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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Year ended December 31, 2005
 Commission File No. 333-51839
 DAY INTERNATIONAL GROUP, INC.
         o þ
  o þ
  þ o
 þ
  o o þ
  o þ
 At the close of business on March 1, 2006:Number of shares of common stock outstanding
    
    
    24,823Aggregate market value of the Companys voting and non-
voting common stock held by non-affiliates
    
    $
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Safe Harbor Statement; Industry Data
     2




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




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Transfer Media
  Chemical Products
  Flexographic Products
  4




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Products
  ® ® ® ® ® ® ® ®
       5




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®
 Sales and Distribution
   Textile Products
  6




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Products
 ® ®
    7




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Sales and Distribution
  Raw Materials
    Research and Development
   Competition
  8




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International Operations
    Environmental Matters
  9




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Associates
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ITEM 1a. RISK FACTORS
  Substantial Leverage and Debt Service Obligations: Our indebtedness could adversely affect our
financial health, limit our ability to grow and compete and prevent us from fulfilling our
obligations under our indebtedness.
   
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on the debt, limiting available cash for other purposes, such as funding
working capital, capital expenditures, dividends, research and development efforts and
other general corporate purposes;
    
    limit our ability to obtain additional debt financing in the future for working
capital, capital expenditures, research and development or acquisitions;
    
    increase the amount of our interest expense, because certain of our borrowings are
at variable rates of interest, which if interest rates increase, would result in
higher interest expense;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    limit our flexibility in planning for, or reacting to, changes in our business and
the industries in which we operate;
    
    restrict us from making strategic acquisitions, introducing new technologies or
exploiting business opportunities; and
    
    place us at a competitive disadvantage compared to our competitors that have less
indebtedness.
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Risks Associated with our Exchangeable Preferred Stock: Various restrictions in the New Credit
Agreements limit our ability to pay cash dividends.
 1 4
 Risks Associated with International Operations: Our substantial international operations subject us
to risks inherent in non-U.S. activities, including political uncertainty, import and export
limitations, exchange controls, unfavorable economic conditions outside of the United States, and
currency fluctuations.
  
    
    agreements may be difficult to enforce and receivables difficult to collect through a
foreign countrys legal system;
    
    foreign customers may have longer payment cycles;
    
    foreign countries may impose additional withholding taxes or otherwise tax our foreign
income, impose tariffs or adopt other restrictions on foreign trade or investment,
including currency exchange controls;
    
    intellectual property rights may be more difficult to enforce in foreign countries;
    
    fluctuations in exchange rates may affect product demand and may adversely affect the
profitability in U.S. dollars of products and services provided by us in foreign markets
where payment for our products and services is made in the local currency;
    
    general economic conditions in the countries in which we operate could have an adverse
effect on our earnings from operations in those countries;
    
    our business and profitability in a particular country could be affected by political or
economic repercussions on a domestic, country-specific or global level from terrorist
activities and the response to such activities;
    
    unexpected adverse changes in foreign laws or regulatory requirements may occur,
including with respect to export duties and quotas;
    
    compliance with a variety of foreign laws and regulations may be difficult;
    
    overlap of different tax structures may subject us to additional taxes; and
    
    significant increases in the value of the U.S. dollar relative to foreign currencies could
have an adverse effect on our ability to meet interest and principal
obligations on U.S.
dollar-denominated debt.
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We are exposed to fluctuations in foreign exchange rates, which may adversely affect our operating
results and net income.
    Interest Rate Risks : We are subject to market risk from exposure to changes in the interest rates
based on our financing activities.
 .
 Commodity Risks: Increases in costs or reductions in supplies of specialty and commodity products
used in our manufacturing process could materially and adversely affect our operating results.
  
    
    new laws or regulations;
    
    suppliers allocations to other purchasers;
    
    interruptions in production by suppliers;
    
    changes in exchange rates; and
    
    worldwide price levels.
 
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Impact of Significant Competition: The competitive pressures we face could harm our sales and gross
profit.
  Environmental Matters: Environmental and health and safety liabilities and requirements could
require us to incur material costs.
  
    
    those governing discharges to the air and water;
    
    the handling and disposal of solid and/or hazardous wastes; and
    
    the remediation of contamination associated with releases of hazardous substances.
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Impact of Technological Change: We may be unable to respond effectively to technological changes in
our industry, which could reduce the demand for our products and adversely affect our results of
operations.
  Recently enacted changes in the securities laws and regulations are likely to increase our costs.
  Due to inherent limitations, there can be no assurance that our system of disclosure and internal
controls and procedures will be successful in preventing all errors or fraud, or in informing
management of all material information in a timely manner.
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There are inherent uncertainties involved in estimates, judgments and assumptions used in the
preparation of financial statements in accordance with US GAAP. Any changes in estimates, judgments
and assumptions could have a material adverse effect on our business, financial position and
results of operations.
  Dependence on Key Personnel: We may be adversely affected if we lose the services of any member of
our senior management team.
  Our production facilities are subject to operating hazards, the occurrence of which could have an
adverse effect on our business, financial condition or results of operations and business
disruptions could seriously harm our future revenue and financial condition and increase our costs
and expenses.
    We are exposed to intangible asset risk.
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Prolonged downturns of our customers industries and general economic uncertainty could adversely
affect our sales and operating profit.
  We rely on patents, trademarks, and confidentiality agreements to protect our intellectual
property. Our future performance and growth could be adversely affected if we fail to protect our
intellectual property rights.
  
 ITEM 1b. UNRESOLVED STAFF COMMENTS
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ITEM 2. PROPERTIES
  Size
    
    
    Owned/Location
    
    Segment
    
    (Sq. Ft.)
    
    
    LeasedManufacturing:Addison, Illinois
    
    Image Transfer
    
    
    38,600
    
    
    OwnedAsheville, North Carolina
    
    Image Transfer
    
    
    240,600
    
    
    OwnedFairfield, New Jersey
    
    Image Transfer
    
    
    19,900
    
    
    LeasedGreenville, South Carolina
    
    Textile Products
    
    
    85,200
    
    
    OwnedHouston, Texas
    
    Image Transfer
    
    
    64,000
    
    
    OwnedThree Rivers, Michigan
    
    Image Transfer
    
    
    58,000
    
    
    OwnedWest Chester, Ohio
    
    Image Transfer
    
    
    14,500
    
    
    OwnedAhaus, Germany
    
    Image Transfer
    
    
    36,200
    
    
    OwnedChrastava, Czech Republic
    
    Image Transfer
    
    
    9,300
    
    
    OwnedDundee, Scotland
    
    Image Transfer
    
    
    184,300
    
    
    OwnedFoshan, China
    
    Image Transfer
    
    
    19,000
    
    
    LeasedKuala Lumpur, Malaysia
    
    Image Transfer
    
    
    8,300
    
    
    LeasedManchester, England
    
    Image Transfer
    
    
    66,000
    
    
    OwnedMelbourne, Australia
    
    Image Transfer
    
    
    28,700
    
    
    OwnedMünster, Germany
    
    Textile Products
    
    
    79,600
    
    
    LeasedParana, Brazil
    
    Image Transfer
    
    
    10,800
    
    
    LeasedWarehouse/Converting:Cleveland, Ohio
    
    Image Transfer
    
    
    37,800
    
    
    LeasedCovington, Georgia
    
    Image Transfer
    
    
    8,100
    
    
    LeasedEagan, Minnesota
    
    Image Transfer
    
    
    10,500
    
    
    LeasedHanover, Massachusetts
    
    Image Transfer
    
    
    20,000
    
    
    LeasedLittle Elm, Texas
    
    Image Transfer
    
    
    16,200
    
    
    LeasedMonrovia, California
    
    Image Transfer
    
    
    25,900
    
    
    LeasedNashville, Tennessee
    
    Image Transfer
    
    
    5,000
    
    
    LeasedRockland, Massachusetts
    
    Image Transfer
    
    
    26,700
    
    
    LeasedRochdale, England
    
    Image Transfer
    
    
    5,800
    
    
    LeasedLerma, Mexico
    
    Image Transfer
    
    
    15,900
    
    
    OwnedMilan, Italy
    
    Textile Products
    
    
    1,500
    
    
    LeasedMoscow, Russia
    
    Image Transfer
    
    
    1,000
    
    
    LeasedParis, France
    
    Image Transfer
    
    
    23,400
    
    
    LeasedReutlingen, Germany
    
    Image Transfer
    
    
    19,400
    
    
    LeasedSales Office:Dayton, Ohio
    
    Corporate/Image Transfer
    
    
    13,800
    
    
    LeasedAlbavilla, Italy
    
    Image Transfer
    
    
    400
    
    
    LeasedHong Kong, China
    
    Image Transfer
    
    
    8,000
    
    
    LeasedHong Kong, China
    
    Textile Products
    
    
    600
    
    
    LeasedTokyo, Japan
    
    Image Transfer
    
    
    600
    
    
    LeasedWillich, Germany
    
    Image Transfer
    
    
    5,500
    
    
    Leased
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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
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ITEM 6. SELECTED FINANCIAL DATA
  2005
    
