<PAGE>   1

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C, 20549

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
      SECURITIES EXCHANGE ACT OF 1934

      For the quarterly period ended June 30, 1999
      --------------------------------------------

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
      SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to
                               -------------------  --------------------

Commission File Number 33-93644 and 333-50839
                       ----------------------

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

        Delaware                                       31-1436 349
---------------------                               -----------------
(State or other jurisdiction of                     (I.R.S. Employer ID No.)
incorporation or organization)

 130 West Second Street, Suite 1700, Dayton, Ohio            45402
--------------------------------------------------          --------
(Address of principal executive offices)                   (zip code)


         (937) 224-4000
-------------------------------------
(Registrant's telephone number including area code)

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
    ----      ----

The number of Common Shares of the Company, $0.01 per share par value,
outstanding as of August 12, 1999 was 23,298


<PAGE>   2




                          DAY INTERNATIONAL GROUP, INC.

                                      Index
<TABLE>
<CAPTION>

                                                                                                   Pages
                                                                                                   -----
<S>                                                                                               <C>
Part I:  Financial Information

         Item 1.  Financial Statements:

             Condensed Consolidated Balance Sheets as of June 30, 1999
             and December 31, 1998                                                                   3

             Condensed Consolidated Statements of Operations for the three months
             ended June 30, 1999 and 1998                                                            4

             Condensed Consolidated Statements of Operations for the six months
             ended June 30, 1999 and 1998                                                            5

             Condensed Consolidated Statements of Comprehensive (Loss) Income
             for the three months ended June 30, 1999 and 1998                                       6

             Condensed Consolidated Statements of Comprehensive (Loss) Income
             for the six months ended June 30, 1999 and 1998                                         6

             Condensed Consolidated Statements of Cash Flows for the six months
             ended June 30, 1999 and 1998                                                            7

             Notes to Condensed Consolidated Financial Statements                               8 - 21

         Item 2.  Management's Discussion and Analysis of Financial Condition
                    and Results of Operations                                                  22 - 28

Part II:  Other Information

         Item 1 - Legal Proceedings                                                                 29

         Item 2 - Changes in Securities and Use of Proceeds                                         29

         Item 6 - Exhibits and Reports on Form 8-K                                                  29

         Signature                                                                                  29
</TABLE>


                                       2

<PAGE>   3


PART I:  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 1999 AND DECEMBER 31, 1998
           (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

         ASSETS                                                  1999         1998
                                                               ---------    ---------
<S>                                                            <C>          <C>
  Cash and cash equivalents                                    $   1,936    $   4,762
  Accounts receivable (less allowance for doubtful
      accounts of $1,510 and $1,384)                              18,825       18,630
  Inventories                                                     19,232       19,179
  Prepaid expenses and other current assets                        1,305        1,267
  Deferred tax assets                                              2,543        2,543
                                                               ---------    ---------
         Total current assets                                     43,841       46,381

  Property, plant and equipment, net                              49,590       50,305
  Goodwill and other intangible assets                           151,847      157,799
  Deferred tax assets                                              2,375        1,523
  Other assets                                                     1,236        1,400
                                                               ---------    ---------
TOTAL ASSETS                                                   $ 248,889    $ 257,408
                                                               =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  Accounts payable                                             $   6,715    $   5,905
  Accrued associate-related costs and other accrued expenses      11,068       13,229
  Income taxes payable                                             2,261        2,913
  Interest payable                                                 4,431        4,336
  Current maturities of long-term debt                             1,292        1,292
                                                               ---------    ---------
         Total current liabilities                                25,767       27,675

  Long-term and subordinated long-term debt                      252,699      256,223
  Deferred tax liabilities                                         1,175        1,353
  Other long-term liabilities                                     15,376       15,813
  Commitments and contingencies
                                                               ---------    ---------
         Total liabilities                                       295,017      301,064

  Exchangeable Preferred Stock                                    39,100       36,627

STOCKHOLDERS' (DEFICIT) EQUITY:
  Common Shares                                                        1            1
  Additional paid-in-capital
  Contra-equity associated with the assumption of
    majority shareholder's bridge loan                           (68,772)     (68,772)
  Retained earnings (deficit)                                    (12,557)     (10,370)
  Foreign currency translation adjustment                         (3,900)      (1,142)
                                                               ---------    ---------
         Total stockholders' (deficit) equity                    (85,228)     (80,283)
                                                               ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY           $ 248,889    $ 257,408
                                                               =========    =========
</TABLE>


           See notes to condensed consolidated financial statements.



                                       3

<PAGE>   4

                 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    THREE MONTHS ENDED JUNE 30, 1999 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                        1999        1998
                                                      --------    --------
<S>                                                   <C>         <C>
NET SALES                                             $ 43,536    $ 42,913

COST OF GOODS SOLD                                      27,051      26,853
                                                      --------    --------
GROSS PROFIT                                            16,485      16,060

SELLING, GENERAL AND ADMINISTRATIVE                      7,323       7,198
AMORTIZATION OF INTANGIBLES                                903         642
MANAGEMENT FEES                                            276         243
                                                      --------    --------
OPERATING PROFIT                                         7,983       7,977

OTHER EXPENSES:
  Interest Expense (including amortization
    of deferred financing costs of $600 in 1999 and
    $576 in 1998)                                        6,862       6,920
  Other expense (income)--net                               53         (30)
                                                      --------    --------
                                                         6,915       6,890
                                                      --------    --------
INCOME BEFORE INCOME TAXES                               1,068       1,087

INCOME TAXES                                               438         376
                                                      --------    --------
NET INCOME                                                 630         711

PREFERRED STOCK DIVIDENDS                               (1,201)     (1,102)

AMORTIZATION OF PREFERRED STOCK
  ISSUANCE COSTS                                           (42)        (42)
                                                      --------    --------

NET LOSS AVAILABLE
  TO COMMON SHAREHOLDERS                              $   (613)   $   (433)
                                                      ========    ========

</TABLE>

           See notes to condensed consolidated financial statements.


