##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission File #0-16148



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Multi-Color Corporation

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|OHIO                                                           |  | 31-1125853                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                              



425 Walnut Street,
Suite 1300, Cincinnati, Ohio 45202

(Address of principal executive offices)



Registrants telephone number  (513) 381-1480



---



Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act).    Yes ̈No  x



|Indicate | by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x
|-------- | --------------------------------------------------------------------------------------------------------------------



Indicate the number of shares outstanding of each of the Registrants classes of common stock, as of the latest practicable date.



Common shares, no par value  6,524,916 (as of October 31, 2005)



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##### Table of Contents

MULTI-COLOR CORPORATION

FORM 10-Q

CONTENTS



|                                                                                                                                |  |     
|------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                |  | Page
|PART I  FINANCIAL INFORMATION                                                                                                  |  |     
|                                                                                                                                | 
|Item 1. Financial Statements (Unaudited)                                                                                        |  |     
|                                                                                                                                | 
|Condensed Consolidated Statements of Income for the Three Months and Six Months Ended September 30, 2005 and September 30, 2004 |  | 1   
|                                                                                                                                | 
|Condensed Consolidated Balance Sheets at September 30, 2005 and March 31, 2005                                                  |  | 2   
|                                                                                                                                | 
|Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2005 and September 30, 2004              |  | 3   
|                                                                                                                                | 
|Notes to Condensed Consolidated Financial Statements                                                                            |  | 4   
|                                                                                                                                | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 11  
|                                                                                                                                | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                              |  | 17  
|                                                                                                                                | 
|Item 4. Controls and Procedures                                                                                                 |  | 17  
|                                                                                                                                | 
|PART II 
OTHER INFORMATION                                                                                                     |  |     
|                                                                                                                                | 
|Item 1.
Legal Proceedings                                                                                                       |  | 18  
|                                                                                                                                | 
|Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                                             |  | 18  
|                                                                                                                                | 
|Item 3.
Defaults upon Senior Securities                                                                                         |  | 18  
|                                                                                                                                | 
|Item 4.
Submission of Matters to a Vote of Security Holders                                                                     |  | 18  
|                                                                                                                                | 
|Item 5.
Other Information                                                                                                       |  | 18  
|                                                                                                                                | 
|Item 6.
Exhibits                                                                                                                |  | 18  
|                                                                                                                                | 
|Signatures                                                                                                                      |  | 19  



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##### Table of Contents

Item 1. Financial Statements



MULTI-COLOR CORPORATION

Condensed Consolidated Statements of Income

(Unaudited)

(Thousands except per share amounts)



|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|----------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                                      |  | Three Months Ended |        |   | Six Months Ended  |  
|                                                      |  | September 30,2005  |        |   | September 30,2004 |   |        | September 30,2005 |  |   | September 30,2004 |  
|Net sales                                             |  | $                  | 49,663 |   |                   | $ | 31,735 |                   |  | $ | 96,391            |   |  | $ | 60,485 |  
|Cost of goods sold                                    |  |                    | 41,667 |   |                   |   | 26,109 |                   |  |   | 80,600            |   |  |   | 50,132 |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Gross profit                                          |  |                    | 7,996  |   |                   |   | 5,626  |                   |  |   | 15,791            |   |  |   | 10,353 |  
|Selling, general and administrative expenses          |  |                    | 4,177  |   |                   |   | 2,758  |                   |  |   | 8,321             |   |  |   | 5,508  |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Operating income                                      |  |                    | 3,819  |   |                   |   | 2,868  |                   |  |   | 7,470             |   |  |   | 4,845  |  
|Other (income) expense, net                           |  |                    | (23    | ) |                   |   | (45    | )                 |  |   | (31               | ) |  |   | (60    | )
|Interest expense                                      |  |                    | 475    |   |                   |   | 223    |                   |  |   | 968               |   |  |   | 416    |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Income before income taxes                            |  |                    | 3,367  |   |                   |   | 2,690  |                   |  |   | 6,533             |   |  |   | 4,489  |  
|Income tax expense                                    |  |                    | 1,316  |   |                   |   | 1,009  |                   |  |   | 2,573             |   |  |   | 1,694  |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Net income                                            |  | $                  | 2,051  |   |                   | $ | 1,681  |                   |  | $ | 3,960             |   |  | $ | 2,795  |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Basic earnings per share                              |  | $                  | 0.31   |   |                   | $ | 0.27   |                   |  | $ | 0.61              |   |  | $ | 0.45   |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Diluted earnings per share                            |  | $                  | 0.30   |   |                   | $ | 0.25   |                   |  | $ | 0.59              |   |  | $ | 0.42   |  
|                                                      |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Weighted average number of common shares outstanding: |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |        |  
|Basic                                                 |  |                    | 6,511  |   |                   |   | 6,324  |                   |  |   | 6,504             |   |  |   | 6,247  |  
|Diluted                                               |  |                    | 6,747  |   |                   |   | 6,606  |                   |  |   | 6,724             |   |  |   | 6,600  |  