    2004
    
    2003
    
    2002
    
    2001(a)
    
    (a) (b)(Dollars in thousands)Statement of Operations Data:Net sales
    
    $
    363,269
    
    
    $
    362,707
    
    
    $
    288,987
    
    
    $
    259,948
    
    
    $
    254,146Gross profit
    
    
    135,016
    
    
    
    132,674
    
    
    
    105,169
    
    
    
    95,522
    
    
    
    91,159Operating profit
    
    
    53,248
    
    
    
    50,729
    
    
    
    39,860
    
    
    
    38,122
    
    
    
    26,662Income (loss) before cumulative effect of change in accounting principle
    
    
    (6,190
    )
    
    
    (10,021
    )
    
    
    (6,373
    )
    
    
    9,182
    
    
    
    (5,108
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    616Net income (loss)
    
    
    (6,190
    )
    
    
    (10,021
    )
    
    
    (6,373
    )
    
    
    9,798
    
    
    
    (5,108
    )Net loss available to common shareholders
    
    
    (6,190
    )
    
    
    (10,021
    )
    
    
    (16,041
    )
    
    
    (7,493
    )
    
    
    (20,066
    )Other Financial Data:Capital expenditures
    
    $
    7,478
    
    
    $
    10,433
    
    
    $
    6,874
    
    
    $
    8,264
    
    
    $
    12,983Depreciation
    
    
    10,782
    
    
    
    10,501
    
    
    
    9,309
    
    
    
    8,197
    
    
    
    7,308Amortization
    
    
    4,124
    
    
    
    4,984
    
    
    
    6,303
    
    
    
    6,332
    
    
    
    9,972Balance Sheet Data (at end of period):Fixed assets, net of accumulated depreciation
    
    $
    68,080
    
    
    $
    74,735
    
    
    $
    74,167
    
    
    $
    74,319
    
    
    $
    72,216Total assets
    
    
    374,657
    
    
    
    370,235
    
    
    
    371,540
    
    
    
    319,877
    
    
    
    317,004Long-term and subordinated long-term debt (including current maturities)
    
    
    399,307
    
    
    
    252,390
    
    
    
    279,820
    
    
    
    252,145
    
    
    
    263,831Redeemable preferred stock
    
    
    48,657
    
    
    
    169,805
    
    
    
    146,649
    
    
    
    126,646
    
    
    
    109,354Stockholders equity (deficit)
    
    
    (151,254
    )
    
    
    (136,018
    )
    
    
    (127,724
    )
    
    
    (119,450
    )
    
    
    (115,918
    )
 
 (a)
    
    Effective July 1, 2003, the Company adopted SFAS No. 150 and recorded dividends on the
redeemable preferred stock as interest expense subsequent to adoption. Preferred stock
dividends included in interest expense were $24,813 in 2005, $23,156 in 2004 and $10,336 for
the period from July 1, 2003 through December 31, 2003.(b)
    
    The Company acquired NDI as of November 24, 2003. The statement of operations data includes
the results of this acquisition from the date of acquisition. 
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003(Dollars in millions)Net sales
    
    $
    363.3
    
    
    
    100.0
    %
    
    $
    362.7
    
    
    
    100.0
    %
    
    $
    289.0
    
    
    
    100.0
    %Cost of goods sold
    
    
    228.3
    
    
    
    62.8
    
    
    
    230.0
    
    
    
    63.4
    
    
    
    183.8
    
    
    
    63.6Gross profit
    
    
    135.0
    
    
    
    37.2
    
    
    
    132.7
    
    
    
    36.6
    
    
    
    105.2
    
    
    
    36.4SG&A
    
    
    80.7
    
    
    
    22.2
    
    
    
    80.9
    
    
    
    22.3
    
    
    
    63.5
    
    
    
    22.0Amortization of intangibles
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.8
    
    
    
    0.3Management fees and expenses
    
    
    1.0
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    0.3Operating profit
    
    $
    53.2
    
    
    
    14.7
    
    
    $
    50.7
    
    
    
    14.0
    %
    
    $
    39.9
    
    
    
    13.8
    %
 Comparison of Results of Operations
 Year Ended December 31, 2005, compared to Year Ended December 31, 2004
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American Jobs Creation Act of 2004
 Share-based Payments
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Year Ended December 31, 2004, compared to Year Ended December 31, 2003
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American Jobs Creation Act of 2004
 Share-based Payments
 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
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Risks Associated with International Operations
   Interest Rate Risks
  25




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Commodity Risks
  Liquidity and Capital Resources
   26




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Note
   Environmental Expenditures
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Critical Accounting Policies
  Accounts Receivable Allowances
 Inventory Valuation
 Recoverability of Long-lived Assets
 Retirement and Other Postretirement Benefits
 Realization of Deferred Tax Assets
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Contractual Obligations
  Less than
    
    
    2 - 3
    
    
    4 - 5
    
    
    AfterTotal
    
    
    one year
    
    
    years
    
    
    years
    
    
    five years(Dollars in thousands)Contractual Obligation:Long-term debt
    
    $
    398,192
    
    
    $
    12,490
    
    
    $
    7,812
    
    
    $
    7,812
    
    
    $
    370,078Redeemable preferred stock
    
    
    48,657
    
    
    
    0
    
    
    
    0
    
    
    
    48,657
    
    
    
    0Capital lease obligation
    
    
    1,115
    
    
    
    115
    
    
    
    250
    
    
    
    280
    
    
    
    470Operating leases
    
    
    10,669
    
    
    
    3,879
    
    
    
    2,587
    
    
    
    2,000
    
    
    
    2,203Total
    
    $
    458,633
    
    
    $
    16,484
    
    
    $
    10,649
    
    
    $
    58,749
    
    
    $
    372,751
 
 ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    32Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    33Consolidated Statements of Operations for the years ended December 31,
2005, 2004 and 2003
    
    
    35Consolidated Statements of Stockholders Equity (Deficit) for the
years ended December 31, 2005, 2004 and 2003
    
    
    36Consolidated Statements of Cash Flows for the years ended December 31,
2005, 2004 and 2003
    
    
    37Notes to Consolidated Financial Statements
    
    
    38
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and Equity
  
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##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
(Amounts in thousands, except share and per share amounts)
 2005
    
    
    2004ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    9,441
    
    
    $
    843Accounts receivable:Trade (less allowance for doubtful accounts) (Note C)
    
    
    46,024
    
    
    
    50,451Other
    
    
    900
    
    
    
    1,516Inventories (Note D)
    
    
    51,150
    
    
    
    50,334Prepaid expenses and other current assets
    
    
    3,688
    
    
    
    6,204Deferred tax assets (Note I)
    
    
    18,445
    
    
    
    11,608Total current assets
    
    
    129,648
    
    
    
    120,956PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    4,294
    
    
    
    4,479Buildings and improvements
    
    
    30,047
    
    
    
    30,655Machinery and equipment
    
    
    98,580
    
    
    
    96,093Construction in progress
    
    
    4,020
    
    
    
    5,100136,941
    
    
    
    136,327Less accumulated depreciation
    
    
    (68,861
    )
    
    
    (61,592
    )68,080
    
    
    
    74,735OTHER ASSETS:Goodwill (Note E)
    
    
    142,212
    
    
    
    143,444Intangible assets (Note E)
    
    
    21,168
    
    
    
    18,842Deferred tax assets (Note I)
    
    
    238
    
    
    
    298Other assets
    
    
    13,311
    
    
    
    11,960176,929
    
    
    
    174,544TOTAL ASSETS
    
    $
    374,657
    
    
    $
    374,657
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2005
    
    
    2004LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    8,071
    
    
    $
    11,020Accrued associate-related costs
    
    
    11,415
    
    
    
    12,672Other accrued expenses
    
    
    10,136
    
    
    
    14,204Income taxes payable
    
    
    883
    
    
    
    3,381Interest payable
    
    
    2,560
    
    
    
    3,209Current maturities of long-term debt and capital lease (Note F)
    
    
    12,604
    
    
    
    4,576Total current liabilities
    
    
    45,669
    
    
    
    49,062LONG-TERM AND SUBORDINATED LONG-TERM
DEBT (Note F)
    
    
    386,703
    
    
    
    247,814DEFERRED TAX LIABILITIES (Note I)
    
    
    13,263
    
    
    
    3,294OTHER LONG-TERM LIABILITIES (Notes L, M and N)
    