                                       4

<PAGE>   5


                 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                          1999        1998
                                                        --------    --------
<S>                                                     <C>         <C>
NET SALES                                               $ 86,092    $ 86,050

COST OF GOODS SOLD                                        53,789      53,841
                                                        --------    --------
GROSS PROFIT                                              32,303      32,209
SELLING, GENERAL AND ADMINISTRATIVE                       15,383      14,549
COMPENSATION AND RELATED
   TRANSACTION COSTS                                                  18,018
AMORTIZATION OF INTANGIBLES                                1,811       1,293
MANAGEMENT FEES                                              530         478
                                                        --------    --------
OPERATING PROFIT (LOSS)                                   14,579      (2,129)

OTHER EXPENSES:
  Interest Expense (including amortization
    of deferred financing costs of $1,200 in 1999 and
    $872 in 1998                                          13,745      13,971
  Other expense (income)--net                                268         180
                                                        --------    --------
                                                          14,013      14,151
                                                        --------    --------
INCOME (LOSS) BEFORE INCOME TAXES
   AND EXTRAORDINARY ITEMS                                   566     (16,280)

INCOME TAXES (BENEFIT)                                       278      (3,428)
                                                        --------    --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                     288     (12,852)

EXTRAORDINARY LOSSES ON EARLY
  EXTINGUISHMENT OF DEBT (NET OF TAX
  BENEFIT OF $2,368)                                        --         3,552
                                                        --------    --------
NET INCOME (LOSS)                                            288     (16,404)

PREFERRED STOCK DIVIDENDS                                 (2,391)     (1,255)

AMORTIZATION OF PREFERRED STOCK
  ISSUANCE COSTS                                             (84)        (49)
                                                        --------    --------
NET LOSS AVAILABLE
  TO COMMON SHAREHOLDERS                                $ (2,187)   $(17,708)
                                                        ========    ========
</TABLE>

           See notes to condensed consolidated financial statements.


                                       5

<PAGE>   6



                 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                    THREE MONTHS ENDED JUNE 30, 1999 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                           1999     1998
                                          -----    -----
<S>                                       <C>      <C>
NET INCOME                                $ 630    $ 711

FOREIGN CURRENCY TRANSLATION ADJUSTMENT    (910)      90
                                          -----    -----

COMPREHENSIVE NET LOSS                    $(280)   $ 801
                                          =====    =====
</TABLE>

                 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                     SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                            1999        1998
                                          --------    --------
<S>                                       <C>         <C>
NET INCOME (LOSS)                         $    288    $(16,404)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT     (2,758)         88
                                          --------    --------

COMPREHENSIVE NET LOSS                    $ (2,470)   $(16,316)
                                          ========    ========
</TABLE>


           See notes to condensed consolidated financial statements.


                                       6

<PAGE>   7


                 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                 1999         1998
                                                               ---------    ---------
<S>                                                            <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                              $     288    $ (16,404)
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
  Extraordinary loss on early extinguishment of debt                            3,552
  Depreciation and amortization                                    7,630        6,417
  Deferred income taxes                                             (851)      (4,447)
  Non-cash charge related to stock option awards                                8,585
  Change in operating assets and liabilities                      (2,870)       2,473
                                                               ---------    ---------
         Net cash provided by operating activities                 4,197          176
                                                               ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                              (3,310)      (2,979)
                                                               ---------    ---------
         Net cash used in investing activities                    (3,310)      (2,979)
                                                               ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of 2008 notes                                          111,134
Proceeds from issuance of exchangeable preferred stock                         32,986
Proceeds from issuance of common stock                                            189
Proceeds from issuance of term loans                                           40,000
Contributions from shareholders                                                 4,573
Repayment of existing credit facility                                         (30,902)
Repayment of bridge loan                                                     (140,000)
Payment of consent fee                                                         (6,500)
Payments of deferred financing fees                                            (2,742)
Payments on term loan                                               (646)      (2,500)
Net payments on revolving credit facility                         (2,874)
                                                               ---------    ---------
         Net cash (used in) provided by financing activities      (3,520)       6,238
                                                               ---------    ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                             (193)         238
                                                               ---------    ---------
CASH AND CASH EQUIVALENTS:
Net (decrease) increase in cash and cash  equivalents             (2,826)       3,673
Cash and cash equivalents at beginning  of period                  4,762          780
                                                               ---------    ---------
Cash and cash equivalents at end of period                     $   1,936    $   4,453
                                                               =========    =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
NON CASH TRANSACTIONS:
  Assumption of bridge loan                                                 $ 140,000
                                                                            =========
  Preferred stock dividends                                    $   2,391    $   1,255
                                                               =========    =========
  Amortization of preferred stock discount                     $      84    $      49
                                                               =========    =========
  Capital contribution                                                      $   4,530
                                                                            =========
</TABLE>

           See notes to condensed consolidated financial statements.


                                       7

<PAGE>   8





                          DAY INTERNATIONAL GROUP, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (IN THOUSANDS)

A. BASIS OF PRESENTATION - The balance sheet as of December 31, 1998 is
condensed financial information derived from the audited balance sheet. The
interim financial statements are unaudited. The financial statements of Day
International Group, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles and, in the opinion of management,
reflect all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation in accordance with generally accepted accounting principles
for the periods presented. The results of operations and cash flows for the
interim periods presented are not necessarily indicative of the results for the
full year.

B. ACQUISITIONS AND RELATED TRANSACTIONS - On January 16, 1998, affiliates of
Greenwich Street Capital Partners, Inc. ("Greenwich Street") and SG Capital
Partners LLC ("SGCP") acquired substantially all of the common stock of the
Company for approximately $206 million (the "Acquisition"), with the Company's
management retaining the balance of the common stock. In conjunction with the
Acquisition, the Company entered into a $60 million Senior Secured Credit
Facility (the "Senior Secured Credit Facility") consisting of a $40 million Term
Loan (the "Term Loan") and a $20 million Revolving Credit Facility (the
"Revolving Credit Facility"). Proceeds from the Term Loan were used to repay the
Company's then existing credit facility and to pay certain acquisition related
fees and expenses. As a result of such repayment of the Company's then existing
Credit Facility, $0.7 million of deferred financing fees were written off as an
extraordinary item. The Acquisition also resulted in compensation related
expenses of $17.0 million associated with employment agreements with certain key
members of management and amendments to the Company's Stock Option Plan.

On March 18, 1998, the Company successfully completed a Consent Solicitation
(the "Consent") with respect to its $100.0 million 11 1/8% Senior Subordinated
Notes which are due in 2005 (the "2005 Notes"). The Consent permitted the
Company to issue $115.0 million of 9 1/2% Senior Subordinated Notes (the "2008
Notes") and $35.0 million of 12 1/4% Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock"). The Consent also allowed the Company to assume
a $140.0 million Bridge Loan (the "Bridge Loan") incurred by its majority
shareholder in connection with the Acquisition, and effected certain other
changes to the Indenture governing the 2005 Notes, including the elimination of
the provisions of the Indenture subordinating the 2005 Notes to other
indebtedness of the Company. As consideration for the Consent, the Company paid
a Consent fee of $65 for every $1,000 of notes held. The proceeds from the
issuance of the 2008 Notes and the Exchangeable Preferred Stock were used to
repay the Bridge Loan and to pay other financing fees and expenses. Expenses
associated with obtaining the Consent were approximately $1.0 million. As a
result of the repayment of the Bridge Loan, $5.2 million of deferred financing
fees and expenses were also written off as an extraordinary





                                       8
<PAGE>   9

item. The Acquisition does not require a change in the Company's historical
basis of accounting since the Company's 2005 Notes remained outstanding
following the Acquisition.