The accompanying notes are an
integral part of this financial information.



-1-



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##### Table of Contents

Item 1. Financial Statements (continued)



MULTI-COLOR CORPORATION

Condensed Consolidated Balance Sheets

(Thousands except per share amounts)



|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                       |  | September 30,2005 |         |   | March 31,2005 |  
|                                                                                                                                                       |  | (Unaudited)       |         |   |               |  
|ASSETS                                                                                                                                                 |  |                   |         |   |               |   |         |  
|Current Assets:                                                                                                                                        |  |                   |         |   |               |   |         |  
|Cash                                                                                                                                                   |  | $                 | 4,313   |   |               | $ | 345     |  
|Accounts receivable, net                                                                                                                               |  |                   | 26,245  |   |               |   | 25,290  |  
|Inventories                                                                                                                                            |  |                   | 16,172  |   |               |   | 14,228  |  
|Deferred tax assets                                                                                                                                    |  |                   | 499     |   |               |   | 499     |  
|Prepaid expenses and other                                                                                                                             |  |                   | 945     |   |               |   | 558     |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Total current assets                                                                                                                                   |  |                   | 48,174  |   |               |   | 40,920  |  
|                                                                                                                                                       |  |                  
|Property, plant and equipment, net                                                                                                                     |  |                   | 51,576  |   |               |   | 52,423  |  
|                                                                                                                                                       |  |                  
|Goodwill                                                                                                                                               |  |                   | 11,759  |   |               |   | 11,759  |  
|                                                                                                                                                       |  |                  
|Intangible assets, net                                                                                                                                 |  |                   | 2,391   |   |               |   | 2,693   |  
|                                                                                                                                                       |  |                  
|Other                                                                                                                                                  |  |                   | 391     |   |               |   | 433     |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Total assets                                                                                                                                           |  | $                 | 114,291 |   |               | $ | 108,228 |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                   |  |                   |         |   |               |   |         |  
|Current liabilities:                                                                                                                                   |  |                   |         |   |               |   |         |  
|Revolving loan                                                                                                                                         |  | $                 |        |   |               | $ | 1,000   |  
|Current portion of long-term debt                                                                                                                      |  |                   | 6,836   |   |               |   | 6,222   |  
|Current portion of capital lease obligations                                                                                                           |  |                   |        |   |               |   | 4       |  
|Current portion of deferred revenue                                                                                                                    |  |                   | 382     |   |               |   |        |  
|Accounts payable                                                                                                                                       |  |                   | 16,306  |   |               |   | 11,204  |  
|Accrued liabilities                                                                                                                                    |  |                   | 7,348   |   |               |   | 5,383   |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Total current liabilities                                                                                                                              |  |                   | 30,872  |   |               |   | 23,813  |  
|                                                                                                                                                       |  |                  
|Long-term debt, excluding current portion                                                                                                              |  |                   | 28,562  |   |               |   | 33,560  |  
|                                                                                                                                                       |  |                  
|Capital lease obligations, excluding current portion                                                                                                   |  |                   |        |   |               |   | 3       |  
|                                                                                                                                                       |  |                  
|Deferred tax liabilities                                                                                                                               |  |                   | 6,937   |   |               |   | 6,937   |  
|                                                                                                                                                       |  |                  
|Deferred compensation and other                                                                                                                        |  |                   | 896     |   |               |   | 818     |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Total liabilities                                                                                                                                      |  |                   | 67,267  |   |               |   | 65,131  |  
|                                                                                                                                                       |  |                  
|Stockholders equity:                                                                                                                                  |  |                   |         |   |               |   |         |  
|Common stock, no par value, $.10 stated value; 15,000 shares authorized, 6,550 and 6,498 shares issued at September 30 and March 31,
2005 respectively |  |                   | 329     |   |               |   | 323     |  
|Paid-in capital                                                                                                                                        |  |                   | 15,497  |   |               |   | 14,913  |  
|Treasury stock, 29 shares at cost                                                                                                                      |  |                   | (119    | ) |               |   | (119    | )
|Accumulated other comprehensive income                                                                                                                 |  |                   | 292     |   |               |   | 261     |  
|Retained earnings                                                                                                                                      |  |                   | 31,025  |   |               |   | 27,719  |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Total stockholders equity                                                                                                                             |  |                   | 47,024  |   |               |   | 43,097  |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                             |  | $                 | 114,291 |   |               | $ | 108,228 |  
|                                                                                                                                                       |  |                   |         |   |               |   |         |  