    
    31,619
    
    
    
    36,278REDEEMABLE PREFERRED STOCK (Note G)
    
    
    48,657
    
    
    
    169,805STOCKHOLDERS EQUITY (DEFICIT) (Note L):Common Shares, $.01 per share par value, 100,000
shares authorized, 24,823 and 23,323 shares issued and outstanding
    
    
    1
    
    
    
    1Contra-equity associated with the assumption of
majority shareholders bridge loan
    
    
    (68,673
    )
    
    
    (68,673
    )Retained earnings (deficit)
    
    
    (81,391
    )
    
    
    (75,201
    )Accumulated other comprehensive income (loss) (Note H)
    
    
    (1,191
    )
    
    
    7,855Total stockholders equity (deficit)
    
    
    (151,254
    )
    
    
    (136,018
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    374,657
    
    
    $
    370,235
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DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands)
 2005
    
    
    2004
    
    
    2003NET SALES
    
    $
    363,269
    
    
    $
    362,707
    
    
    $
    288,987COST OF GOODS SOLD
    
    
    228,253
    
    
    
    230,033
    
    
    
    183,818GROSS PROFIT
    
    
    135,016
    
    
    
    132,674
    
    
    
    105,169SELLING, GENERAL AND ADMINISTRATIVE
    
    
    80,734
    
    
    
    80,911
    
    
    
    63,493AMORTIZATION OF INTANGIBLES
    
    
    34
    
    
    
    34
    
    
    
    816MANAGEMENT FEES (Note K)
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000OPERATING PROFIT
    
    
    53,248
    
    
    
    50,729
    
    
    
    39,860OTHER EXPENSES:Interest expense:Long-term debt (including amortization of deferred
financing costs and discount of $1,826, $1,775, and
$2,313 in 2005, 2004 and 2003 and loss on extinguishment
of debt of $8,378 and $2,783 in 2005 and 2003)
    
    
    31,222
    
    
    
    21,985
    
    
    
    28,655Redeemable preferred stock (including amortization of discount
and issuance costs of $185, $188 and $94 in 2005,
2004 and 2003) (Note G)
    
    
    24,813
    
    
    
    23,156
    
    
    
    10,336Gain on expired Stock Options
    
    
    (6,640
    )Other expense (income)net
    
    
    (2,492
    )
    
    
    (2,791
    )
    
    
    3,042INCOME (LOSS) BEFORE INCOME TAXES
    
    
    6,345
    
    
    
    8,379
    
    
    
    (2,173
    )INCOME TAXES (Note I)
    
    
    12,535
    
    
    
    18,400
    
    
    
    4,200NET INCOME (LOSS)
    
    
    (6,190
    )
    
    
    (10,021
    )
    
    
    (6,373
    )PREFERRED STOCK DIVIDENDS (Note G)
    
    
    
    
    
    
    
    
    
    
    (9,574
    )AMORTIZATION OF PREFERRED STOCK DISCOUNT AND ISSUANCE COSTS
    
    
    
    
    
    
    
    
    
    
    (94
    )NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
    
    $
    (6,190
    )
    
    $
    (10,021
    )
    
    $
    (16,041
    )
  34




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##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(Dollar amounts in thousands)
 AccumulatedRetained
    
    
    Other
    
    
    ComprehensiveCommon Shares
    
    
    Contra
    
    
    Earnings
    
    
    Comprehensive
    
    
    IncomeShares
    
    
    Amount
    
    
    Equity
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    (Loss)December 31, 2002
    
    
    23,298
    
    
    $
    1
    
    
    $
    (68,772
    )
    
    $
    (49,139
    )
    
    $
    (1,540
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,373
    )
    
    
    
    
    
    $
    (6,373
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,574
    )Amortization of preferred
stock discount and
issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (94
    )Minimum pension liability
adjustment (net of tax of $238)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    178Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,797
    
    
    
    7,797Unrealized loss on cash flow
hedges (net of tax of $134)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208
    )
    
    
    (208
    )December 31, 2003
    
    
    23,298
    
    
    
    1
    
    
    
    (68,772
    )
    
    
    (65,180
    )
    
    
    6,277
    
    
    $
    1,394Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,021
    )
    
    
    
    
    
    $
    (10,021
    )Stock option exercise
    
    
    25
    
    
    
    
    
    
    
    99Amortization of preferred
stock discount and
issuance costsMinimum pension liability
adjustment (net of tax of $406)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (193
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,577
    
    
    
    1,577Unrealized loss on cash flow
hedges (net of tax of $157)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244
    
    
    
    244December 31, 2004
    
    
    23,323
    
    
    
    1
    
    
    
    (68,673
    )
    
    
    (75,201
    )
    
    
    7,855
    
    
    $
    (8,393
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,190
    )
    
    
    
    
    
    $
    (6,190
    )Class C Common Shares
Issued
    
    
    1,500Minimum pension liability
adjustment (net of tax of $282)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    (190
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,696
    )
    
    
    (7,696
    )Unrealized gain on cash flow
hedges (net of tax of $741)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,160
    )
    
    
    (1,160
    )December 31, 2005
    
    
    24,823
    
    
    $
    1
    
    
    $
    (68,673
    )
    
    $
    (81,391
    )
    
    $
    (1,191
    )
    
    $
    (15,236
    )
  35




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##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands)
 2005
    
    
    2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (6,190
    )
    
    $
    (10,021
    )
    
    $
    (6,373
    )Adjustments to reconcile net income (loss) to net cash provided by operating
activities:Depreciation
    
    
    10,782
    
    
    
    10,501
    
    
    
    9,309Amortization of goodwill and intangibles
    
    
    4,124
    
    
    
    4,984
    
    
    
    6,303Interest expense:Redeemable preferred stock dividends
    
    
    24,813
    
    
    
    23,156
    
    
    
    10,336Loss on extinguishment of debt
    
    
    8,378
    
    
    
    
    
    
    
    2,783Deferred income taxes
    
    
    3,436
    
    
    
    9,105
    
    
    
    (2,183
    )Foreign currency (gain) loss
    
    
    (5,986
    )
    
    
    (1,690
    )
    
    
    2,666Undistributed earnings of investee
    
    
    (609
    )
    
    
    (325
    )Non-cash gain related to stock options expiration
    
    
    (6,640
    )Non-cash loss on disposal of fixed assets
    
    
    (34
    )
    
    
    (28
    )
    
    
    930Change in assets and liabilities:Accounts receivable
    
    
    1,261
    
    
    
    (5,816
    )
    
    
    2,693Inventories
    
    
    (3,129
    )
    
    
    (146
    )
    
    
    (3,367
    )Prepaid expenses and other current assets
    
    
    (938
    )
    
    
    684
    
    
    
    (963
    )Accounts payable and accrued expenses
    
    
    (1,662
    )
    
    
    9,313
    
    
    
    (3,144
    )Net cash provided by operating activities
    
    
    27,606
    
    
    
    39,717
    
    
    
    18,990CASH FLOWS FROM INVESTING ACTIVITIES:Cash paid for acquisitions
    
    
    (379
    )
    
    
    (1,346
    )
    
    
    (33,407
    )Capital expenditures
    
    
    (7,478
    )
    
    
    (10,433
    )
    
    
    (6,874
    )Proceeds from sale of property
    
    
    
    
    
    
    2,085
    
    
    
    2,447Net cash used in investing activities
    
    
    (7,857
    )
    
    
    (9,694
    )
    
    
    (37,834
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    
    
    
    
    25Proceeds from issuance of debt
    
    
    390,000
    
    
    
    
    
    
    
    163,950Redemption of Preferred Shares
    
    
    (149,518
    )Payment of deferred financing fees
    
    
    (10,506
    )
    
    
    (633
    )
    
    
    (4,117
    )Payments on long-term debt
    
    
    (239,938
    )
    
    
    (30,057
    )
    
    
    (136,797
    )Net (payments on) proceeds from revolving credit facility
    
    
    (1,025
    )
    
    
    575
    
    
    
    (4,500
    )Net cash provided by (used in) financing activities
    
    
    (10,987
    )
    
    
    (30,090
    )
    
    
    18,536EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (164
    )
    
    
    184
    
    
    
    38CASH AND CASH EQUIVALENTS:Net increase (decrease) in cash and cash equivalents
    
    
    8,598
    
    
    
    117
    
    
    
    (270
    )Cash and cash equivalents at beginning of period
    
    
    843
    
    
    
    726
    
    
    
    996Cash and cash equivalents at end of period
    
    $
    9,441
    
    
    $
    843
    
    
    $
    726
  36




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##### Table of Contents



DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(Dollar amounts in thousands)
 A. NATURE OF OPERATIONS, BASIS OF PRESENTATION
   B. SIGNIFICANT ACCOUNTING PRINCIPLES
 Principles of Consolidation
 Cash and Cash Equivalents
 Inventories
 Property, Plant and Equipment
 Goodwill and Other Intangibles
 37