Effective December 31, 1998, the Company acquired the stock of Rotec
Hulsensysteme GmbH ("Rotec") and entered into a five-year noncompete agreement
with the selling shareholders. The acquisition was financed through an
additional $10 million term loan under the Senior Secured Credit Facility and
additional equity from the Company's two major shareholders and was accounted
for as a purchase in accordance with Accounting Principles Board Opinion No. 16.

The following summarizes the changes in stockholders' (deficit) equity for the
six months ended June 30, 1999:

<TABLE>
<CAPTION>
(dollars in thousands)                                                                                           FOREIGN
                                                    COMMON SHARES                               RETAINED         CURRENCY
                                               -------------------------        CONTRA          EARNINGS       TRANSLATION
                                               SHARES             AMOUNT        EQUITY         (DEFICIT)        ADJUSTMENT
                                               ------             ------        ------         ---------        ----------
<S>                                         <C>                 <C>        <C>              <C>               <C>
Balance at December 31, 1998                   23,298              $ 1        $ (68,772)       $ (10,370)        $ (1,142)

Net income                                                                                           288

Preferred stock dividends                                                                         (2,391)

Amortization of preferred
    stock discount                                                                                   (84)

Foreign currency
    translation adjustment                         -                -                -                -            (2,758)
                                               ------              ---        ---------        ---------         --------
Balance at June 30, 1999                       23,298              $ 1        $ (68,772)       $ (12,557)        $ (3,900)
                                               ======              ===        =========        =========         ========
</TABLE>

On July 29, 1999, the Company signed a definitive purchase agreement to acquire
the textiles products operations of Armstrong World Industries, Inc. The
acquisition is expected to be financed through the Company's line of credit and
is expected to close in the next three months.

C.       INVENTORIES

Inventories as of  June 30, 1999 and December 31, 1998 consist of:
<TABLE>
<CAPTION>
                  JUNE 30,        DECEMBER 31,
                    1999              1998
                    ----              ----
<S>                <C>              <C>
Finished Goods     $10,504          $ 9,762
Work in Progress     4,537            5,220
Raw Materials        4,191            4,197
                   -------          -------
                   $19,232          $19,179
                   =======          =======
</TABLE>




                                       9

<PAGE>   10

D.       BUSINESS SEGMENTS

The Company produces precision-engineered rubber products, specializing in the
design and customization of consumable image-transfer products for the graphic
arts (printing) industry and fiber handling products for the textile industry.
The Company's printing components division ("Image Transfer") designs,
manufactures and markets high-quality printing blankets and sleeves for use in
offset printing.

Segment performance is evaluated based on operating profit results compared to
the annual operating plan. Intersegment sales and transfers are not material.

The Company manages the two segments as separate strategic business units. They
are managed separately because each business unit requires different
manufacturing processes, technology and marketing strategies.
<TABLE>
<CAPTION>

                               THREE MONTHS ENDED JUNE 30, 1999
                               --------------------------------
                          IMAGE
                         TRANSFER             TEXTILE            TOTALS
                         --------             -------            ------
<S>                       <C>                  <C>                <C>
Third party sales         $36,231              $7,305             $43,536
Operating profit            9,955                 419              10,374
</TABLE>
<TABLE>
<CAPTION>
                               THREE MONTHS ENDED JUNE 30, 1998
                               --------------------------------
                          IMAGE
                         TRANSFER             TEXTILE            TOTALS
                         --------             -------            ------
<S>                       <C>                  <C>                <C>
Third party sales         $34,593              $8,320             $42,913
Operating profit            8,814               1,168               9,982
</TABLE>

<TABLE>
<CAPTION>
                                SIX MONTHS ENDED JUNE 30, 1999
                                ------------------------------
                         IMAGE
                       TRANSFER             TEXTILE            TOTALS
                       --------             -------            ------
<S>                       <C>                 <C>                 <C>
Third party sales         $71,412             $14,680             $86,092
Operating profit           18,601                 720              19,321
</TABLE>

<TABLE>
<CAPTION>

                                SIX MONTHS ENDED JUNE 30, 1998
                                ------------------------------
                         IMAGE
                        TRANSFER             TEXTILE            TOTALS
                        --------             -------            ------
<S>                       <C>                 <C>                 <C>
Third party sales         $68,712             $17,338             $86,050
Operating profit           17,823               2,043              19,866
</TABLE>


                                       10

<PAGE>   11



The following is a reconciliation of the operating profit reported above to the
amount reported in the Consolidated Financial Statements:
<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED JUNE 30,
                                           ---------------------------
                                                1999        1998
                                                ----        ----
<S>                                          <C>         <C>
Segment operating profit                     $ 10,374    $  9,982
APB #16 depreciation and amortization          (1,022)     (1,022)
Non allocated corporate expenses                 (190)        (98)
Amortization of intangibles                      (903)       (642)
Management fees                                  (276)       (243)
                                             --------    --------
         Total operating profit              $  7,983    $  7,977
                                             ========    ========
</TABLE>
<TABLE>
<CAPTION>
                                            SIX MONTHS ENDED JUNE 30,
                                            -------------------------
                                               1999        1998
                                               ----        ----
<S>                                          <C>         <C>
Segment operating profit                     $ 19,321    $ 19,866
APB #16 depreciation and amortization          (2,044)     (2,044)
Non allocated corporate expenses                 (357)       (162)
Compensation and related transaction costs                (18,018)
Amortization of intangibles                    (1,811)     (1,293)
Management fees                                  (530)       (478)
                                             --------    --------
         Total operating profit (loss)       $ 14,579    $ (2,129)
                                             ========    ========
</TABLE>

E. CONTINGENCIES - Claims have been made against the Company for the costs of
environmental remedial measures taken or to be taken. Reserves for such
liabilities have been established and no insurance recoveries have been
anticipated in the determination of the reserves. 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 the Company. The
Company's previous parent and its parent, M.A. Hanna, have agreed to indemnify
the Company for certain of the costs associated with these matters.



                                       11
<PAGE>   12




F. SUPPLEMENTAL CONSOLIDATING INFORMATION - The Company issued $100,000 of 11
1/8% Senior Notes in conjunction with the purchase of Day International, Inc.,
("Day") from M.A. Hanna and in March 1998, the Company issued $115,000 of 9 1/2%
Senior Subordinated Notes in conjunction with the acquisition of the Company by
Greenwich (collectively, the "Notes"). As a result of the 1995 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). Day has 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 do not have any
credit arrangements senior to the Notes. 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
eliminations 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 June 30, 1999 and December 31, 1998 and
the supplemental combined condensed statements of operations and cash flows for
the three and six months ended June 30, 1999 and 1998 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.