The accompanying notes are an
integral part of this financial information.



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##### Table of Contents

Item 1. Financial Statements (continued)



MULTI-COLOR CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Thousands)



|                                                                                            |  |                   |        |   |                   |   |        |  
|------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                            |  | Six Months Ended  |       
|                                                                                            |  | September 30,2005 |        |   | September 30,2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES :                                                      |  |                   |        |   |                   |   |        |  
|Net income                                                                                  |  | $                 | 3,960  |   |                   | $ | 2,795  |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                   |        |   |                   |   |        |  
|Depreciation                                                                                |  |                   | 3,023  |   |                   |   | 2,010  |  
|Amortization                                                                                |  |                   | 279    |   |                   |   | 212    |  
|Net loss on disposal of equipment                                                           |  |                   | 84     |   |                   |   | 79     |  
|Increase in non-current deferred compensation and other                                     |  |                   | 78     |   |                   |   | 7      |  
|Tax benefit from stock option exercises                                                     |  |                   | 302    |   |                   |   | (183   | )
|Net (increase) decrease in accounts receivable                                              |  |                   | (955   | ) |                   |   | 83     |  
|Net increase in inventory                                                                   |  |                   | (1,944 | ) |                   |   | (364   | )
|Net (increase) decrease in prepaid expenses and other                                       |  |                   | (314   | ) |                   |   | 1,051  |  
|Deferred taxes                                                                              |  |                   |       |   |                   |   | 69     |  
|Net increase (decrease) in accounts payable                                                 |  |                   | 5,102  |   |                   |   | (2,157 | )
|Net increase in accrued liabilities                                                         |  |                   | 1,965  |   |                   |   | 319    |  
|Increase in deferred revenue                                                                |  |                   | 382    |   |                   |   |       |  
|                                                                                            |  |                   |        |   |                   |   |        |  
|Net cash provided by operating activities                                                   |  |                   | 11,962 |   |                   |   | 3,921  |  
|                                                                                            |  |                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |  |                   |        |   |                   |   |        |  
|Capital expenditures                                                                        |  |                   | (2,512 | ) |                   |   | (3,602 | )
|Proceeds from sale of property and equipment                                                |  |                   | 3      |   |                   |   | 11     |  
|Adjustment to acquisition purchase price                                                    |  |                   | 272    |   |                   |   |       |  
|                                                                                            |  |                   |        |   |                   |   |        |  
|Net cash used in investing activities                                                       |  |                   | (2,237 | ) |                   |   | (3,591 | )
|                                                                                            |  |                  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |  |                   |        |   |                   |   |        |  
|Repayment of long-term debt                                                                 |  |                   | (4,384 | ) |                   |   | (2,964 | )
|Proceeds from issuance of long-term debt                                                    |  |                   |       |   |                   |   | 3,650  |  
|Repayment of capital lease obligations                                                      |  |                   | (7     | ) |                   |   | (1     | )