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##### Table of Contents



Stock-Based Compensation Accounting for Stock-Based Compensation
 2005
    
    
    2004
    
    
    2003Net income (loss)as reported
    
    $
    (6,190
    )
    
    $
    (10,021
    )
    
    $
    (6,373
    )Lessstock-based compensation expense
determined using fair value based method in SFAS No. 123
    
    
    (736
    )
    
    
    (719
    )
    
    
    (764
    )Pro forma net income (loss)
    
    $
    (6,926
    )
    
    $
    (10,740
    )
    
    $
    (7,137
    )
 Revenue Recognition
 Foreign Currency Translation
 Concentration of Credit Risk
 Foreign Exchange Contracts
 38




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##### Table of Contents



Interest
Rate Swap Agreement
 Fair Value of Financial Instruments 1 2 1 2 1 4 1 4
 Research and Development
 Distribution
 Advertising
 Management Estimates
 C. ACCOUNTS RECEIVABLE
  2005
    
    
    2004
    
    
    2003Balance at beginning of year
    
    $
    3,694
    
    
    $
    3,407
    
    
    $
    2,735Provision for doubtful accounts
    
    
    315
    
    
    
    961
    
    
    
    369Acquisition
    
    
    
    
    
    
    
    
    
    
    368Write-off of uncollectible accounts
    
    
    (517
    )
    
    
    (808
    )
    
    
    (352
    )Currency translation
    
    
    (234
    )
    
    
    134
    
    
    
    287Balance at end of year
    
    $
    3,258
    
    
    $
    3,694
    
    
    $
    3,407
 39




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##### Table of Contents



D. INVENTORIES
  2005
    
    
    2004Finished goods
    
    $
    24,643
    
    
    $
    24,384Work in process
    
    
    5,505
    
    
    
    5,193Raw materials
    
    
    21,002
    
    
    
    20,757$
    51,150
    
    
    $
    50,334
 E. GOODWILL AND INTANGIBLE ASSETS
  Image
    
    
    TextileTransfer
    
    
    Products
    
    
    TotalBalance at December 31, 2002
    
    $
    121,856
    
    
    $
    5,224
    
    
    $
    127,080Acquisitions
    
    
    13,817
    
    
    
    
    
    
    
    13,817Foreign currency exchange
    
    
    1,683
    
    
    
    
    
    
    
    1,683Balance at December 31, 2003
    
    
    137,356
    
    
    
    5,224
    
    
    
    142,580Acquisitions
    
    
    269
    
    
    
    
    
    
    
    269Purchase adjustments
    
    
    (361
    )
    
    
    
    
    
    
    (361
    )Foreign currency exchange
    
    
    956
    
    
    
    
    
    
    
    956Balance at December 31, 2004
    
    
    138,220
    
    
    
    5,224
    
    
    
    143,444Acquisitions
    
    
    425
    
    
    
    
    
    
    
    425Foreign currency exchange
    
    
    (1,657
    )
    
    
    
    
    
    
    (1,657
    )Balance at December 31, 2005
    
    $
    136,988
    
    
    $
    5,224
    
    
    $
    142,212
 40




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##### Table of Contents



Weighted-Average2005
    
    
    2004
    
    
    LifeIntangible Assets:Gross Carrying Amount:Deferred financing costs
    
    $
    11,058
    
    
    $
    15,710
    
    
    9 yearsPrinting technology
    
    
    27,946
    
    
    
    27,946
    
    
    11 yearsTextile compound formulas
    
    
    5,247
    
    
    
    5,247
    
    
    31 yearsUnpatented technology
    
    
    9,529
    
    
    
    9,529
    
    
    20 yearsOther
    
    
    613
    
    
    
    613
    
    
    5 yearsTotal intangibles
    
    
    54,393
    
    
    
    59,045
    
    
    14 yearsAccumulated Amortization:Deferred financing costs
    
    
    (128
    )
    
    
    (9,507
    )Printing technology
    
    
    (25,480
    )
    
    
    (23,827
    )Textile compound formulas
    
    
    (1,827
    )
    
    
    (1,638
    )Unpatented technology
    
    
    (5,338
    )
    
    
    (4,909
    )Other
    
    
    (452
    )
    
    
    (322
    )Total accumulated amortization
    
    
    (33,225
    )
    
    
    (40,203
    )Net book value
    
    $
    21,168
    
    
    $
    18,842
  F. LONG-TERM AND SUBORDINATED LONG-TERM DEBT
  2005
    
    
    2004New Credit Agreements:First Lien Credit and Guaranty Agreement
U.S. term loan
    
    $
    204,488Euro term loan (face amount of 59,466)
    
    
    70,407Second Lien Credit and Guaranty Agreement
Term loan
    
    
    114,713Senior Secured Credit Facility:Tranche A term loan (face amount of 20,406)
    
    
    
    
    
    
    27,584Tranche D term loan (face amount of $108,343)
    
    
    
    
    
    
    107,519Revolving line of credit
    
    
    
    
    
    
    1,02591/2%
Senior Subordinated Notes (face amount $8,450)
    
    
    8,584
    
    
    
    114,866Capital lease obligation (Note P)
    
    
    1,115
    
    
    
    1,396399,307
    
    
    
    252,390LessCurrent maturities of long-term debt and capital lease
    
    
    (12,604
    )
    
    
    (4,576
    )$
    386,703
    
    
    $
    247,814
  41




---



##### Table of Contents



1 2
 1 4
 NEW CREDIT AGREEMENTS
        42




---



##### Table of Contents



SENIOR SECURED CREDIT FACILITY
 Debtors Accounting for a Modification or Exchange of Debt Instruments
  1 2
 91/2% SENIOR SUBORDINATED NOTES
 1 2
 43




---



##### Table of Contents



G. REDEEMABLE PREFERRED STOCK
 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
 121/4% SENIOR EXCHANGEABLE PREFERRED STOCK
 1 4
 1 4
  44




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##### Table of Contents



18% CONVERTIBLE CUMULATIVE PREFERRED STOCK
   1 4
 H. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  2005
    
    
    2004Foreign currency translation adjustments
    
    $
    1,327
    
    
    $
    9,023Minimum pension liabilities
    
    
    (1,403
    )
    
    
    (1,213
    )Unrealized gain on cash flow hedges
    
    
    (1,115
    )
    
    
    45$
    (1,191
    )
    
    $
    7,855
 I. INCOME TAXES
  2005
    
    
    2004Deferred tax assets:Accounts receivable reserves
    
    $
    1,289
    
    
    $
    1,332Inventory reserves
    
    
    1,108
    
    
    
    1,344Other reserves
    
    
    3,260
    
    
    
    3,880AMT
credit and Foreign Tax credit carryforward
    
    
    1,201
    
    
    
    627Net operating loss carryforwards
    
    
    16,746
    
    
    
    15,242Stock option compensation
    
    
    411
    
    
    
    3,131Pension benefits
    
    
    1,778
    
    
    
    1,521Unrealized foreign exchange losses
    
    
    
    
    
    
    518Other postretirement benefits
    
    
    4,140
    
    
    
    3,686Total deferred tax assets
    
    
    29,933
    
    
    
    31,281
 45




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##### Table of Contents



2005
    
    
    2004Deferred tax liabilities:Unrealized
Foreign Exchange Gain
    
    
    (592
    )Depreciation
    
    
    (5,591
    )
    
    
    (7,845
    )Amortization
    
    
    (18,330
    )
    
    
    (14,824
    )Total deferred tax liabilities
    
    
    (24,513
    )
    
    
    (22,669
    )Net deferred tax assets
    
    $
    5,420
    
    
    $
    8,612Included in the balance sheets:Current assets
    
    $
    18,445
    
    
    $
    11,608Noncurrent assets
    
    
    238
    
    
    
    298Noncurrent liability
    
    
    (13,263
    )
    
    
    (3,294
    )Net deferred tax assets
    
    $
    5,420
    
    
    $
    8,612
  2005
    
    
    2004
    
    
    2003Current:United States:Federal alternative minimum
    
    $
    
    
    
    $
    500
    
    
    $State and local
    
    
    293
    
    
    
    351
    
    
    
    451International
    
    
    7,301
    
    
    
    8,904
    
    
    
    5,7397,594
    
    
    
    9,755
    
    
    
    6,190Deferred
    
    
    3,918
    
    
    
    8,396
    
    
    
    (2,117
    )11,512
    
    
    
    18,151
    
    
    
    4,073Allocation to other comprehensive income
    
    
    1,023
    
    
    
    249
    
    
    