                                       12
<PAGE>   13




                          DAY INTERNATIONAL GROUP, INC.

                 SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEET

                                  JUNE 30, 1999
<TABLE>
<CAPTION>

                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------
<S>                                              <C>                <C>           <C>            <C>           <C>
ASSETS
Cash and cash equivalents                        $      1,121        $   (375)   $    1,190                    $    1,936
Accounts receivable -- net                                             10,242         8,583                        18,825
Inventories                                                            11,802         7,430                        19,232
Other assets                                                            2,580         1,268                         3,848
                                                     --------        --------      --------      ---------       --------
         TOTAL CURRENT ASSETS                           1,121          24,249        18,471             --         43,841
Intercompany                                          253,991              --                    $(253,991)            --
Property, plant and equipment -- net                                   36,398        13,192                        49,590
Investment in subsidiaries                            (52,078)         28,840                       23,238             --
Intangible and other assets                                           139,233        16,225                       155,458
                                                     --------        --------      --------      ---------       --------
         TOTAL ASSETS                                $203,034        $228,720      $ 47,888      $(230,753)      $248,889
                                                     ========        ========      ========      =========       ========
LIABILITIES AND
  STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable                                                     $  4,194      $  3,240      $    (719)      $  6,715
Current maturities of long-term debt                 $  1,292                                                       1,292
Accrued associate-related costs and
  other expenses                                        4,431           8,185         5,144                        17,760
                                                     --------        --------      --------      ---------       --------
         TOTAL CURRENT LIABILITIES                      5,723          12,379         8,384           (719)        25,767
Intercompany                                          (13,160)        254,102        12,360       (253,302)            --
Long-term and subordinated long-term
  debt                                                252,699                                                     252,699
Other long-term liabilities                                            13,825         2,726                        16,551
Exchangeable Preferred Stock                           39,100                                                      39,100
Total stockholders' equity (deficit)                  (81,328)        (51,586)       24,418         23,268        (85,228)
                                                     --------        --------      --------      ---------       --------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY (DEFICIT)                                   $203,034        $228,720      $ 47,888      $(230,753)      $248,889
                                                     ========        ========      ========      =========       ========
</TABLE>



                                       13
<PAGE>   14



                          DAY INTERNATIONAL GROUP, INC.

                 SUPPLEMENTAL COMBINING CONDENSED BALANCE SHEET
                                DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------
<S>                                                <C>               <C>         <C>             <C>           <C>
ASSETS
Cash and cash equivalents                          $    3,256        $   (955)   $    2,461                    $    4,762
Accounts receivable -- net                                             10,147         8,483                        18,630
Inventories                                                            11,450         7,729                        19,179
Other assets                                                            2,527         1,283                         3,810
                                                     --------        --------      --------      ---------       --------
         TOTAL CURRENT ASSETS                           3,256          23,169        19,956             --         46,381
Intercompany                                          253,367              --                    $(253,367)            --
Property, plant and equipment -- net                                   36,812        13,493                        50,305
Investment in subsidiaries                            (52,370)         28,561                       23,809             --
Intangible and other assets                                           142,819        17,903                       160,722
                                                     --------        --------      --------      ---------       --------
         TOTAL ASSETS                                $204,253        $231,361      $ 51,352      $(229,558)      $257,408
                                                     ========        ========      ========      =========       ========
LIABILITIES AND
  STOCKHOLDERS' EQUITY (DEFICIT)

Accounts payable                                                     $  2,702      $  3,337      $    (134)      $  5,905
Current maturities of long-term debt                 $  1,292                                                       1,292
Accrued associate-related costs and
  other expenses                                        4,336           9,261         6,881                        20,478
                                                     --------        --------      --------      ---------       --------
         TOTAL CURRENT LIABILITIES                      5,628          11,963        10,218           (134)        27,675
Intercompany                                          (15,082)        255,984        12,331       (253,233)            --
Long-term and subordinated long-term
  debt                                                256,223                                                     256,223
Other long-term liabilities                                            14,187         2,979                        17,166
Exchangeable Preferred Stock                           36,627                                                      36,627
Total stockholders' equity (deficit)                  (79,143)        (50,773)       25,824         23,809        (80,283)
                                                     --------        --------      --------      ---------       --------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY (DEFICIT)                                   $204,253        $231,361      $ 51,352      $(229,558)      $257,408
                                                     ========        ========      ========      =========       ========
</TABLE>



                                       14
<PAGE>   15



                          DAY INTERNATIONAL GROUP, INC.

            SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS

                        THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>

                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------

<S>                                                   <C>             <C>           <C>           <C>             <C>
Net sales                                             $    --         $30,699       $12,837       $     --        $43,536
Cost of goods sold                                                     18,142         8,909                        27,051
                                                      -------         -------       -------        -------       --------
         Gross profit                                      --          12,557         3,928             --         16,485
Selling, general and administrative                         2           5,031         2,290                         7,323
Amortization of intangibles                                               822            81                           903
Management fees                                                           276                                         276
                                                      -------         -------       -------        -------       --------
         Operating income                                  (2)          6,428         1,557             --          7,983
Other expenses (income):
Equity in (earnings) loss of subsidiaries                (629)           (883)                       1,512             --
Interest expense                                                        6,862                                       6,862
Other (income) expense                                     (3)            (18)           74                            53
                                                      -------         -------       -------        -------       --------
         Income (before income taxes                      630             467         1,483         (1,512)         1,068
Income taxes (benefit)                                    -              (162)          600                           438
                                                      -------         -------       -------        -------       --------
         Net income                                   $   630         $   629       $   883        $(1,512)      $    630
                                                      =======         =======       =======        =======       ========
</TABLE>





                                       15
<PAGE>   16




                          DAY INTERNATIONAL GROUP, INC.

            SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
                        THREE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------
<S>                                                   <C>             <C>           <C>          <C>              <C>
Net sales                                             $    --         $32,780       $10,133      $                $42,913
Cost of goods sold                                                     20,126         6,728                        26,854
                                                      -------         -------       -------        -------       --------
         Gross profit                                      --          12,654         3,405             --         16,059
Selling, general and administrative                        16           5,270         1,910                         7,196
Amortization of intangibles                                               631            12                           643
Management fees                                                           243                                         243
                                                      -------         -------       -------        -------       --------
         Operating income                                 (16)          6,510         1,483             --          7,977
Other expenses (income):
Equity in loss (earnings) of subsidiaries                (708)           (964)                       1,672             --
Interest expense                                                        6,920                                       6,920
Other (income) expense                                    (21)              9           (18)                          (30)
                                                      -------         -------       -------        -------       --------
         Income (loss) before income taxes                713             545         1,501         (1,672)         1,087
Income taxes (benefit)                                      2            (163)          537                           376
                                                      -------         -------       -------        -------       --------
         Net income (loss)                            $   711         $   708       $   964        $(1,672)      $    711
                                                      =======         =======       =======        =======       ========
</TABLE>




                                       16
<PAGE>   17




                          DAY INTERNATIONAL GROUP, INC.

            SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>

                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------
<S>                                                   <C>             <C>           <C>           <C>             <C>
Net sales                                             $    --         $60,678       $25,414       $     --        $86,092
Cost of goods sold                                                     36,364        17,425                        53,789
                                                      -------        --------     ---------        -------        -------
         Gross profit                                      --          24,314         7,989             --         32,303
Selling, general and administrative                        11          10,666         4,706                        15,383
Amortization of intangibles                                             1,646           165                         1,811
Management fees                                                           530                                         530
                                                      -------        --------     ---------        -------        -------
         Operating income                                 (11)         11,472         3,118             --         14,579
Other expenses (income):
Equity in (earnings) loss of subsidiaries                (292)         (1,720)                       2,012             --
Interest expense                                                       13,745                                      13,745
Other (income) expense                                     (5)             68           205                           268
                                                      -------        --------     ---------        -------        -------
         Income (loss) before income taxes                286            (621)        2,913         (2,012)           566
Income taxes (benefit)                                     (2)           (913)        1,193                           278
                                                      -------        --------     ---------        -------        -------
         Net income (loss)                            $   288        $    292     $   1,720        $(2,012)       $   288
                                                      =======        ========     =========        =======        =======
</TABLE>




                                       17
<PAGE>   18




                          DAY INTERNATIONAL GROUP, INC.

            SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>

                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------
<S>                                                   <C>             <C>           <C>          <C>            <C>
Net sales                                             $    --         $64,100       $21,950      $                $86,050
Cost of goods sold                                                     38,980        14,861                        53,841
                                                    ---------      ----------     ---------       --------     ---------
         Gross profit                                      --          25,120         7,089             --         32,209
Selling, general and administrative                        29          10,630         3,890                        14,549
Compensation and related transaction costs                             18,018                                      18,018
Amortization of intangibles                                             1,271            22                         1,293
Management fees                                                           478                                         478
                                                    ---------      ----------     ---------       --------     ---------
         Operating income                                 (29)         (5,277)        3,177             --         (2,129)
Other expenses (income):
Equity in loss (earnings) of subsidiaries              11,524          (1,944)                      (9,580)            --
Interest expense                                        2,797          11,174                                      13,971
Other (income) expense                                    (34)             (3)          217                           180
                                                    ---------      ----------     ---------       --------     ---------
         Income (loss) before income taxes
             and extraordinary items                  (14,316)        (14,504)        2,960          9,580       (16,280)
Income taxes (benefit)                                 (1,036)         (3,408)        1,016                       (3,428)
                                                    ---------      ----------     ---------       --------     ---------
         Income (loss) before
             extraordinary items                      (13,280)        (11,096)        1,944          9,580       (12,852)
Extraordinary losses on early
    extinguishment of debt                              3,124             428            --             --         3,552
                                                    ---------      ----------     ---------       --------     ---------
         Net income (loss)                          $ (16,404)     $  (11,524)    $   1,944       $  9,580     $ (16,404)
                                                    =========      ==========     =========       ========     =========
</TABLE>







                                       18
<PAGE>   19



                          DAY INTERNATIONAL GROUP, INC.

            SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
                         SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>

                                                                     DAY
                                                       DAY         INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------
<S>                                                <C>              <C>           <C>           <C>             <C>
Operating Activities:
Net income                                         $      288       $     292     $   1,720     $   (2,012)     $     288
  Adjustments to reconcile net
    income to net cash provided by
    (used in) operating activities:
  Depreciation and amortization                                         6,443         1,187                         7,630
  Equity in (earnings) loss of subsidiaries              (292)         (1,720)                       2,012             --
  Deferred income taxes and other                                        (851)                                       (851)
  Changes in operating assets and liabilities              96            (441)       (2,281)          (244)        (2,870)
                                                   ----------      ----------     ---------       --------       --------
Net cash provided by (used in)
  operating activities                                     92           3,723           626           (244)         4,197
Investing activities:
  Capital expenditures                                                 (1,598)       (1,712)                       (3,310)
                                                   ----------      ----------     ---------       --------       --------
Net cash used in investing activities                      --          (1,598)       (1,712)            --         (3,310)
Financing Activities:
  Payments on term loans                                 (646)                                                       (646)
  Net payments on credit facilities                    (2,874)                                                     (2,874)
                                                   ----------      ----------     ---------       --------       --------
Net cash used in financing activities                  (3,520)             --            --             --         (3,520)
Intercompany transfers and dividends                    1,293          (1,545)            8            244             --
Effects of exchange rates on cash                                                      (193)                         (193)
                                                   ----------      ----------     ---------       --------       --------
Cash and Cash Equivalents:
Net increase (decrease) in cash and
  cash equivalents                                     (2,135)            580        (1,271)            --         (2,826)
Cash and cash equivalents at beginning of period        3,256            (955)        2,461                         4,762
                                                   ----------      ----------     ---------       --------       --------
Cash and cash equivalents at end of period         $    1,121      $     (375)    $   1,190       $     --       $  1,936
                                                   ==========      ==========     =========       ========       ========
</TABLE>




                                       19
<PAGE>   20



                          DAY INTERNATIONAL GROUP, INC.
            SUPPLEMENTAL COMBINING CONDENSED STATEMENT OF CASH FLOWS
                         SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>

                                                       DAY       DAY INTER-
                                                     INTER-       NATIONAL          NON
                                                    NATIONAL        INC.         GUARANTOR
                                                   GROUP, INC.   (GUARANTOR)   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                   -----------   -----------   ------------   ------------   ------------

<S>                                               <C>              <C>           <C>            <C>         <C>
Operating Activities:
Net income (loss)                                  $  (16,404)     $  (11,524)    $   1,944        $ 9,580     $  (16,404)
  Adjustments to reconcile net
    income (loss)to net cash provided by
    (used in) operating activities:
  Extraordinary loss on early
     extinguishment of debt                             3,124             428                                       3,552
  Depreciation and amortization                                         5,627           790                         6,417
  Non-cash charge related to stock
    option awards                                                       8,585                                       8,585
  Equity in (earnings) loss of subsidiaries            11,524          (1,944)                      (9,580)            --
  Deferred income taxes and other                                      (4,447)                                     (4,447)
  Changes in operating assets and liabilities           3,149          (2,234)        1,217            341          2,473
                                                   ----------        --------     ---------       --------       --------
Net cash provided by (used in)
  operating activities                                  1,393          (5,509)        3,951            341            176
Investing activities:
  Capital expenditures                                                 (1,951)       (1,028)                       (2,979)
                                                   ----------        --------     ---------       --------       --------