|Proceeds relating to issuance of common stock                                               |  |                   | 284    |   |                   |   | 759    |  
|Decrease in revolving line of credit, net                                                   |  |                   | (1,000 | ) |                   |   |       |  
|Dividends paid                                                                              |  |                   | (650   | ) |                   |   |       |  
|                                                                                            |  |                   |        |   |                   |   |        |  
|Net cash provided by (used in) financing activities                                         |  |                   | (5,757 | ) |                   |   | 1,444  |  
|                                                                                            |  |                   |        |   |                   |   |        |  
|Net increase in cash                                                                        |  |                   | 3,968  |   |                   |   | 1,774  |  
|Cash, beginning of period                                                                   |  |                   | 345    |   |                   |   | 1,464  |  
|                                                                                            |  |                   |        |   |                   |   |        |  
|Cash, end of period                                                                         |  | $                 | 4,313  |   |                   | $ | 3,238  |  
|                                                                                            |  |                   |        |   |                   |   |        |  
|                                                                                            |  |                  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                          |  |                   |        |   |                   |   |        |  
|Interest paid                                                                               |  | $                 | 857    |   |                   | $ | 160    |  
|Income taxes paid                                                                           |  | $                 | 1,229  |   |                   | $ | 62     |  
|                                                                                            |  |                  
|SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:                                            |  |                   |        |   |                   |   |        |  
|Interest rate swaps                                                                         |  | $                 | 31     |   |                   | $ | (56    | )



The accompanying notes are an
integral part of this financial information.



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##### Table of Contents

MULTI-COLOR CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in Thousands)



Item 1. Financial Statements (continued)



1. Description of Business and Significant Accounting Policies:



The Company:



Multi-Color Corporation (the Company), headquartered in Cincinnati, Ohio,
supplies printed labels, engravings and packaging services to consumer product and food and beverage companies, retailers and container manufacturers primarily located in the United States, Canada, Mexico, Central and South America. The Company has
manufacturing plants located in Scottsburg, Indiana; Batavia, Troy and Cincinnati, Ohio; Erlanger, Kentucky; Framingham, Massachusetts; Green Bay and Watertown, Wisconsin and Norway, Michigan.



Basis of Presentation:



The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures, normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States (US GAAP), have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures are adequate to make the information presented not misleading.
These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Companys 2005 Annual Report on Form 10-K.



The information furnished in these condensed consolidated financial statements reflects all estimates and adjustments which
are, in the opinion of management, necessary to present fairly the results for the interim periods reported.



The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Certain prior year balances have been reclassified to conform to current year classifications.



Revenue Recognition:



The Decorating Solutions segment recognizes revenue on sales of products when the customer receives title to the goods, which is generally upon delivery.
The Packaging Services segment recognizes revenue upon completion of the service provided to the customer. All revenues are denominated in U.S. dollars.



Inventories:



Inventories are stated at the lower of FIFO (first-in, first-out) cost or market. Excess and obsolete cost reductions are generally established based on
inventory age.



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##### Table of Contents

Property, Plant and Equipment:



Property, plant and equipment are stated at cost.



Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, as follows:



|                        |  |            
|----------------------- |  | -----------
|Buildings               |  | 20-39 years
|Machinery and equipment |  | 3-15 years 
|Computers               |  | 3-5 years  
|Furniture and fixtures  |  | 5-10 years 



Goodwill and
Intangible Assets:



Goodwill is no longer amortized as the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets as of April 1, 2001. In accordance with SFAS No. 142, the Company tests goodwill annually as of
February 28thof each fiscal year for impairment by comparing the fair value of the reporting unit goodwill to
its carrying amount. The test is completed on a segment basis. Under SFAS No. 142, impairment is also tested when events or changes in circumstances indicate that the assets carrying values may be greater than the fair values. Intangible assets
with definite useful lives continue to be amortized using the straight-line method over periods of up to eight years. Intangible assets are also tested annually for impairment in accordance with SFAS No. 142 and SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.



Income Taxes:



Deferred
income tax assets and liabilities are provided for temporary differences between the tax basis and reported amounts of assets and liabilities that will result in taxable or deductible amounts in future years.



Use of Estimates in Financial Statements:



In preparing financial statements in conformity with US GAAP,
management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.



Fair Value Disclosure:



The fair value of financial instruments approximates carrying value.



Derivative Financial Instruments  Interest Rate Swaps:



The Company accounts for derivative financial instruments in accordance with SFAS No. 133, Accounting for Derivatives and Hedging
Activities, as amended. This standard requires the recognition of derivative instruments as either assets or liabilities in the balance sheet at fair value and the recognition of resulting gains or losses as adjustments to earnings or other
comprehensive income. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.



The Company has two interest rate swaps that are designated as cash flow hedges which have been determined to be highly effective. Therefore, the
resulting gains or losses are recorded in other comprehensive income. The Company measures hedge effectiveness by formally assessing, at least quarterly, the probable high correlation of the expected future cash flows of the hedged item and the
derivative hedging instrument. If a hedge, or portion thereof, is determined to be ineffective, any change in fair value would be recorded in the consolidated income statement.



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##### Table of Contents

Stock Based Compensation:



During the six months ended September 30, 2005 the Company granted 150 stock options with a weighted fair value of
$4.14 per share. As of September 30, 2005, 378 of the authorized but unissued common shares were reserved for future issuance to key employees and directors under the Companys qualified and non-qualified stock option plans. Stock options
granted under the plans enable the holder to purchase common stock at an exercise price not less than the market value on the date of grant. To the extent not exercised, options will expire not more than ten years after the date of grant. The
applicable options vest immediately or ratably over a three to five year period.



The provisions of SFAS No. 123 Accounting for Stock-Based Compensation require that employee stock-based compensation either continue to be determined under Accounting Principles Board Opinion (APB)
No. 25 Accounting for Stock Issued to Employees or in accordance with the provisions of SFAS No. 123, whereby compensation expense is recognized based on the fair value of stock-based awards on the grant date. The Company
accounts for such awards under the recognition and measurement provisions of APB No. 25 and, accordingly, no compensation cost has been recognized for any stock awards unless required by APB No. 25. The Company has adopted SFAS
No. 123 for disclosure purposes only (also refer to New Pronouncements below). Had compensation cost for the Companys stock option plans been determined based on the fair value at the grant date for awards for the three and six months
ended September 30, 2005 and 2004, consistent with the provisions of SFAS No. 123, the Companys net income and earnings per share (EPS) would have been reduced to the pro forma amounts indicated below:



