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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, 2007
 Commission File No. 333-51839
 DAY INTERNATIONAL GROUP, INC.
 
     þ o
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DAY INTERNATIONAL GROUP, INC.
INDEX
 PagePART
I FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2007 and
December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three months
ended March 31, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4.
    
    Controls and Procedures
    
    
    15PART II OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    16Signature
    
    
    16EX-31.1EX-31.2EX-32.1EX-32.2
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PART I FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2007 AND DECEMBER 31, 2006
(In thousands)
 2007
    
    
    2006(Unaudited)ASSETSCash and cash equivalents
    
    $
    2,018
    
    
    $
    574Accounts
receivable (less allowance for doubtful accounts of $2,665 and
$2,580, respectively)
    
    
    56,272
    
    
    
    55,807Inventories (Note B)
    
    
    54,877
    
    
    
    51,534Other current assets
    
    
    21,792
    
    
    
    23,157Total current assets
    
    
    134,959
    
    
    
    131,072Property, plant and equipment, net of accumulated depreciation of $70,154 and $67,550, respectively
    
    
    74,771
    
    
    
    72,843Goodwill
    
    
    163,472
    
    
    
    163,294Intangible assets, net of accumulated amortization of $33,914 and $33,454, respectively
    
    
    13,543
    
    
    
    14,361Other assets
    
    
    25,882
    
    
    
    25,737TOTAL ASSETS
    
    $
    412,627
    
    
    $
    407,307LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Accounts payable
    
    $
    23,162
    
    
    $
    20,832Current maturities of long-term debt
    
    
    4,181
    
    
    
    4,407Other current liabilities
    
    
    30,334
    
    
    
    31,735Total current liabilities
    
    
    57,677
    
    
    
    56,974Long-term and subordinated long-term debt
    
    
    355,420
    
    
    
    356,030Other long-term liabilities
    
    
    51,043
    
    
    
    52,596Redeemable preferred stock (Note C)
    
    
    56,791
    
    
    
    55,342STOCKHOLDERS EQUITY (DEFICIT):Common shares
    
    
    1
    
    
    
    1Additional pain-in capital
    
    
    1,375
    
    
    
    1,375Contra-equity associated with the assumption of majority shareholders bridge loan
    
    
    (68,673
    )
    
    
    (68,673
    )Accumulated deficit
    
    
    (51,841
    )
    
    
    (57,765
    )Accumulated other comprehensive income
    
    
    10,834
    
    
    
    11,427Total stockholders equity (deficit)
    
    
    (108,304
    )
    
    
    (113,635
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    412,627
    
    
    $
    407,307
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DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(In thousands)
(Unaudited)
 2007
    
    
    2006NET SALES
    
    $
    98,813
    
    
    $
    80,406COST OF GOODS SOLD
    
    
    61,866
    
    
    
    49,907GROSS PROFIT
    
    
    36,947
    
    
    
    30,499SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
    
    
    21,017
    
    
    
    18,309AMORTIZATION OF INTANGIBLES
    
    
    8
    
    
    
    8MANAGEMENT FEES
    
    
    250
    
    
    
    250OPERATING PROFIT
    
    
    15,672
    
    
    
    11,932OTHER EXPENSES:Interest expense:Long-term debt (including gain on swap termination of
($596) and $0, and amortization of deferred financing fees
of $460, and $460)
    
    
    8,139
    
    
    
    8,565Redeemable preferred stock dividends (including
amortization of discount and issuance
costs of $33 and $33)
    
    
    1,449
    
    
    
    1,490Other (income) expense
    
    
    166
    
    
    
    1,690INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    5,918
    
    
    
    187INCOME TAX EXPENSE
    
    
    2,826
    
    
    
    566INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    3,092
    
    
    
    (379
    )DISCONTINUED
OPERATIONS: (Note I)INCOME FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    1,608INCOME TAX EXPENSE
    
    
    
    
    
    
    617INCOME FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    991NET INCOME
    
    $
    3,092
    
    
    $
    612
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DAY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(In thousands)
(Unaudited)
 2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    3,092
    
    
    $
    612Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    3,412
    
    
    
    3,231Interest expenseredeemable preferred stock dividends
    
    
    1,449
    
    
    