Net cash used in investing activities                      --          (1,951)       (1,028)            --         (2,979)
Financing Activities:
Proceeds from issuance of 2008 Notes                  111,134                                                     111,134
Proceeds from issuance of  exchangeable
   preferred stock                                     32,986                                                      32,986
Proceeds from issuance of common stock                    189                                                         189
Proceeds from issuance of term loans                   40,000                                                      40,000
Contributions from shareholders                         4,573                                                       4,573
Repayment of existing credit facility                 (30,000)                         (902)                      (30,902)
Repayment of bridge loan                             (140,000)                                                   (140,000)
Payment of consent fee                                 (6,500)                                                     (6,500)
Payment of deferred financing fees                     (2,742)                                                     (2,742)
Payments on the term loan                              (2,500)                                                     (2,500)
                                                   ----------        --------     ---------       --------       --------
Net cash provided by (used in)
   financing activities                                 7,140              --          (902)            --          6,238
Intercompany transfers and dividends                   (7,145)          7,486                         (341)            --
Effects of exchange rates on cash                                                       238                           238
                                                   ----------        --------     ---------       --------       --------
Cash and Cash Equivalents:
Net increase (decrease) in cash and
  cash equivalents                                      1,388              26         2,259             --          3,673
Cash and cash equivalents at beginning of period          596            (320)          504                           780
                                                   ----------        --------     ---------       --------       --------
Cash and cash equivalents at end of period         $    1,984        $   (294)    $   2,763       $     --       $  4,453
                                                   ==========        ========     =========       ========       ========
</TABLE>



                                       20
<PAGE>   21

G.    RECENTLY ISSUED ACCOUNTING STANDARD

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and for Hedging Activities." Under the Statement, every derivative is recorded
in the balance sheet as either an asset or liability measured at its fair value.
Changes in the derivatives fair value will be recognized currently in earnings
unless specific hedge criteria are met.

Day will be required to adopt this standard for its fiscal 2001 financial
statements. Based on current hedging activities, Day does not anticipate this
standard to have a material effect on its financial statements.



                                       21
<PAGE>   22





                          DAY INTERNATIONAL GROUP, INC.

Item 2.     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>
                                                     Three Months                       Six Months
                                                     ------------                       ----------
                                                    Ended June 30                      Ended June 30
                                                    -------------                      -------------
                                             1999                1998               1999               1998
                                             ----                ----               ----               ----
                                          $         %          $       %        $         %        $          %
                                         ----     -----      ----    -----     ----     -----     ----     -----
<S>                                     <C>       <C>        <C>     <C>       <C>      <C>       <C>      <C>
Net sales.............................   43.5     100.0      42.9    100.0     86.1     100.0     86.1     100.0
Costs of goods sold...................   27.0      62.1      26.9     62.7     53.8      62.5     53.9      62.6
Gross profit..........................   16.5      37.9      16.0     37.3     32.3      37.5     32.2      37.4
SG&A..................................    7.3      16.8       7.2     16.8     15.4      17.9     14.5      16.8
Compensation and related
     transaction costs................                                                            18.0      20.9
Amortization of intangibles...........    0.9       2.1       0.6      1.4      1.8       2.1      1.3       1.5
Management Fees.......................    0.3       0.7       0.2      0.5      0.5       0.6      0.5       0.6
Operating income......................    8.0      18.4       8.0     18.6     14.6      17.0     (2.1)     (2.4)
</TABLE>

COMPARISON OF RESULTS OF OPERATIONS

Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998

Net sales increased to $43.5 million for the three months ended June 30, 1999
from $42.9 million for the comparable period in 1998, an increase of $0.6
million or 1.4%. Sales volumes increased by $1.0 million or 2.3% offset by the
effect of foreign currency translation of $0.4 million or 0.9%. Image Transfer's
sales increased to $36.2 million for the three months ended June 30, 1999 from
$34.6 million for the comparable period in 1998, an increase of $1.6 million or
4.6%. The acquisition of Rotec Hulsensysteme GmbH ("Rotec") at the end of 1998
contributed $2.6 million to Image Transfer's net sales in the three months ended
June 30, 1999. Excluding sales contributed by Rotec, Image Transfer sales
decreased $1.0 million or 2.9% from the comparable period in 1998. The decrease
is mainly a result of lower US export sales to Japan and Latin America compared
to the same period a year ago. Domestic US sales, as well as sales in Europe and
Mexico, are ahead of the same period a year ago. Foreign currency translation
reduced Image Transfer's revenue by $0.3 million or 0.9%. Textiles' sales were
$7.3 million for the three months ended June 30, 1999 compared to $8.3 million
for the comparable




                                       22
<PAGE>   23

period in 1998, a decrease of $1.0 million or 12.0%. Textile sales decreased
across all markets. The decline in Europe was a result of a significant decline
in sales to original equipment manufacturers ("OEM's"). The decline in sales to
OEM's is a result of delays in purchasing of new equipment by the major yarn
manufacturers due to an overall slow down in the world-wide yarn spinning
industry that began in the second half of 1998 and continued in the first half
of 1999. Domestic sales were lower as increased imports of low cost Asian yarns
adversely impacted domestic yarn producers. At the same time, domestic mills
were faced with higher than normal inventories causing several yarn spinning
mills to be closed in the second half of 1998 and the first half of 1999. Export
sales to Asian markets were adversely impacted by the currency devaluations
which occurred in 1998 making the Day products more expensive. Sales to carpet
and fiber glass manufacturers remained strong. Foreign currency translation had
no material impact on Textile's sales this quarter.

Gross profit increased $0.5 million to $16.5 million for the three months ended
June 30, 1999 from $16.0 million for the three months ended June 30, 1998. As a
percentage of net sales, gross profit increased to 37.9% for the three months
ended June 30, 1999 from 37.3% for the comparable period in 1998. Foreign
currency translation reduced gross profit $0.1 million. Changes in market mix
along with slightly higher yields from production were the major contributions
to the improved gross margin.

SG&A increased to $7.3 million for the three months ended June 30, 1999 from
$7.2 million for the comparable period in 1998, an increase of $0.1 million or
1.4%. In the quarter ended June 30, 1999, foreign currency translation caused
SG&A to decrease by $0.1 million. As a percentage of net sales, SG&A remained
constant at 16.8% for both quarters.

Amortization of intangibles increased to $0.9 million for the three months ended
June 30, 1999 from $0.6 million for the comparable period in 1998, an increase
of $0.3 million. The increase is a result of the amortization of the goodwill in
conjunction with the Rotec acquisition.

