment banking positions at Kidder, Peabody & Co., Incorporated, including
Senior Vice President. Mr. Ward is currently a director of Easco and RBX.

Robert L. Purdum retired as Chairman of Armco in 1994. From November 1990 to
1993, Mr. Purdum was Chairman and Chief Executive Officer of Armco. Mr. Purdum
has been a director of Partners since joining the firm in 1994 and is a limited
partner of AIP-LP and AIPII-LP and a stockholder of AIPMC and AIPCorp. Mr.
Purdum is also a director of Holophane Corporation, Berlitz International, Inc.
and GMI Engineering & Management Institute, Inc.

Directors do not receive compensation for their services as directors, with the
exception of the Chairman of the Board, who receives $100,000 per year.

                                       70

<PAGE>   71

EMPLOYMENT AGREEMENTS

Mr. Wolters is a party to a three-year employment agreement with Day
International, Inc., and various members of management are party to two-year
employment agreements with the Guarantor. Each associate who is subject to an
employment agreement received a sales fulfillment incentive fee upon the
consummation of the Acquisition. Mr. Wolters' incentive fee was two times his
base salary, while the other managers' incentive fees were equal to their
respective base salaries, in both cases adjusted up or down according to the
purchase price of the Acquisition. Subject to certain exceptions, in the event
any such executive is terminated by the Guarantor, each employment agreement
provides that the executive is entitled to a lump sum equal to the greater of
(i) such executive's total base compensation and minimum incentive bonus
compensation payable from the date of termination to the last day of the
executive's respective employment period or (ii) 150% of the sum of the
executive's annual base compensation and minimum annual incentive bonus
compensation.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation for 1996
for Mr. Wolters and the other executive officers of the Company.

<TABLE>
<CAPTION>
                                                                                               ALL
                                                ANNUAL COMPENSATION                           OTHER
                                               ---------------------    LONG-TERM            COMPEN-
           NAME AND PRINCIPAL POSITION         SALARY ($)  BONUS ($)  COMPENSATION($)(a)     SATION ($)
           ---------------------------         ----------  ---------  -------------------    ----------
        <S>                                     <C>         <C>            <C>                 <C>
        Dennis R. Wolters, President and        186,667     77,063         29,178              13,442
         Chief Executive Officer
        John R. Elia, Vice President            87,567      16,246         11,087              28,567
        David B. Freimuth, Vice President       90,000      19,265          7,586               7,662



<FN>
(a)  Represents compensation received in 1996 under a Hanna long-term incentive
     plan. The Company has replaced the Hanna long-term incentive plan with a
     stock option program. No options were awarded to the officers in 1996.
</TABLE>

                                       71

<PAGE>   72

The following table sets forth information concerning the compensation for 1995
for Mr. Wolters and the three other officers of the Company.
<TABLE>
<CAPTION>
                                                                                                            ALL
                                                  ANNUAL COMPENSATION                                      OTHER
                                                  -------------------             LONG-TERM               COMPEN-
           NAME AND PRINCIPAL POSITION          SALARY ($)      BONUS ($)       COMPENSATION($)(a)     SATION ($)(b)
           ---------------------------          ----------      ---------       -------------------     -------------
<S>                                              <C>             <C>                <C>                   <C>
        Dennis R. Wolters, President and         156,564         234,985            128,604               602,408
         Chief Executive Officer
        James W. Mann, Vice President             91,000          84,249             61,719               198,326
        John R. Elia, Vice President              74,300          58,200             39,133               196,817
        David B. Freimuth, Vice President         79,822          50,063             28,702               194,008
<FN>
(a) The Company's management participated in a Hanna long-term incentive plan
    which the Company has replaced with a new stock option program.
(b) Includes sale incentive awards from Hanna related to the sale of the
    Company.
</TABLE>

The following table sets forth information concerning the options/stock
appreciation rights granted in 1995 for Mr. Wolters and the other executive
officers of the Company.
<TABLE>
<CAPTION>
                                               Option/SAR Grants in Last Fiscal Year (a)
                                               -----------------------------------------
                                      Number of     % of Total
                                     Securities      Options/
                                     Underlying        SARs                              Grant
                                      Options/      Granted to   Exercise                Date
                                       SARS        Employees in   or Base  Expiration   Present
  NAME AND PRINCIPAL POSITION        Granted (#)    Fiscal Year    Price      Date     Value (b)
  ---------------------------        ----------    ------------   -------  ----------  --------
<S>                                    <C>             <C>        <C>         <C>       <C>
Dennis R. Wolters, President and
  Chief Executive Officer              1,200           44.0%      $1,000      2005      $462
James W. Mann, Vice President            200            7.3%       1,000      2005       462
John R. Elia, Vice President             200            7.3%       1,000      2005       462
David B. Freimuth, Vice President        200            7.3%       1,000      2005       462
</TABLE>

(a) The options vest nine years from date of grant, however, vesting is
    accelerated if the Company achieves certain performance objectives.
(b) The grant date present value calculated using Black-Scholes pricing model.