    1,490Deferred income taxes
    
    
    (733
    )
    
    
    5,369Equity in earnings of investees
    
    
    (179
    )
    
    
    (87
    )Foreign currency loss
    
    
    230
    
    
    
    4,001Gain on disposal of fixed assets
    
    
    (11
    )
    
    
    Change in operating assets and liabilities
    
    
    (2,372
    )
    
    
    (6,619
    )Net cash provided by operating activities
    
    
    4,888
    
    
    
    7,997CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (3,890
    )
    
    
    (2,172
    )Net cash used in investing activities
    
    
    (3,890
    )
    
    
    (2,172
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments on long-term debt
    
    
    (6,446
    )
    
    
    (12,752
    )Net proceeds from revolving credit facility
    
    
    5,000
    
    
    
    400Net cash used in financing activities
    
    
    (1,446
    )
    
    
    (12,352
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    1,892
    
    
    
    (30
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,444
    
    
    
    (6,557
    )Cash and cash equivalents at beginning of period
    
    
    574
    
    
    
    9,441Cash and cash equivalents at end of period
    
    $
    2,018
    
    
    $
    2,884
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DAY INTERNATIONAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
 A. BASIS OF PRESENTATION
    B. INVENTORIES
  2007
    
    
    2006(Audited)Finished goods
    
    $
    23,890
    
    
    $
    22,678Work in process
    
    
    6,475
    
    
    
    6,160Raw materials
    
    
    24,512
    
    
    
    22,696$
    54,877
    
    
    $
    51,534
 C.
REDEEMABLE PREFERRED STOCK
 1 4
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1 4
 D. INCOME TAXES
    7




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E. BUSINESS SEGMENTS
  F. COMPREHENSIVE INCOME (LOSS)
  G. CONTINGENCIES
  8




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H. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
  2007
    
    
    2006Service cost
    
    $
    27
    
    
    $
    27Interest cost
    
    
    17
    
    
    
    14Expected return on plan assets
    
    
    
    
    
    
    Actuarial loss recognized
    
    
    (5
    )
    
    
    5Net periodic pension costs
    
    $
    39
    
    
    $
    46
  2007
    
    
    2006Service cost
    
    $
    281
    
    
    $
    346Interest cost
    
    
    210
    
    
    
    247Amortization of prior service cost
    
    
    (185
    )
    
    
    (209
    )Actuarial loss recognized
    
    
    
    
    
    
    61Net periodic postretirement benefit costs
    
    $
    306
    
    
    $
    445
 Medicare Prescription Drug, Improvement and
Modernization Act of 2003
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I. DISCONTINUED OPERATIONS
  2006Net sales
    
    $
    11,836Pre-tax income
    
    
    1,696
  2006Net sales
    
    $
    2,069Pre-tax income (loss)
    
    
    (88
    )
 J. SUBSEQUENT EVENT
  10




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
 K. RECENTLY ISSUED ACCOUNTING STANDARDS
    11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Safe Harbor Statement
    Basis of Presentation
  Three Months Ended March 312007
    
    2006$
    
    %
    
    $
    
    %Net sales
    
    
    98.8
    
    
    
    100.0
    
    
    
    80.4
    
    
    
    100.0Costs of goods sold
    
    
    61.9
    
    
    
    62.7
    
    
    
    49.9
    
    
    
    62.1Gross profit
    
    
    36.9
    
    
    
    37.3
    
    
    
    30.5
    
    
    
    37.9Selling, general and administrative expense
    
    
    21.0
    
    
    
    21.3
    
    
    
    18.3
    
    
    
    22.8Management fees
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Operating profit
    
    
    15.7
    
    
    
    15.8
    
    
    
    12.0
    
    
    
    14.9
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Comparison of Results of Operations
 Three Months Ended March 31, 2007, Compared with Three Months Ended March 31, 2006
        13




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Liquidity and Capital Resources
     
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Risks Associated with International Operations
   14




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 
 Interest Rate Risks
 
 Commodity Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
  15




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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
 
 Signature
  Day International Group, Inc.
(Registrant)Date: May 14, 2007
    /s/ Thomas J. KoenigThomas J. KoenigVice President and
Chief Financial Officer
(Principal Financial Officer) 16