Operating income was $8.0 million for the three months ended June 30, 1999 and
1998. As a percentage of net sales, operating income decreased to 18.4% for the
three months ended June 30, 1999 from 18.6% for the comparable period in 1998.

The effective tax rate for the second quarter of 1999 was 41.0%, which
approximates the combined US federal and state rate of around 40%, compared to
34.6% for the second quarter of 1998. The lower effective tax rate in 1998 was
mainly a result of changes in the locations where European profits were
generated with more of the profits being generated in markets with lower tax
rates.

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Net sales were $86.1 million for the six months ended June 30, 1999 and 1998.
Sales volumes for the six months ended June 30, 1999, were $0.4 million or 0.5%
higher than the same period in 1998. Foreign currency translation reduced sales
by $0.4 million for the six months ended June 30, 1999 compared to the same
period a year ago. Image Transfer's sales increased to $71.4 million for the six
months ended



                                       23
<PAGE>   24

June 30, 1999 from $68.7 million for the comparable period in 1998, an increase
of $2.7 million or 3.9%. The acquisition of Rotec Hulsensysteme GmbH ("Rotec")
at the end of 1998 contributed $5.2 million to Image Transfer's net sales in the
six months ended June 30, 1999. Excluding sales contributed by Rotec, Image
Transfer sales decreased $2.5 million or 3.6% from the comparable period in
1998. The decrease is mainly a result of lower US export sales to Japan and
Latin America compared to the same period a year ago combined with lower sales
in the UK. Foreign currency translation reduced Image Transfer's revenue by $0.3
million or 0.4%. Textiles' sales were $14.7 million for the six months ended
June 30, 1999 compared to $17.3 million for the comparable period in 1998; a
decrease of $2.6 million or 15.0%. Foreign currency translation accounted for
$0.1 million of the decrease. Textile sales decreased across all markets. The
decline in Europe was a result of a significant decline in sales to original
equipment manufacturers ("OEM's"). The decline in sales to OEM's is a result of
delays in purchasing of new equipment by the major yarn manufacturers due to an
overall slow down in the world-wide yarn spinning industry that began in the
second half of 1998 and continued in the first half of 1999. Domestic sales were
lower as increased imports of low cost Asian yarns adversely impacted domestic
yarn producers. At the same time, domestic mills were faced with higher than
normal inventories causing several yarn spinning mills to be closed in the
second half of 1998 and the first half of 1999. Export sales to Asian markets
were adversely impacted by the currency devaluations which occurred in 1998
making the Day products more expensive. Sales to carpet and fiber glass
manufacturers remained strong.

Gross profit for the six months ended June 30, 1999 remained virtually constant
at $32.3 million compared to $32.2 million for the six months ended June 30,
1998. As a percentage of net sales, gross profit also remained virtually
constant at 37.5% for the six months ended June 30, 1998 compared to 37.4% for
the same period of 1998. Gross profit decreased $0.1 million as a result of
foreign currency translation.

SG&A increased to $15.4 million for the six months ended June 30, 1999 from
$14.5 million for the comparable period in 1998, an increase of $0.9 million or
6.2%. The increase in SG&A as a percent of sales is a result of the fixed
component of SG&A supporting the decreased sales volumes. The foreign currency
translation had no impact on SG&A for the six months ended June 30, 1999
compared to the same period of 1998. As a percentage of net sales, SG&A
increased to 17.9% from 16.8%.

Amortization of intangibles increased to $1.8 million for the six months ended
June 30, 1999 from $1.3 million for the comparable period in 1998, an increase
of $0.5 million. The increase is a result of the amortization of the goodwill in
conjunction with the Rotec acquisition.

In 1998, compensation and related acquisition costs include $8.6 million as a
result of changes in the Company's stock option plan, $8.4 million related to
amounts payable under certain management employment agreements and $1.0 million
of expenses associated with obtaining the Consent. All of these items arose out
of the Acquisition and related transactions.


                                       24
<PAGE>   25

Operating income decreased to $14.6 million for the six months ended June 30,
1999 from $15.9 million, excluding the compensation and related acquisition
costs, for the comparable period in 1998, a decrease of $1.3 million or 8.2%. As
a percentage of net sales (excluding the compensation and related acquisition
costs), operating income decreased to 17.0% for the six months ended June 30,
1999 from 18.5% for the comparable period in 1998.

The effective tax rate for the first half of 1999 was an expense of 49.0%
compared to a benefit of 26.1% for the first half of 1998, including the effect
of the extraordinary item. The higher income tax percentage in 1999 compared to
1998 is mainly a result of the establishment of a deferred tax valuation
allowance in 1998 and more profits generated in markets with lower rates.

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
the majority of inventory and maintain the receivables of the end users.

Cash Flows From Operating Activities. Cash flows provided by operations for the
six months ended June 30, 1999 were $4.2 million compared to $0.2 million for
the six months ended June 30, 1998. For the six months ended June 30, 1999, cash
flows from operations were adversely impacted by a $2.9 million increase in
working capital requirements. Cash flows from operations in 1998 were impacted
by $9.5 million of compensation and related transaction costs associated with
the Acquisition.

Cash Flows From Investing Activities. The Company's expenditures for property,
plant and equipment were $7.1 million, $5.1 million and $5.2 million for 1998,
1997 and 1996, respectively. The Company believes that capital expenditures of
$7.0 million to $9.0 million over the next several years will be sufficient to
maintain its market position. The Company expects to fund these capital
expenditures from cash flow from operations. Capital expenditures were $3.3
million and $3.0 million for the six months ended June 30, 1999 and 1998,
respectively.

On July 29, 1999, The Company signed a definitive purchase agreement to acquire
the textile products operations of Armstrong World Industries, Inc. The
acquisition is expected to be financed through the Company's line of credit and
is expected to close in the next three months.

Cash Flows From Financing Activities. In the first six months of 1999, the
Company repaid $2.9 million on its revolving line of credit and $0.6 million on
its term loans. In January 1998, the Company entered into a $60 million Senior
Secured Credit Facility, concurrent with the Acquisition. The facility consisted
of a $40 million Term Loan and a $20 million Revolving Credit Facility. During
the six months ended June 30, 1998, the Company made $2.5 million in payments on
the Term Loan. The proceeds from the Term Loan were used to repay the Company's
then existing US Credit Facility and to pay certain of the expenses associated
with the Acquisition. As of June 30, 1999, there was $5.0 million outstanding
under the Revolving Credit Facility and the Company had approximately $13.3
million available under the Revolving Credit Facility (calculated by applying
the applicable borrowing base limitation).