    127$
    12,535
    
    
    $
    18,400
    
    
    $
    4,200
  2005
    
    
    2004
    
    
    2003Tax provision (benefit) at the United States federal statutory rate$
    
    $
    2,157
    
    
        $
    2,849
    
    
    $
    (739
    )International tax rate differential
    
    
    134
    
    
    
    541
    
    
    
    302State and local taxes, net of federal
income tax effect
    
    
    605
    
    
    
    627
    
    
    
    363Foreign source income taxable in the United States
    
    
    721
    
    
    
    6,421
    
    
    
    369Non-deductible preferred stock dividends included in net loss
    
    
    8,582
    
    
    
    7,873
    
    
    
    3,514Non-deductible expenses
    
    
    181
    
    
    
    187
    
    
    
    138Other
    
    
    155
    
    
    
    (98
    )
    
    
    253$
    12,535
    
    
    $
    18,400
    
    
    $
    4,200
  46




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##### Table of Contents



J. BUSINESS SEGMENTS
    2005
    
    
    2004
    
    
    2003Third party sales:Image Transfer
    
    $
    317,797
    
    
    $
    313,672
    
    
    $
    240,539Textile Products
    
    
    45,472
    
    
    
    49,035
    
    
    
    48,448Total
    
    $
    363,269
    
    
    $
    362,707
    
    
    $
    288,987Segment operating profit:Image Transfer
    
    $
    53,562
    
    
    $
    50,325
    
    
    $
    41,737Textile Products
    
    
    6,342
    
    
    
    6,634
    
    
    
    4,263Total
    
    $
    59,904
    
    
    $
    56,959
    
    
    $
    46,000Depreciation and amortization:Image Transfer
    
    $
    7,782
    
    
    $
    7,338
    
    
    $
    6,913Textile Products
    
    
    1,702
    
    
    
    1,712
    
    
    
    1,813Total
    
    $
    9,484
    
    
    $
    9,050
    
    
    $
    8,726Assets:Image Transfer
    
    $
    152,649
    
    
    $
    157,305
    
    
    $
    147,827Textile Products
    
    
    27,498
    
    
    
    30,222
    
    
    
    29,300Total
    
    $
    180,147
    
    
    $
    187,527
    
    
    $
    177,127Capital expenditures:Image Transfer
    
    $
    5,799
    
    
    $
    8,163
    
    
    $
    6,253Textile Products
    
    
    1,679
    
    
    
    2,270
    
    
    
    621Total
    
    $
    7,478
    
    
    $
    10,433
    
    
    $
    6,874
 47




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Operating profit:Segment operating profit
    
    $
    59,904
    
    
    $
    56,959
    
    
    $
    46,000APB #16 depreciation and amortization
    
    
    (3,569
    )
    
    
    (4,626
    )
    
    
    (3,757
    )UK Pension Settlement
    
    
    (703
    )Non-allocated corporate expenses
    
    
    (1,350
    )
    
    
    (570
    )
    
    
    (567
    )Amortization of intangibles
    
    
    (34
    )
    
    
    (34
    )
    
    
    (816
    )Management fees
    
    
    (1,000
    )
    
    
    (1,000
    )
    
    
    (1,000
    )Total operating profit
    
    $
    53,248
    
    
    $
    50,729
    
    
    $
    39,860Depreciation and amortization:Segment depreciation and amortization
    
    $
    9,484
    
    
    $
    9,050
    
    
    $
    8,726Amortization of intangibles
    
    
    34
    
    
    
    34
    
    
    
    816APB #16 depreciation and amortization
    
    
    3,569
    
    
    
    4,626
    
    
    
    3,757Amortization of deferred financing fees
    
    
    1,819
    
    
    
    1,775
    
    
    
    2,313Total depreciation and amortization
    
    $
    14,906
    
    
    $
    15,485
    
    
    $
    15,612Assets:Segment assets
    
    $
    180,147
    
    
    $
    187,527
    
    
    $
    177,127APB #16 Adjustment
    
    
    3,743
    
    
    
    5,120
    
    
    
    6,523Goodwill and other intangibles
    
    
    163,380
    
    
    
    162,286
    
    
    
    165,803Deferred tax assets
    
    
    18,684
    
    
    
    11,906
    
    
    
    18,838Cash and other assets
    
    
    8,703
    
    
    
    3,396
    
    
    
    3,249Total assets
    
    $
    374,657
    
    
    $
    370,235
    
    
    $
    371,540
  2005
    
    
    2004
    
    
    2003Net sales:United States
    
    $
    180,606
    
    
    $
    187,850
    
    
    $
    136,495Germany
    
    
    83,230
    
    
    
    82,138
    
    
    
    71,855United Kingdom
    
    
    47,081
    
    
    
    44,597
    
    
    
    37,051Other international
    
    
    76,173
    
    
    
    72,291
    
    
    
    64,517Total international
    
    
    206,484
    
    
    
    199,026
    
    
    
    173,423Interarea
    
    
    (23,821
    )
    
    
    (24,169
    )
    
    
    (20,931
    )$
    363,269
    
    
    $
    362,707
    
    
    $
    288,987Long-lived assets:United States
    
    $
    168,546
    
    
    $
    169,032
    
    
    $
    174,762Germany
    
    
    29,612
    
    
    
    32,288
    
    
    
    28,407United Kingdom
    
    
    21,656
    
    
    
    23,784
    
    
    
    23,928Other international
    
    
    11,646
    
    
    
    11,917
    
    
    
    12,873Total international
    
    
    62,914
    
    
    
    67,989
    
    
    
    65,208$
    231,460
    
    
    $
    237,021
    
    
    $
    239,970
  48




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K. RELATED PARTY TRANSACTIONS
  L. STOCKHOLDERS EQUITY AND STOCK BASED COMPENSATION PLAN
 1998 Stock Option Plan
    Day Stock Option Plan
  49




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2005
    
    
    2004
    
    
    2003Exercise
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    10,165
    
    
    $
    3,223
    
    
    
    10,290
    
    
    $
    1,970
    
    
    
    10,480
    
    
    $
    3,237Granted
Exercised
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    1,000Forfeited
    
    
    (2,343
    )
    
    
    1,000
    
    
    
    (100
    )
    
    
    4,030
    
    
    
    (190
    )
    
    
    3,871Outstanding at end of year
    
    
    7,822
    
    
    
    3,889
    
    
    
    10,165
    
    
    
    3,223
    
    
    
    10,290
    
    
    
    3,226Exercisable at end of year
    
    
    1,642
    
    
    
    3,414
    
    
    
    3,985
    
    
    
    1,995
    
    
    
    3,973
    
    
    
    1,970
  M. RETIREMENT PLANS
   50




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51




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2005
    
    
    2004Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    19,490
    
    
    $
    15,672Service cost
    
    
    366
    
    
    
    390Interest cost
    
    
    399
    
    
    
    787Actuarial (gains) losses
    
    
    1,264
    
    
    
    2,043Benefits paid
    
    
    (91
    )
    
    
    (685
    )Transfers
    
    
    (10,361
    )Foreign currency exchange
    
    
    (1,226
    )
    
    
    1,283Benefit obligation at end of year
    
    
    9,841
    
    
    
    19,490Change in plan assets:Fair value of plan assets at the beginning of the year
    
    
    7,534
    
    
    
    7,036Actual return on plan assets
    
    
    
    
    
    
    632Employer contribution
    
    
    91
    
    
    
    63Benefits paid
    
    
    (91
    )
    
    
    (685
    )Transfers
    
    
    (7,534
    )Foreign currency exchange
    
    
    
    
    
    
    488Fair value of plan assets at end of year
    
    
    0
    
    
    
    7,534Funded status
    
    
    (9,841
    )
    
    
    (11,956
    )Unrecognized net actuarial (gain) loss
    
    
    2,554
    
    
    
    2,443Additional minimum liabilityincluded in accumulated other comprehensive income (loss)
    
    
    (2,377
    )
    
    
    (1,906
    )(Accrued) pension costs
    
    $
    (9,664
    )
    
    $
    (11,419
    )Included in the balance sheets:Other accrued expensescurrent liability
    
    $
    
    
    
    $
    (2,826
    )Other long-term liabilities
    
    
    (9,664
    )
    
    
    (8,593
    )(Accrued) pension costs
    
    $
    (9,664
    )
    
    $
    (11,419
    )Accumulated benefit obligation
    
    $
    9,664
    
    
    $
    18,953Weighted-average assumptions:Discount rate
    
    
    4.25
    %
    
    
    4.50
    %Long-term rate of increase in compensation
    
    
    2.86
    %
    
    
    2.80
    %Long-term rate of return on plan assets
    
    
    0
    %
    
    
    4.50
    %Post-retirement pension increase (cost-of-living adjustment)
    