|                                                                                                                  |  |                                 |       |                               |   |       |  |      |       |  |   |      
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- | ----------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                                                                                                  |  | Three Months EndedSeptember 30, |       | Six Months EndedSeptember 30,
|                                                                                                                  |  | 2005                            |       | 2004                          |   | 2005  |  | 2004
|Net income  as reported                                                                                          |  | $                               | 2,051 |                               | $ | 1,681 |  | $    | 3,960 |  | $ | 2,795
|Stock-based compensation expense determined underthe fair value method for all awards, net of income tax benefits |  |                                 | 78    |                               |   | 77    |  |      | 156   |  |   | 148  
|                                                                                                                  |  |                                 |       |                               |   |       |  |      |       |  |   |      
|Net income  proforma                                                                                             |  | $                               | 1,973 |                               | $ | 1,604 |  | $    | 3,804 |  | $ | 2,647
|                                                                                                                  |  |                                 |       |                               |   |       |  |      |       |  |   |      
|Net income per common and common equivalent share  as reported                                                   |  |                                 |       |                               |   |       |  |      |       |  |   |      
|Basic                                                                                                             |  | $                               | 0.31  |                               | $ | 0.27  |  | $    | 0.61  |  | $ | 0.45 
|Diluted                                                                                                           |  | $                               | 0.30  |                               | $ | 0.25  |  | $    | 0.59  |  | $ | 0.42 
|                                                                                                                  |  |                                 |       |                              
|Net income per common and common equivalent share  proforma                                                      |  |                                 |       |                               |   |       |  |      |       |  |   |      
|Basic                                                                                                             |  | $                               | 0.30  |                               | $ | 0.25  |  | $    | 0.58  |  | $ | 0.42 
|Diluted                                                                                                           |  | $                               | 0.29  |                               | $ | 0.24  |  | $    | 0.57  |  | $ | 0.40 



New
Pronouncements:



In December 2004, the Financial
Accounting Standards Board (FASB) issued SFAS 123 (revised 2004 SFAS 123 R), Share-Based payment. SFAS 123 R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity
instruments based upon the grant date fair value. Currently the company accounts for such awards under the recognition and measurement provisions of APB No. 25 and discloses the pro forma impact on net income and EPS in accordance with SFAS
123. The effective date of SFAS 123 R is the beginning of the first annual reporting period beginning after June 15, 2005, and therefore the Company will adopt SFAS 123 R in the fiscal year beginning April 1, 2006. Although the Company is
currently evaluating the impact of adopting SFAS 123 R, the Company expects the impact will be material.



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##### Table of Contents

In November 2004, the FASB issued SFAS No. 151, Inventory Costs  an Amendment of ARB 43,
Chapter 4. This standard provides clarification that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. Additionally, this standard requires the allocation of fixed
production overheads to the costs of conversion be based upon the normal capacity of the production facilities. SFAS 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not
expect that this standard will have a material impact on its results of operations.



2. Earnings Per Common Share Data:



The
computation of basic earnings per common share (EPS) is based upon the weighted average number of common shares outstanding during the period. Diluted EPS is based upon the weighted average number of common shares outstanding during the period plus,
in periods in which they have a dilutive effect, the effect of common shares contingently issuable.



The following is a reconciliation of the number of shares used in the basic and diluted EPS computations:



|                                 |  |                                 |  |                               |  |       |  |      
|-------------------------------- |  | ------------------------------- |  | ----------------------------- |  | ----- |  | -----
|                                 |  | Three Months EndedSeptember 30, |  | Six Months EndedSeptember 30,
|                                 |  | 2005                            |  | 2004                          |  | 2005  |  | 2004 
|Denominator for basic EPS        |  | 6,511                           |  | 6,324                         |  | 6,504 |  | 6,247
|Effect of dilutive stock options |  | 236                             |  | 282                           |  | 220   |  | 353  
|                                 |  |                                 |  |                               |  |       |  |      
|Denominator for diluted EPS      |  | 6,747                           |  | 6,606                         |  | 6,724 |  | 6,600
|                                 |  |                                 |  |                               |  |       |  |      



3. Inventories:



Inventories are comprised of the following:



|                |  |                   |        |               |   |       
|--------------- |  | ----------------- | ------ | ------------- | - | ------
|                |  | September 30,2005 |        | March 31,2005
|Finished goods  |  | $                 | 8,942  |               | $ | 7,034 
|Work in process |  |                   | 2,138  |               |   | 2,875 
|Raw materials   |  |                   | 5,092  |               |   | 4,319 
|                |  |                   |        |               |   |       
|                |  | $                 | 16,172 |               | $ | 14,228
|                |  |                   |        |               |   |       