                                       25
<PAGE>   26

Also, during the six months ended June 30, 1998, the Company paid the holders of
the existing 2005 Notes a $6.5 million Consent Fee so as to permit the Company
to issue $115.0 million of 9 1/2% Senior Subordinated Notes due in 2008 (the
"2008 Notes") and $35.0 million of 12 1/4% Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock"). The Consent Agreement also allowed the Company
to assume the $140.0 million Bridge Loan (the "Bridge Loan") of its new majority
shareholder. The proceeds from the issuance of the 2008 Notes and the
Exchangeable Preferred Stock were used to repay the Bridge Loan and to pay other
financing fees and expenses. The Company also received a capital contribution of
$9.1 million from its majority shareholder in the six months ended June 30, 1998
which was used to pay certain financing fees and expenses.

As a result of the additional debt incurred by the Company in conjunction with
the Acquisition, the Company is highly leveraged. The Company's aggregate
indebtedness is approximately $254.0 million and the aggregate liquidation
preference of the Exchangeable Preferred Stock is $40.9 million.

The level of the Company's indebtedness could have important consequences
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; (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 dividends
on the Exchangeable Preferred Stock and to satisfy its other debt obligations,
including its debt obligations under the 2005 Notes, 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
Revolving Credit Facility (which is subject to borrowing base limitations) or a
successor facility. The Company anticipates that its operating cash flow,
together with borrowings under the Revolving Credit Facility, will be sufficient
to meet its operating expenses and capital expenditures and to service its debt
requirements as they become due. However, there can be no assurance that the
Company's cash flow, availability under the Revolving Credit Facility and other
capital resources will be sufficient for payment of principal and interest on
its indebtedness, including the Senior Secured Credit Facility, the 2005 Notes
and the 2008 Notes, for the payment of periodic cash dividends on the
Exchangeable Preferred Stock, for any redemption of the Exchangeable Preferred
Stock for cash, or if the exchange debentures (the "Exchange Debentures") have
been issued in exchange for the Exchangeable Preferred Stock, the payment of
principal or cash interest on the Exchange Debentures. If the Company's cash
flow, availability under the Revolving Credit Facility and other capital
resources are insufficient to fund the Company's debt service obligations, the
Company may be forced to reduce or delay capital expenditures, to sell assets,
to restructure or refinance its indebtedness, or to seek additional equity
capital. There can be no assurance that any of such measures could be
implemented on satisfactory terms, or if implemented, would be successful or
would permit the Company to meet its debt service obligations.


                                       26
<PAGE>   27

Year 2000. The Year 2000 issue relates to the inability of information systems
to recognize and process date-sensitive information beyond January 1, 2000.

The Company recognizes the importance of the Year 2000 issue and is continuing
to make progress in its efforts to identify and rectify all potential Year 2000
problems related to its Information Technology ("IT") systems, manufacturing
equipment, vendors and customers.

A Year 2000 committee has been established consisting of senior members of
management along with members of the IT and the facilities' engineering
departments. The committee's objective is to ensure that the Company will be
able to continue to service its customers, both internal and external, after
January 1, 2000. The scope of the Year 2000 project includes (i) information
technology, both hardware and software; (ii) non-IT systems or embedded
technology such as micro controllers contained in various manufacturing and lab
equipment, environmental and safety systems, facilities and utilities; and (iii)
readiness of key third parties, including suppliers and customers and electronic
data interchange, where applicable, with those key third parties. If the
necessary modifications and conversions are not made on a timely basis, the Year
2000 issue could have a material impact on the Company's operations.

The Company is using internal resources, and where necessary, external resources
to perform most of the testing and remediation functions. Upgrades to the
Company's business system were completed and tested by the end of July 1999. A
complete inventory of all equipment (manufacturing and otherwise) has been
completed and communication with the manufacturers of the equipment has
commenced to determine whether the equipment is Year 2000 compliant. Letters
have been sent to all significant vendors and customers requesting them to
confirm the status of their Year 2000 projects. Responses have been received
from a majority of the vendors and customers and follow-up efforts are in
process with those who have not yet responded.

The Company's historical and estimated costs of remediation of all potential
Year 2000 problems have not been and are not anticipated to be material to the
Company's results of operations or financial position, and will be funded
through operating cash flows. Total costs associated with the remediation of the
Year 2000 issues (including systems, software, and non-IT systems replaced as a
result of Year 2000 issues) are currently estimated to be less than $1 million.
The largest cost factor to date has been the expenditure of management and
associates' time in attention to Year 2000 and related issues. Estimated
remediation costs are based on management's best estimates. There can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated, particularly if unanticipated Year 2000
issues arise.

While the Company expects to make the necessary modifications or changes to both
its internal IT and non-IT systems and existing product base in a timely
fashion, there can be no assurance that the Company's internal systems will not
be materially adversely affected by the advent of Year 2000.

In the event of a failure as a result of Year 2000 issues, the Company could
lose or have trouble accessing accurate internal data, resulting in incomplete
or inaccurate accounting of Company financial



                                       27
<PAGE>   28

results, the Company's manufacturing operating systems could be impaired, and
the Company could be required to expend significant resources to address such
failures. In an effort intended to minimize potential disruption to its internal
systems, the Company intends to perform additional hard-disk back-up of its
rudimentary systems and critical information in advance of the Year 2000.

Similarly, in the event of a failure as a result of Year 2000 issues in any
systems of third parties with whom the Company interacts, the Company could lose
or have trouble accessing or receive inaccurate third party data, experience
internal and external communications difficulties or have difficulty obtaining
components that are Year 2000 compliant from its vendors. The Company could also
experience a slowdown or reduction of sales if Year 2000 issues adversely affect
customers. In an effort to mitigate the potential impact of any failures, the
Company is developing and documenting contingency plans for each critical area
of the business. These contingency plan are expected to be completed by the end
of August 1999.

Euro. The Company began accepting orders in the Euro and making payments in the
Euro effective January 1, 1999. Business system upgrades that allow for
transactions in the Euro are installed at the Company's European facilities.
Customers and suppliers have been contacted indicating the Company's ability to
transact business in the Euro on January 1, 1999 and price lists have been
modified accordingly. The Company does not anticipate any material impact to its
revenues, expenses or results of operations as a result of the adoption of the
Euro.



                                       28
<PAGE>   29





                          DAY INTERNATIONAL GROUP, INC.

                           Part II: Other Information

Item 1. Legal Proceedings - None

Item 2. Changes in Securities and Use of Proceeds - None

Item 6. Exhibits and Reports on Form 8-K

         a.   Reports on Form 8-K - None

         b.   Exhibits

              27  Financial Data Schedule

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the
Registrants has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                   Day International Group, Inc.
                                   -----------------------------
                                           (Registrant)

Date:  August 12, 1999             /s/ David B. Freimuth
                                   -----------------------------
                                   David B. Freimuth
                                   Vice President and
                                     Chief Financial Officer


                                       29