    
    1.00
    %
    
    
    1.90
    %
  52




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2005
    
    
    2004
    
    
    2003Defined benefit plans:Service cost
    
    $
    366
    
    
    $
    390
    
    
    $
    325Interest cost
    
    
    399
    
    
    
    787
    
    
    
    696Expected return on plan assets
    
    
    
    
    
    
    (341
    )
    
    
    (329
    )Actuarial loss recognized
    
    
    34
    
    
    
    888
    
    
    
    678Net periodic pension cost
    
    
    799
    
    
    
    1,724
    
    
    
    1,370Defined contribution plans
    
    
    3,171
    
    
    
    3,335
    
    
    
    2,594Total pension expense
    
    $
    3,970
    
    
    $
    5,059
    
    
    $
    3,964Weighted-average assumptions:Discount rate
    
    
    4.5
    %
    
    
    5.25
    %
    
    
    5.00
    %Compensation increase
    
    
    2.86
    %
    
    
    3.00
    %
    
    
    2.50
    %Long-term rate of return on plan assets
    
    
    0
    %
    
    
    5.00
    %
    
    
    4.50
    %
  N. OTHER POSTRETIREMENT BENEFITS
   2005
    
    
    2004Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    15,744
    
    
    $
    12,640Service cost
    
    
    1,321
    
    
    
    1,101Interest cost
    
    
    1,013
    
    
    
    849Participant contributions
    
    
    388
    
    
    
    229Actuarial (gains) losses
    
    
    (1,714
    )
    
    
    1,721Benefits paid
    
    
    (764
    )
    
    
    (796
    )Benefit obligation at end of year
    
    
    15,988
    
    
    
    15,744Unrecognized prior service gain
    
    
    3,746
    
    
    
    4,580Unrecognized net actuarial gain (loss)
    
    
    (4,183
    )
    
    
    (6,346
    )Accrued postretirement benefit obligation
    
    $
    15,551
    
    
    $
    13,978Discount rate used in determining the benefit obligation at year end
    
    
    6.00
    %
    
    
    6.00
    %
  53




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2005
    
    
    2004
    
    
    2003Service cost
    
    $
    1,321
    
    
    $
    1,101
    
    
    $
    829Interest cost
    
    
    1,013
    
    
    
    849
    
    
    
    885Prior service gain recognized
    
    
    (834
    )
    
    
    (641
    )
    
    
    (206
    )Actuarial loss recognized
    
    
    449
    
    
    
    234
    
    
    
    263Net periodic postretirement benefit costs
    
    $
    1,949
    
    
    $
    1,543
    
    
    $
    1,771Discount rate used in determining the interest cost
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    7.00
    %
 Medicare Prescription Drug, Improvement and
Modernization Act of 2003
 O. COMMITMENTS AND CONTINGENCIES
 LEASE COMMITMENTS
  2005
    
    
    2004Land and buildings
    
    $
    1,596
    
    
    $
    1,822Accumulated depreciation
    
    
    (494
    )
    
    
    (423
    )$
    1,102
    
    
    $
    1,399
  54




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Capital
    
    
    OperatingLease
    
    
    Leases2006
    
    $
    176
    
    
    $
    3,8792007
    
    
    176
    
    
    
    2,5872008
    
    
    176
    
    
    
    2,0002009
    
    
    176
    
    
    
    1,4232010
    
    
    176
    
    
    
    469Thereafter
    
    
    514
    
    
    
    311$
    1,394
    
    
    $
    10,669Amount representing interest
    
    
    (279
    )Present value of minimum lease payments (including current portion of $115)
    
    $
    1,115
 CONTINGENCIES
  P. SUPPLEMENTAL CASH FLOW DISCLOSURES
 2005
    
    
    2004
    
    
    2003NON-CASH TRANSACTIONS:Preferred stock dividends paid in kind
    
    
    
    
    
    
    
    
    
    $
    1,901CASH PAID FOR:Income taxes
    
    $
    8,335
    
    
    $
    9,938
    
    
    $
    8,427Interest
    
    $
    17,616
    
    
    $
    20,230
    
    
    $
    25,762
 Q. RECENTLY ISSUED ACCOUNTING STANDARDS
 Inventory Costs
 Share-based
Payment
 55




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##### Table of Contents



R. SUBSEQUENT EVENT
 1 2
 S.
RESTATED THIRD QUARTER RESULTS (UNAUDITED)
 rd
 3 months ended
    
    
    9 months endedSeptember 30, 2005
    
    
    September 30, 2005(Restated)
    
    
    (Restated)Net sales
    
    $
    91,854
    
    
    $
    273,163Gross profit
    
    
    33,948
    
    
    
    101,622Operating profit
    
    
    14,013
    
    
    
    40,560Income before Taxes
    
    
    9,886
    
    
    
    13,197Net income (loss)
    
    
    8,245
    
    
    
    5,258
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
  
 ITEM 9A. CONTROLS AND PROCEDURES
   
 ITEM 9B. OTHER INFORMATION
  
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  56




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Name
    
    Age
    
    PositionWilliam C. Ferguson
    
    
    75
    
    
    Chairman of the BoardSean W. Brophy
    
    
    37
    
    
    DirectorCarl J. Crosetto
    
    
    57
    
    
    DirectorMatthew C. Kaufman
    
    
    35
    
    
    DirectorPhilip Raygorodetsky
    
    
    32
    
    
    DirectorChristopher A. White
    
    
    40
    
    
    DirectorDennis R. Wolters
    
    
    59
    
    
    Chief Executive Officer, President and DirectorName
    
    Age
    
    PositionDwaine R. Brooks
    
    
    63
    
    
    Vice President, Human ResourcesDavid B. Freimuth
    
    
    53
    
    
    Group Vice President and General Manager, Textiles and Flexographic Products since January 2004;
prior to that Senior Vice President, General Manager, Textile ProductsDermot J. Healy
    
    
    51
    
    
    Managing Director, EuropeThomas J. Koenig
    
    
    45
    
    
    Vice President and Chief Financial Officer and Assistant SecretaryStephen P. Noe
    
    
    49
    
    
    Group Vice President and General Manager, Image Transfer Group since November 2003; prior to that
Senior Vice President, General Manager, Transfer Media since July 2001; prior to that Senior Vice
President, Marketing & Sales, Transfer Media since January 2001; prior to that Principal at CSC
Consulting in the Emerging Markets Practice since July 2000; prior to that Business Director at
FMC CorporationBrent A. Stephen
    
    
    54
    
    
    Managing Director, Pacific Rim since January 2003; prior to that Vice President and Sales
Manager, Australia
   57




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1 4
  Director Compensation
  58




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Audit Committee Financial Expert
  Code of Ethics
  59




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ITEM 11. EXECUTIVE COMPENSATION
  Long TermCompensationAwardsAnnual
    
    
    SecuritiesName and
    
    
    
    
    
    Compensation
    
    
    Underlying
    
    
    All OtherPrincipal Position
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Options(#)
    
    
    CompensationDennis R. Wolters,
    
    
    2005
    
    
    $
    370,000
    
    
    $
    250,000
    
    
    
    0
    
    
    $
    53,007
    (a)President and Chief
    
    
    2004
    
    
    
    351,200
    
    
    
    250,000
    
    
    
    0
    
    
    
    46,736Executive Officer
    
    
    2003
    
    
    
    270,000
    
    
    
    140,000
    
    
    
    0
    
    
    
    31,312David B. Freimuth, Group
    
    
    2005
    
    
    
    217,750
    
    
    
    99,000
    
    
    
    0
    
    
    
    26,245
    (b)Vice President and General
    
    
    2004
    
    
    
    210,364
    
    
    
    59,000
    
    
    
    0
    
    
    
    16,124Manager, Textiles and
Flexographic Products
    
    
    2003
    
    
    
    170,800
    
    
    
    55,000
    
    
    
    0
    
    
    
    15,384Dermot J. Healy,
    
    
    2005
    
    
    
    243,746
    
    
    
    65,797
    
    
    
    0
    
    
    
    70,806
    (c)Managing Director,
    
    
    2004
    
    
    
    236,824
    
    
    
    89,615
    
    
    
    0
    
    
    
    64,004Europe
    
    
    2003
    
    
    
    188,037
    
    
    
    67,330
    
    
    
    0
    
    
    
    58,811Thomas J. Koenig,
    
    
    2005
    
    
    
    200,000
    
    
    
    66,096
    
    
    
    0
    
    
    
    22,165
    (d)Vice President and
    
    
    2004
    
    
    
    190,640
    
    
    
    59,000
    
    
    
    0
    
    
    
    17,349Chief Financial Officer
    
    
    2003
    
    
    
    159,000
    
    
    
    40,000
    
    
    
    0
    
    
    