                                       72

<PAGE>   73

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 21, 1997, there were 34 holders of record of shares of Common Stock.
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 21, 1997, assuming the exercise of options
exercisable within 60 days of the date hereof, by (i) each person who is known
by the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each of the Company's directors and the named executives in the Summary
Compensation Table and (iv) all directors and executive officers as a group. To
the knowledge of the Company, each stockholder has sole voting and investment
power as to the shares shown unless otherwise noted.
<TABLE>
<CAPTION>
                             NAME                                    NUMBER(1)  PERCENTAGE(1)
                             ----                                    ---------  -------------
<S>                                                                  <C>         <C>
        American Industrial Partners Capital Fund, L.P.(2)              32,500       63.00%
        American Industrial Partners Capital Fund II, L.P.(2)           17,500       33.90%
        Dennis R. Wolters                                                  300            *
        David B. Freimuth                                                  100            *
        John R. Elia                                                       100            *
        Burnell R. Roberts                                                  75            *
        Robert L. Purdum                                                    30            *
        Lawrence W. Ward, Jr.                                               10            *
        W. Richard Bingham (3)                                          50,000       97.00%
        Theodore C. Rogers(3)                                           50,000       97.00%
        All directors and executive officers as a group (11 persons)    50,805       98.50%
</TABLE>



  * Represents less than 1%
(1) Based upon 51,555.5 shares of Common Stock outstanding.
(2) The address of AIP I and AIP II is One Maritime Plaza, Suite 2475, San
    Francisco, CA 94111.
(3) 32,500 of such shares are held of record by AIP I, and 17,500 of such shares
    are held of record by AIP II. Messrs. Bingham and Rogers are general
    partners of AIP-LP (the general partner of AIP I) and shareholders of AIPMC
    (the general partner of AIP-LP) and AIPCorp. (the general partner of
    AIPII-LP, which in turn is the general partner of AIP II) and therefore
    share investment and voting power with respect to the securities owned by
    AIP I and AIP II, but each disclaim beneficial ownership of any shares of
    Common Stock of the Company. The business address of Mr. Bingham is One
    Maritime Plaza, Suite 2525, San Francisco, CA 94111, and the business
    address of Mr. Rogers is 551 Fifth Avenue, Suite 3800, New York, NY 10176.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In accordance with a management services agreement, the Company is required to
pay American Industrial Partners, an affiliate of the controlling shareholders
of Day, an annual management fee of $800,000, plus expenses, payable
semi-annually. The agreement expires in June, 2005 or if there is a change in
control of the Company.

All stockholders have entered into a Stockholders Agreement which provides for
the election of directors and restrictions on the sale or transfer of the common
stock of the Company.

                                       73

<PAGE>   74

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial Statements

The following consolidated financial statements of the Company and its
subsidiaries are incorporated by reference as part of this Report at Item 8
hereof.

DAY INTERNATIONAL GROUP, INC.
Year ended December 31, 1996 and the
     period from June 7, 1995 through December 31, 1995:

         Independent Auditors' Report
         Consolidated Balance Sheets
         Consolidated Statements of Operations
         Consolidated Statements of Stockholders' Equity
         Consolidated Statements of Cash Flows
         Notes to Consolidated Financial Statements

DAY INTERNATIONAL, INC.
Period from January 1.1995 through June 6, 1995:

         Independent Auditors' Report
         Consolidated Balance Sheet
         Consolidated Statement of Operations
         Consolidated Statement of Stockholders' Equity
         Consolidated Statement of Cash Flows
         Notes to Consolidated Financial Statements

Year ended December 31, 1994:

         Independent Accountants' Report
         Consolidated Statement of Income
         Consolidated Statement of Cash Flows
         Notes to Consolidated Financial Statements

                                       74

<PAGE>   75

(a)(2) FINANCIAL STATEMENT SCHEDULES

    Year ended December 31 , 1996 and periods ended June 6, 1995 and December
        31, 1995:
            Independent Auditors' Report - At pages 22 and 44 of this Report.
            Schedule II - Valuation and Qualifying accounts (At page 77 of this
                Report).

    Year ended December 31, 1994:
            Independent Accountants' Report - At page 78 of this Report.
            Schedule II - Valuation and Qualifying accounts (At page 79 of this
                Report).

