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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period ended March 31, 2006
 Commission File No. 333-51839
 DAY INTERNATIONAL GROUP, INC.
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DAY INTERNATIONAL GROUP, INC.
INDEX
 PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    15PART II OTHER INFORMATIONItem 6. Exhibits
    
    
    15Signature
    
    
    16EX-31.1 CERTEX-31.2 CERTEX-32.1 CERTEX-32.2 CERT
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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2006 AND DECEMBER 31, 2005
 (In thousands)
 2006
    
    
    2005(Unaudited)ASSETSCash and cash equivalents
    
    $
    2,884
    
    
    $
    9,441Accounts receivable (less allowance for doubtful accounts of $3,982 and $3,258)
    
    
    54,056
    
    
    
    46,924Inventories (Note B)
    
    
    53,000
    
    
    
    51,150Other current assets
    
    
    21,833
    
    
    
    22,133Total current assets
    
    
    131,773
    
    
    
    129,648Property, plant and equipment, net of accumulated depreciation of $71,487 and $68,861
    
    
    68,258
    
    
    
    68,080Goodwill
    
    
    142,488
    
    
    
    142,212Intangible assets (net of accumulated amortization of $34,084 and $33,225)
    
    
    20,305
    
    
    
    21,168Other assets
    
    
    17,443
    
    
    
    13,549TOTAL ASSETS
    
    $
    380,267
    
    
    $
    374,657LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Accounts payable
    
    $
    9,458
    
    
    $
    8,071Current maturities of long-term debt
    
    
    4,010
    
    
    
    12,604Other current liabilities
    
    
    29,919
    
    
    
    24,994Total current liabilities
    
    
    43,387
    
    
    
    45,669Long-term and subordinated long-term debt
    
    
    384,640
    
    
    
    386,702Other long-term liabilities
    
    
    49,745
    
    
    
    44,883Redeemable preferred stock (Note C)
    
    
    50,147
    
    
    
    48,657STOCKHOLDERS EQUITY (DEFICIT):Common shares
    
    
    1
    
    
    
    1Contra-equity associated with the assumption of majority shareholders bridge loan
    
    
    (68,673
    )
    
    
    (68,673
    )Retained earnings (deficit)
    
    
    (80,779
    )
    
    
    (81,391
    )Accumulated other comprehensive income (loss)
    
    
    1,799
    
    
    
    (1,191
    )Total stockholders equity (deficit)
    
    
    (147,652
    )
    
    
    (151,254
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    380,267
    
    
    $
    374,657
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DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 THREE MONTHS ENDED MARCH 31, 2006 AND 2005
 (In thousands)
 2006
    
    
    2005(Unaudited)NET SALES
    
    $
    94,312
    
    
    $
    89,919COST OF GOODS SOLD
    
    
    59,008
    
    
    
    56,878GROSS PROFIT
    
    
    35,304
    
    
    
    33,041SELLING, GENERAL AND ADMINISTRATIVE
    
    
    21,281
    
    
    
    20,522AMORTIZATION OF INTANGIBLES
    
    
    9
    
    
    
    9MANAGEMENT FEES
    
    
    250
    
    
    
    250OPERATING PROFIT
    
    
    13,764
    
    
    
    12,260OTHER EXPENSES:Interest expense:Long-term debt (including amortization of deferred financing
costs and discount of $461 and $456)
    
    
    8,565
    
    
    
    5,467Redeemable preferred stock dividends (including amortization
of discount and issuance costs of $32 and $47)
    
    
    1,490
    
    
    
    6,428Other expensenet
    
    
    1,914
    
    
    
    310INCOME BEFORE INCOME TAXES
    
    
    1,795
    
    
    
    55INCOME TAX EXPENSE
    
    
    1,183
    
    
    
    2,624NET INCOME (LOSS)
    
    $
    612
    
    
    $
    (2,569
    )
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DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 THREE MONTHS ENDED MARCH 31, 2006 AND 2005
 (In thousands)
 2006
    
    
    2005(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    612
    
    
    $
    (2,569
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    3,231
    
    
    
    4,089Interest expenseredeemable preferred stock dividends
    
    
    1,490
    
    
    
    6,428Deferred income taxes
    
    
    5,369
    
    
    
    2,155Equity in earnings of investees
    
    
    (87
    )
    
    
    (59
    )Foreign currency loss (gain)
    
    
    4,001
    
    
    
    (633
    )Change in operating assets and liabilities
    
    
    (6,619
    )
    
    
    (12,021
    )Net cash provided by (used in) operating activities
    
    
    7,997
    
    
    
    (2,610
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (2,172
    )
    
    
    (1,821
    )Net cash used in investing activities
    
    
    (2,172
    )
    
    
    (1,821
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments on long term debt
    