    16,047Stephen P. Noe, Group Vice
    
    
    2005
    
    
    
    231,500
    
    
    
    114,659
    
    
    
    0
    
    
    
    25,288
    (e)President and General
    
    
    2004
    
    
    
    222,162
    
    
    
    114,000
    
    
    
    0
    
    
    
    23,137Manager, Image Transfer
    
    
    2003
    
    
    
    181,100
    
    
    
    62,000
    
    
    
    0
    
    
    
    18,134
 
 (a)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($26,436),
company contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($15,848), premiums for group term life insurance ($5,180), and automobile allowance ($5,543).(b)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($16,481), company
contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($2,575), premiums for group term life insurance ($1,569) and automobile allowance ($5,620).(c)
    
    Represents company contributions to an UK benefit plan ($51,341) and automobile allowance
($19,465).(d)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($15,889), company
contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($1,786), premiums for group term life insurance ($765) and automobile allowance ($3,725). 60




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##### Table of Contents



(e)
    
    Represents company contributions to the Day 401(k) and Profit Sharing Plan ($18,485), company
contributions to the Day International, Inc. Supplemental Savings and Retirement Plan
($5,246), premiums for group term life insurance ($1,032) and automobile allowance ($525). FY-End Option/SAR Values
 Numberof Securities
    
    
    Value ofUnderlying
    
    
    UnexercisedUnexercised
    
    
    In-the-MoneyOptions/SARs
    
    
    Options/SARsat FY-End(#)
    
    
    at FY-End($)Exercisable/
    
    
    Exercisable/Unexer-
    
    
    Unexer-Name
    
    cisable
    
    
    cisable(1)Dennis R. Wolters
    
    
    450/
    
    
    $
    0/2,400
    
    
    $
    0David B. Freimuth
    
    
    434/
    
    
    $
    939,309/731
    
    
    $
    0Dermot J. Healy
    
    
    114/
    
    
    $
    0/322
    
    
    $
    0Thomas J. Koenig
    
    
    69/
    
    
    $
    0/186
    
    
    $
    0Stephen P. Noe
    
    
    100/
    
    
    $
    0/200
    
    
    $
    0
 
 (1)
    
    Based upon estimated fair market value of the shares less the exercise price. Employment Agreements
  61




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Compensation Committee Interlocks
  62




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Equity Compensation Plan Information
 Number ofsecuritiesremainingavailable forNumber of
    
    
    
    
    
    
    future issuancesecurities to be
    
    
    
    
    
    
    under equityissued upon
    
    
    Weighted-average
    
    
    compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected inand rights
    
    
    and rights
    
    
    column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    
    
    
    $
    
    
    
    
    Equity compensation plans not approved by security holders (1)
    
    
    8,044
    
    
    
    3,893
    
    
    
    448Total
    
    
    8,044
    
    
    $
    3,893
    
    
    
    448
 
 (1)
    
    These plans consist of the Day Stock Option Plan, the 1998 Stock Option Plan and warrants
issued to individual directors as compensation for services performed. These plans were approved by
shareholders holding a majority of the Class A Voting Common Stock through their representation on
the Board of Directors. See Note L to the Consolidated Financial Statements for detailed
descriptions of these plans. Security Ownership
  63




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##### Table of Contents



No. of Sharesof Stock
    
    
    % ofName of Beneficial Owner
    
    (a)(b)
    
    
    StockCommon Stock:Dennis R. Wolters
    
    
    750
    
    
    
    2.4David B. Freimuth
    
    
    534
    
    
    
    1.7Dermot J. Healy
    
    
    114
    
    
    
    0.3Thomas J. Koenig
    
    
    84
    
    
    
    0.2Stephen P. Noe
    
    
    100
    
    
    
    0.3Sean W. Brophy
    
    
    
    
    
    
    Carl J. Crosetto (c)
    
    
    74
    
    
    
    0.2William C. Ferguson
    
    
    148
    
    
    
    0.4Matthew C. Kaufman (c)
    
    
    
    
    
    
    Neal Moszkowski
    
    
    
    
    
    
    Philip Raygorodetsky (c)
    
    
    
    
    
    
    Christopher A. White (d)
    
    
    
    
    
    
    All Directors and Executive Officers as a Group (14 persons)
    
    
    4,780
    
    
    
    15.0Unione Italiana
    
    
    195
    
    
    
    0.6Towerbrook
    
    
    974
    
    
    
    3.0SG Capital Partners LLC (d)
    
    
    3,865
    
    
    
    12.61221 Avenue of the Americas
New York, NY 10020Greenwich IV, LLC (c)
    
    
    19,156
    
    
    
    62.2GSC Partners
500 Campus Drive, Suite 220, Florham Park, NJ 07932121/4% Senior Exchangeable Preferred:GSC Recovery II, L.P. (e)
    
    
    15,397
    
    
    
    31.6
 
 (a)
    
    Beneficial ownership is determined in accordance with the rules of the Commission and
includes general voting power and/or investment power with respect to securities. The table
includes shares of Common Stock subject to options and warrants currently exercisable or
exercisable within 60 days of the date of this report. As of the date of this report, the
number of such shares is 4,146.5. Exercisable options included in the number of shares above
include 450 shares for Mr. Wolters, 434 shares for Mr. Freimuth, 53 shares for Mr. Healy, 69
shares for Mr. Koenig, 100 shares for Mr. Noe and 2,808.5 shares for all directors and
executive officers as a group. The shares listed for Mr. Crosetto and Mr. Ferguson represent
vested warrants to purchase shares of Common Stock.(b)
    
    SGCP owns shares of Class B Non-Voting Common Stock. All other shares are shares of Class A
Voting Common Stock.(c)
    
    Greenwich IV, LLC is an affiliate of GSC Partners. Messrs. Crosetto, Kaufman and
Raygorodetsky may be deemed to have indirect beneficial ownership of the 19,156 shares of
Common Stock beneficially owned by Greenwich IV, LLC by virtue of their affiliation with GSC
Partners. Each of Messrs. Crosetto, Kaufman and Raygorodetsky disclaim any such beneficial
ownership.(d)
    
    Mr. White may be deemed to have indirect beneficial ownership of the 3,865 shares of Common
Stock. Class C Non Voting Shares are owned by Unione Italiana, Towerbrook, SGCP, and GSC partners 64




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(e)
    
    GSC Recovery II, L.P. is an affiliate of GSC Partners. Messrs. Crosetto, Kaufman and
Raygorodetsky may be deemed to have indirect beneficial ownership of the 15,397 shares of
Senior Exchangeable Preferred Stock beneficially owned by GSC Recovery II, L.P. by virtue of
their affiliation with GSC Partners. Each of Messrs. Crosetto, Kaufman and Raygorodetsky
disclaim any such beneficial ownership. The Senior Exchangeable Preferred Stock has no voting
rights other than the right to elect two directors as long as dividends are in arrears and
unpaid for four consecutive quarterly periods. This right was exercised in 2004 with Carl
Crosetto and Sean Brophy elected as directors.
 Stockholders Agreement
    
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Fees
  2005
    
    
    2004Audit fees
    
    $
    527
    
    
    $
    423Audit-related fees
    
    
    3
    
    
    
    30Tax fees
    
    
    435
    
    
    
    346Total
    
    $
    965
    
    
    $
    799
    Policy on Pre-Approval of Services of the Independent Auditor
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Part IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1) Financial Statements
  Day International Group, Inc.
 
 (a)(2) Financial Statement Schedules
  (b) Exhibits
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Signatures
  Day International Group, Inc.(Registrant)Date: March 27, 2006
    
    
    
    By:
    
    /s/ Dennis R WoltersDennis R. WoltersPresident and Chief Executive Officer
  Date: March 27, 2006
    
    
    
    By:      /s/ Dennis R WoltersDennis R. WoltersPresident, Chief Executive Officer andDirector (Principal Executive Officer)Date: March 27, 2006
    
    
    
    By:       /s/ Thomas J. KoenigThomas J. KoenigVice President and Chief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer)Date: March 27, 2006
    
    
    
    By:      /s/ William C. FergusonWilliam C. FergusonDirectorDate: March 27, 2006
    
    
    
    By:      /s/ Sean W. BrophySean W. BrophyDirector
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Date: March 27, 2006
    
    
    
    By:      /s/ Carl J. CrosettoCarl J. CrosettoDirectorDate: March 27, 2006
    
    
    
    By:      /s/ Matthew C. KaufmanMatthew C. KaufmanDirectorDate: March 27, 2006
    
    
    
    By:      /s/ Philip RaygorodetskyPhilip RaygorodetskyDirectorDate: March 27, 2006
    
    
    