    The information required to be submitted in Schedules I, III, IV and V for
    Day International Group, Inc. and consolidated subsidiaries has either been
    shown in the financial statements or notes, or is not applicable or required
    under Regulation S-X, and, therefore, those schedules have been omitted.

(b) REPORTS ON FORM 8-K

    No report on Form 8-K was filed during the quarter ended December 31, 1996.

(c) EXHIBITS. SEE INDEX TO EXHIBITS

(d) SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
    SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
    PURSUANT TO SECTION 12 OF THE ACT

    No annual report covering the Company's last fiscal year, and no proxy
    statement, form of proxy or other proxy soliciting material, has been sent
    to security holders of the Company.

                                       75

<PAGE>   76

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Day International Group, Inc. has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Day International Group, Inc.
(Registrant)
Date:  March 24, 1997   By:   /s/ Dennis R Wolters
                              -------------------------
                              Dennis R. Wolters
                              President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of Day International
Group, Inc. and in the capacities and on the dates indicated.

Date:  March 24, 1997   By:     /s/ Dennis R Wolters
                              -------------------------
                              Dennis R. Wolters
                              President, Chief Executive Officer and
                              Director (Principal Executive Officer)

Date:  March 24, 1997   By:     /s/ David B. Freimuth
                              -------------------------
                              David B. Freimuth
                              Vice President and Chief Financial
                              Officer (Principal Financial Officer
                              and Principal Accounting Officer)

Date:  March 24, 1997   By:     /s/ Burnell P. Roberts
                              -------------------------
                              Burnell P. Roberts
                              Director

Date:  March 24, 1997   By:     /s/ W. Richard Bingham
                              -------------------------
                              W. Richard Bingham
                              Director

Date:  March 24, 1997   By:     /s/ Theodore C. Rogers
                              -------------------------
                              Theodore C. Rogers
                              Director

Date:  March 24, 1997   By:     /s/ Lawrence W. Ward, Jr.
                              -------------------------
                              Lawrence W. Ward, Jr.
                              Director

Date:  March 24, 1997   By:     /s/ Robert L. Purdum
                              -------------------------
                              Robert L. Purdum
                              Director

                                       76

<PAGE>   77

DAY INTERNATIONAL GROUP, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
    COLUMN A               COLUMN B                    COLUMN C                          COLUMN D         COLUMN E
    --------               --------     ------------------------------------------       --------         --------
                                                      ADDITIONS
                                        -----------------------------------------
 ALLOWANCE FOR             BALANCE AT     CHARGED TO                                    DEDUCTIONS          BALANCE
    DOUBTFUL               BEGINNING      COSTS AND                     CURRENCY          FROM              AT END
    ACCOUNTS               OF PERIOD      EXPENSES      ACQUIRED       TRANSLATION       RESERVES          OF PERIOD
 -------------             ---------      ----------    --------       -----------      ----------         ---------
<S>                   <C>                <C>            <C>             <C>             <C>             <C>
Period Ended:
December 31, 1996       $       (1,248)  $      (118)   $     (50)      $       25      $       409     $         (982)
                        ==============   ===========    =========       ==========      ===========     ==============
December 31, 1995       $       (1,258)  $      (130)   $       -       $        1      $       139     $       (1,248)
                        ==============   ===========    =========       ==========      ===========     ==============
June 6,1995             $       (1,153)  $      (138)   $       -       $      (39)     $        60     $       (1,270)
                        ==============   ===========    =========       ==========      ===========     ==============
</TABLE>

                                       77

<PAGE>   78

                       Report of Independent Accountants
                       ---------------------------------
                        on Financial Statement Schedule
                        -------------------------------

To the Board of Directors and Stockholder of
Day International, Inc.

Our audit of the consolidated financial statements of Day International, Inc.
and its subsidiaries referred to in our report dated May 1, 1995 appearing on
page 59 of this Annual Report on Form 10-K also included an audit of the
Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our
opinion, this Financial Statement Schedule of Day International, Inc. and its
subsidiaries presents fairly, in all material respects, the information set
forth therein as of December 31, 1994 and for the year then ended when read in
conjunction with the related consolidated financial statements. We have not
audited the consolidated financial statements of Day International, Inc. for any
period subsequent to December 31, 1994.