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4. Debt:



The components of the Companys debt are as follows:



|                                                                                                                                                                                             |  |                   |        |   |               |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ------------- | - | ------ | -
|                                                                                                                                                                                             |  | September 30,2005 |        |   | March 31,2005 |  
|Scottsburg Industrial Revenue Bonds, floating weekly rate (2.90% at September 30, 2005), quarterly principal payments of $170 plus
interest through October 2009                             |  | $                 | 2,705  |   |               | $ | 3,215  |  
|Clermont County Industrial Revenue Bonds, floating weekly rate (3.15% at September 30, 2005), quarterly principal payments of $70 plus
interest through March 2016                           |  |                   | 2,925  |   |               |   | 3,065  |  
|Note payable to Avery Dennison Corporation, annual principal payments of $1,099 plus interest at 5%, due each January, final payment due
January 2007                                        |  |                   | 2,198  |   |               |   | 2,198  |  
|Note payable to former owners of Quick Pak, Inc., annual principal payments of $100 plus interest at 5%, due each May, final payment made in
May 2005                                        |  |                   |       |   |               |   | 100    |  
|Mortgage note payable, interest at LIBOR plus 1.50%, (5.25% at September 30, 2005), quarterly principal payments of $45 plus interest,
scheduled balloon payment of $1,800 due November 2013 |  |                   | 3,285  |   |               |   | 3,375  |  
|Bank term note payable, interest at LIBOR plus 1.25%, (4.96% at September 30, 2005), quarterly principal payments of $435 plus interest,
due August 1, 2007                                  |  |                   | 5,000  |   |               |   | 7,829  |  
|Bank term note payable, interest at LIBOR plus 1.25%, (4.94% at September 30, 2005), quarterly principal payments of $714 plus interest
beginning August 1, 2005, due August 1, 2007         |  |                   | 19,285 |   |               |   | 20,000 |  
|                                                                                                                                                                                             |  |                   |        |   |               |   |        |  
|                                                                                                                                                                                             |  |                   | 35,398 |   |               |   | 39,782 |  
|Less-current portion of debt                                                                                                                                                                 |  |                   | (6,836 | ) |               |   | (6,222 | )
|                                                                                                                                                                                             |  |                   |        |   |               |   |        |  
|                                                                                                                                                                                             |  | $                 | 28,562 |   |               | $ | 33,560 |  
|                                                                                                                                                                                             |  |                   |        |   |               |   |        |  



The following is a
schedule of future annual principal payments as of September 30, 2005, including quarterly Industrial Revenue Bond payments required under the Companys credit agreement:



|           |  |   |        |   |      
|---------- |  | - | ------ | - | -----
|Year       |  | 1 |        | $ | 6,836
|           |  | 2 |        |   | 6,836
|           |  | 3 |        |   | 5,517
|           |  | 4 |        |   | 3,982
|           |  | 5 |        |   | 3,317
|Thereafter |  |   | 8,910 
|           |  |   |        |   |      
|Total      |  | $ | 35,398
|           |  |   |        |   |      



The Company maintains
a Revolving Line of Credit (Revolver) which provides for borrowings up to a maximum of $10,000. The interest rates under the Revolver are based upon prime or LIBOR plus certain margin amounts based upon the Companys leverage ratio. The Company
had no outstanding borrowings under the Revolver at September 30, 2005.



The Company also maintains a Non-Revolving Line of Credit Facility (Non-Revolver) not to exceed $45,000. The lenders have no obligation to make any advances under the Non-Revolver after the Draw
Termination date of January 24, 2006. At September 30, 2005, the Company had borrowed $19,285 under the Non-Revolver in conjunction with the acquisition of the NorthStar Print Group (see footnote 6 below). The Non-Revolver agreement
also contains various financial and operating covenants which, among others, requires the Company to maintain certain leverage, fixed charge coverage and net worth ratios and limits the payment of dividends to $1,500 annually. The credit agreement
expires August 1, 2007.