    By:      /s/ Christopher A. WhiteChristopher A. WhiteDirector
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INDEX TO EXHIBITS
 (1) Underwriting Agreements
 1.1
    
    Purchase Agreement, dated as of March 13, 1998 between the Company and Societe
Generale Securities Corporation (incorporated by reference to Exhibit 1.1 to the
Amendment No. 1 to Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No.
333-51839))
 (3) Articles of Incorporation and By-Laws
 3.1
    
    Certificate of Incorporation of Day International Group, Inc. (Group), as
amended (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for
the year ended December 31, 2003)3.2
    
    By-Laws of Group, as amended (incorporated by reference to Exhibit 3.2 to the
Annual Report on Form 10-K for the year ended December 31, 2003)
 (4) Instruments Defining Rights of Security Holders, including Indentures
 4.1
    
    Registration Rights Agreement, dated as of March 18, 1998, by and between the
Company and Societe Generale Securities Corporation (incorporated by reference to
Exhibit 4.4 to the Amendment No. 1 to Registration Statement on Form S-4/A filed on May
8, 1998 (Reg. No. 333-51839))4.2
    
    Certificate of Designation, dated March 18, 1998, of Powers, Preferences and
Relative, Participating, Optional and other Special Rights of 121/4% Senior Exchangeable
Preferred Stock due 2010 and Qualifications, Limitations and Restrictions thereof (the
Exchangeable Preferred Stock) (incorporated by reference to Exhibit 4.5.1 to the
Amendment No. 1 to Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No.
333-51839))4.3
    
    Form of Global Certificate for the Exchangeable Preferred Stock (incorporated
by reference to Exhibit 4.5.2 to the Amendment No. 1 to Registration Statement on Form
S-4/A filed on May 8, 1998 (Reg. No. 333-51839))4.4
    
    Exchange Debenture Indenture, dated as of March 18, 1998, among Day
International Group, Inc., Day International, Inc. and the Bank of New York as Trustee
(incorporated by reference to Exhibit 4.6 to the Amendment No. 1 to Registration
Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839))4.5
    
    Preference Stock Purchase Agreement, dated as of
October 19, 1999, among the Company and the several investors
party thereto (incorporated by reference to Exhibit 4.4 to Form
8-K dated October 28, 1999)4.6
    
    Amended and Restated Stockholders Agreement, dated as of
October 19, 1999, among the Company and certain of its
Stockholders (incorporated by reference to Exhibit 4.5 to Form
8-K dated October 28, 1999)
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(10) Material Contracts
 10.1
    
    Credit Agreement, dated December 5, 2005 (incorporated
by reference to Form 8-K dated December 5, 2005)10.2
    
    Deed of Trust, dated January 15, 1998, with respect to the North Carolina
property (incorporated by reference to Exhibit 4.12 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839)); as
amended October 19, 1999 (incorporated by reference to Exhibit 10.6.1 to the Form 8-K
dated September 22, 2003); as further amended June 29, 2001 (incorporated by reference
to Exhibit 10.6.2 to the Form 8-K dated September 22, 2003); and as modified September
16, 2003 (incorporated by reference to Exhibit 10.6.3 to the Form 8-K dated September
22, 2003) as modified December 200510.3
    
    Mortgage and Security Agreement Dated January 16, 1998, with respect to the
Michigan Property (incorporated by reference to Exhibit 4.13 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839)); as
amended October 19, 1999 (incorporated by reference to Exhibit 10.7.1 to the Form 8-K
dated September 22, 2003); as further amended June 29, 2001 (incorporated by reference
to Exhibit 10.7.2 to the Form 8-K dated September 22, 2003); and as modified September
16, 2003 (incorporated by reference to Exhibit 10.7.3 to the Form 8-K dated September
22, 2003) as modified10.4
    
    Mortgage Agreement, dated October 19, 1999, with respect to the South Carolina
property (incorporated by reference to Exhibit 10.5.1 to the Form 8-K dated September
22, 2003); as amended June 29, 2001 (incorporated by reference to Exhibit 10.5.2 to the
Form 8-K dated September 22, 2003); and as modified September 16, 2003 (incorporated
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by reference to Exhibit 10.5.3 to the Form 8-K dated
September 22, 2003) as modified10.5
    
    Deed of Trust, dated October 19, 1999, with respect to the Texas property
(incorporated by reference to Exhibit 10.8.1 to the Form 8-K dated September 22, 2003);
as modified September 16, 2003 (incorporated by reference to Exhibit 10.8.2 to the Form
8-K dated September 22, 2003) as modified10.6
    
    Mortgage Agreement, dated October 19, 1999, with respect to the Illinois
property (incorporated by reference to Exhibit 10.9.1 to the Form 8-K dated September
22, 2003); as amended June 29, 2001 (incorporated by reference to Exhibit 10.9.2 to the
Form 8-K dated September 22, 2003); and as modified September 16, 2003 (incorporated by
reference to Exhibit 10.9.3 to the Form 8-K dated
September 22, 2003) as modified10.9
    
    Stock Purchase Agreement, dated as of December 18, 1997, by and among Greenwich
IV, LLC, GSD Acquisition Corp. and the Stockholders of Day International Group, Inc.
parties thereto (incorporated by reference to Exhibit 2.1 to the Form 8-K dated January
16, 1998); as amended on January 16, 1998 (incorporated by reference to Exhibit 2.2 to
the Form 8-K dated January 16, 1998)10.10*
    
    Consulting Agreement between the Company and GSC Partners (incorporated by reference
to Exhibit 10.5.1 to the Amendment No. 2 to Registration Statement on Form S-4/A filed
on June 22, 1998 (Reg. No. 333-51839))10.11*
    
    Indemnification Agreement between the Company and GSC Partners (incorporated by
reference to Exhibit 10.5.2 to the Amendment No. 2 to Registration Statement on Form
S-4/A filed on June 22, 1998 (Reg. No. 333-51839))10.12*
    
    Consulting Agreement between the Company and SG Capital Partners Limited
(incorporated by reference to Exhibit 10.5.3 to the Amendment No. 2 to Registration
Statement on Form S-4/A filed on June 22, 1998 (Reg. No. 333-51839))10.13*
    
    Indemnification Agreement between the Company and SG Capital Partners Limited
(incorporated by reference to Exhibit 10.5.4 to the Amendment No. 2 to Registration
Statement on Form S-4/A filed on June 22, 1998 (Reg. No. 333-51839))10.14
    
    Purchase Agreement between Armstrong World Industries, Inc. and Armstrong
World Industries GmbH, as Sellers and Day International, Inc., as Buyer (incorporated
by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1999)10.15*
    
    Stock warrant to purchase shares of Common Stock of the Company, dated as of January
18, 1998, issued to Mr. William C. Ferguson (incorporated by reference to Exhibit 10.30
to the Annual Report on Form 10-K for the year ended December 31, 1998)10.16*
    
    Stock warrant to purchase shares of Common Stock of the Company, dated as of January
27, 2000, issued to Mr. William C. Ferguson (incorporated by reference to Exhibit 10.37
to the Annual Report on Form 10-K for the year ended December 31, 2000)10.17*
    
    Stock warrant to purchase shares of Common Stock of the Company, dated as of January
18, 2000, issued to Mr. Carl J. Crosetto (incorporated by reference to Exhibit 10.38 to
the Annual Report on Form 10-K for the year ended December 31, 2000)
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10.18*
    
    Employment Agreement, dated January 16, 1998, between the Guarantor and Mr. Dennis R.
Wolters (incorporated by reference to Exhibit 10.4 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839))10.19*
    
    Employment Agreement, dated January 16, 1998, between Day International, Inc. and Mr.
David B. Freimuth (incorporated by reference to Exhibit 10.5 to the Amendment No. 1 to
Registration Statement on Form S-4/A filed on May 8, 1998 (Reg. No. 333-51839))10.20*
    
    Day International Group, Inc. Stock Option Plan, dated as of July 6, 1995
(incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K for the
period ended December 31, 1995); as amended on September 19, 1996 (incorporated by
reference to Exhibit 10.17 to the Annual Report on Form 10-K for the year ended
December 31, 1996); and as further amended on January 16, 1998 (incorporated by
reference to Exhibit 10.2.3 to the Amendment No. 1 to Registration Statement on Form
S-4/A filed on May 8, 1998 (Reg. No. 333-51839))10.21*
    
    Day International, Inc. Supplemental Savings and Retirement Plan, dated as of March
1, 2001 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001)
 (21) Subsidiaries of the Registrant
 (31) Rule 13a-14(a)/15d-14(a) Certifications
 31.1
    
    Chief Executive Officer Certification31.2
    
    Chief Financial Officer Certification
 (32) Section 1350 Certifications
 32.1
    
    Chief Executive Officer Certification32.2
    
    Chief Financial Officer Certification
  73