Price Waterhouse LLP

Cleveland, Ohio
May 1, 1995

                                       78

<PAGE>   79

DAY INTERNATIONAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
    COLUMN A               COLUMN B               COLUMN C              COLUMN D         COLUMN E
    --------               --------       -----------------------       --------         --------
                                                ADDITIONS
                                          -----------------------
 ALLOWANCE FOR             BALANCE AT     CHARGED TO                    DEDUCTIONS       BALANCE
    DOUBTFUL               BEGINNING      COSTS AND     CURRENCY          FROM           AT END
    ACCOUNTS               OF PERIOD      EXPENSES     TRANSLATION       RESERVES       OF PERIOD
 -------------             ----------     ----------   -----------      ----------      ---------
<S>                   <C>             <C>             <C>             <C>              <C>
Period Ended:
December 31, 1994        $     (919)    $    (439)      $    226       $      (21)     $     (1,153)
                         ==========     =========       ========       ==========      ============
</TABLE>

                                       79

<PAGE>   80

<TABLE>
<CAPTION>
INDEX TO EXHIBITS
                                                                                                           Page No.
                                                                                                           --------
<S>            <C>                                                                                        <C>
(3)     Articles of Incorporation and By-Laws:
                  3.1   Certificate of Incorporation of Day International Group, Inc. ("Group")                *
                  3.2   By-Laws of Group                                                                       *
                  3.3   Certificate of Incorporation of Day International, Inc. (the "Guarantor")              *
                  3.4   By-Laws of the Guarantor                                                               *

(4)     Instruments Defining Rights of Security Holders, including Indentures:
                  4.1   Indenture dated June 6, 1995 among Registrant, the Guarantor and
                        American Bank National Association                                                     *
                  4.2   Registration Rights Agreement dated as of June 6, 1995 among Group,
                        the Guarantor, Donaldson, Lufkin & Jenrette Securities Corporation,
                        NationsBanc Capital Markets, Inc.                                                      *

(10)    Material Contracts:
               10.1    Purchase Agreement dated as of May 25, 1995 among Group, the Guarantor
                       (as of June 6, 1995) Donaldson, Lufkin & Jenrette Securities Corporation and
                       NationsBanc Capital Markets, Inc.                                                       *
               10.2    Stockholders Agreement dated as of June 6, 1995 among Group,
                       American Industrial Partners Capital Fund, L.P., American
                       Industrial Partners Capital Fund II, L.P., and certain other
                       signatories thereto.                                                                    *
               10.3    Credit Agreement dated as of June 6, 1995 among Group, the Guarantor,
                       NationsBank of Texas, N.A. (the "Agent").                                               *
               10.4    Security Agreement dated as of June 6, 1995 among the Guarantor, certain
                       subsidiaries signatory thereto from time to time and the Agent.                         *
               10.5    Pledge and Security Agreement dated as of June 6, 1995 among Group
                       and the Agent.                                                                          *
               10.6    Pledge and Security Agreement dated as of June 6, 1995 among the
                       Guarantor and the Agent.                                                                *
               10.7    Employment Agreement dated December 9, 1994 between the Guarantor
                       and Dennis R. Wolters.                                                                  *
               10.8    Form of Employment Agreement between the Guarantor with certain
                       members of management.                                                                  *
               10.9    Stock Purchase Agreement dated April 11, 1995 among Group, M.A. Hanna
                       Company and Cadillac Plastic Group, Inc., as amended.                                   *
               10.10   Share Purchase Agreement dated April 11, 1995 between Group and
                       Cadillac Plastic Limited, as amended.                                                   *
               10.11   Asset Purchase Agreement between Day International (Canada) Limited
                       and Group, as amended.                                                                  *
               10.12   Management Agreement dated as of June 6, 1995 between Group, the
                       Guarantor and American Industrial Partners.                                             *
               10.13   Stock Option Plan                                                                       **
               10.14   Bank of Scotland Credit Agreement                                                       ***
               10.15   Amendment No.1 to Credit Agreement dated June 6, 1995                                   ***
               10.16   Amendment No.2 to Credit Agreement dated June 6, 1995                                   82-87
</TABLE>



                                       80

<PAGE>   81

<TABLE>
<CAPTION>
                                                                                                           Page No.
                                                                                                           --------
<S>            <C>                                                                                        <C>

        10.17   Amendment to Stock Option Plan                                                               88-89

        10.18   Asset Purchase Agreement between Day International, Inc. and
                Flint Ink Corporation dated December 31, 1996                                               90-134

(21) Subsidiaries                                                                                              135

(27) Financial Data Schedule                                                                                   136
</TABLE>

*    Incorporated by reference to the Group's Registration Statement on Form S-4
     (Reg. No.33-93644).

**   Incorporated by reference to the Group's Form 10K for the period ended
     December 31, 1995.

***  Incorporated by reference to the Group's Form 10Q for the quarterly period
     ended June 30, 1996.

                                       81