    
    (12,752
    )
    
    
    (1,022
    )Net proceeds from revolving credit facility
    
    
    400
    
    
    
    5,675Net cash (used in) provided by financing activities
    
    
    (12,352
    )
    
    
    4,653EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (30
    )
    
    
    46Net (decrease) increase in cash and cash equivalents
    
    
    (6,557
    )
    
    
    268Cash and cash equivalents at beginning of period
    
    
    9,441
    
    
    
    843Cash and cash equivalents at end of period
    
    $
    2,884
    
    
    $
    1,111
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DAY INTERNATIONAL GROUP, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 (Dollars In thousands)
 A. BASIS OF PRESENTATION
  B. INVENTORIES
  2006
    
    
    2005(Audited)Finished goods
    
    $
    25,828
    
    
    $
    24,643Work in process
    
    
    5,535
    
    
    
    5,505Raw materials
    
    
    21,637
    
    
    
    21,002$
    53,000
    
    
    $
    51,150
 C. EXCHANGEABLE PREFERRED STOCK
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D. INCOME TAXES
  E. BUSINESS SEGMENTS
    2006
    
    
    2005Third party sales:Image Transfer
    
    $
    82,476
    
    
    $
    77,813Textile Products
    
    
    11,836
    
    
    
    12,106Total
    
    $
    94,312
    
    
    $
    89,919
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2006
    
    
    2005Segment operating profit:Image Transfer
    
    $
    12,991
    
    
    $
    12,496Textile Products
    
    
    1,672
    
    
    
    1,308Total
    
    $
    14,663
    
    
    $
    13,804
  2006
    
    
    2005Segment operating profit
    
    $
    14,663
    
    
    $
    13,804APB #16 depreciation and amortization
    
    
    (419
    )
    
    
    (1,119
    )Non-allocated corporate expenses
    
    
    (221
    )
    
    
    (166
    )Amortization of intangibles
    
    
    (9
    )
    
    
    (9
    )Management fees
    
    
    (250
    )
    
    
    (250
    )Total operating profit
    
    $
    13,764
    
    
    $
    12,260
 F. COMPREHENSIVE INCOME (LOSS)
  G. CONTINGENCIES
  H. STOCK-BASED COMPENSATION
 1998 Stock Option Plan
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Day Stock Option Plan
  Accounting for Stock-Based Compensation
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2005Net (loss)as reported
    
    $
    (2,569
    )Lessstock-based
compensation expense determined using fair value based method in SFAS No. 123
    
    
    (186
    )Pro forma net (loss)
    
    $
    (2,755
    )
 I. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
  2006
    
    
    2005Service cost
    
    $
    101
    
    
    $
    108Interest cost
    
    
    102
    
    
    
    105Actuarial loss recognized
    
    
    29
    
    
    
    13Settlement loss
    
    
    
    
    
    
    703Net periodic pension costs
    
    $
    232
    
    
    $
    929
   2006
    
    
    2005Service cost
    
    $
    346
    
    
    $
    330Interest cost
    
    
    247
    
    
    
    253Amortization of prior service cost
    
    
    (209
    )
    
    
    (208
    )Actuarial loss recognized
    
    
    61
    
    
    
    112Net periodic postretirement benefit costs
    
    $
    445
    
    
    $
    487
 Medicare Prescription Drug, Improvement and
Modernization Act of 2003
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J. SUBSEQUENT EVENTS
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Safe Harbor Statement
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Basis of Presentation
  Three Months Ended March 31,2006
    
    
    2005$
    
    
    %
    
    
    $
    
    
    %Net sales
    
    
    94.3
    
    
    
    100.0
    
    
    
    89.9
    
    
    
    100.0Costs of goods sold
    
    
    59.0
    
    
    
    62.6
    
    
    
    56.9
    
    
    
    63.3Gross profit
    
    
    35.3
    
    
    
    37.4
    
    
    
    33.0
    
    
    
    36.7Selling, general and administrative expense
    
    
    21.3
    
    
    
    22.6
    
    
    
    20.5
    
    
    
    22.8Amortization of intangibles
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Management fees
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Operating profit
    
    
    13.8
    
    
    
    14.6
    
    
    
    12.3
    
    
    
    13.7
 Comparison of Results of Operations
 Three Months Ended March 31, 2006, Compared to Three Months Ended March 31, 2005
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Liquidity and Capital Resources
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Risks Associated with International Operations
   
 Interest Rate Risks
 
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Commodity Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II OTHER INFORMATION
 
 ITEM 6. EXHIBITS
 (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
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Signature
  Day International Group, Inc.(Registrant)Date: May 15, 2006
    
    /s/ Thomas J. Koenig

Thomas J. KoenigVice President andChief Financial Officer(Principal Financial Officer)
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