With respect to the Industrial
Revenue Bonds, the Company has the option to establish the bonds interest rate form (variable or fixed interest rate). When a fixed interest rate is selected, the fixed rate



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##### Table of Contents

assigned will approximate the market rate for comparable securities. When a variable rate is selected, or at the end of a fixed interest rate period, the
bondholders reserve the right to demand payment of the bonds. In the event that any of the bondholders exercise their rights, a remarketing agent is responsible for remarketing the bonds on a best efforts basis for not less than the outstanding
principal and accrued interest. In the event the bonds are not able to be remarketed and the letters of credit are exercised, the lender is committed to providing financing for up to 458 days. These letters of credit expire June 1, 2006.



Substantially all assets of the Company are pledged as
collateral under the Companys borrowings.



5. Segment Information:



The Company is organized into two segments within the
packaging industry: Decorating Solutions and Packaging Services. The Decorating Solutions segments primary operations involve the design and printing of labels, while the Packaging Services segment provides promotional packaging, assembly and
fulfillment services. Both segments sell to major consumer product companies.



Financial information by operating segment is as follows:



|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------- |  | -------------------------------- | ------ | - | ----------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                   |  | Three Months Ended September 30, |        |   | Six Months Ended September 30 |  
|                                   |  | 2005                             |        |   | 2004                          |   |        | 2005 |  |   | 2004   |  
|Sales:                             |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Decorating Solutions               |  | $                                | 43,023 |   |                               | $ | 25,116 |      |  | $ | 86,118 |   |  | $ | 49,611 |  
|Packaging Services                 |  |                                  | 6,866  |   |                               |   | 6,642  |      |  |   | 10,577 |   |  |   | 10,897 |  
|Intersegment                       |  |                                  | (226   | ) |                               |   | (23    | )    |  |   | (304   | ) |  |   | (23    | )
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|                                   |  | $                                | 49,663 |   |                               | $ | 31,735 |      |  | $ | 96,391 |   |  | $ | 60,485 |  
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Income (Loss) before income taxes: |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Decorating Solutions               |  | $                                | 4,805  |   |                               | $ | 2,275  |      |  | $ | 9,860  |   |  | $ | 4,600  |  
|Packaging Services                 |  |                                  | 38     |   |                               |   | 1,126  |      |  |   | (530   | ) |  |   | 1,528  |  
|Corporate expenses                 |  |                                  | (1,476 | ) |                               |   | (711   | )    |  |   | (2,797 | ) |  |   | (1,639 | )
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|                                   |  | $                                | 3,367  |   |                               | $ | 2,690  |      |  | $ | 6,533  |   |  | $ | 4,489  |  
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Capital expenditures:              |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Decorating Solutions               |  | $                                | 334    |   |                               | $ | 533    |      |  | $ | 939    |   |  | $ | 2,443  |  
|Packaging Services                 |  |                                  | 234    |   |                               |   | 232    |      |  |   | 1,107  |   |  |   | 682    |  
|Corporate                          |  |                                  | 239    |   |                               |   | 285    |      |  |   | 466    |   |  |   | 477    |  
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|                                   |  | $                                | 807    |   |                               | $ | 1,050  |      |  | $ | 2,512  |   |  | $ | 3,602  |  
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Depreciation and amortization:     |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Decorating Solutions               |  | $                                | 1,333  |   |                               | $ | 997    |      |  | $ | 2,742  |   |  | $ | 1,983  |  
|Packaging Services                 |  |                                  | 157    |   |                               |   | 109    |      |  |   | 275    |   |  |   | 207    |  
|Corporate                          |  |                                  | 150    |   |                               |   | 16     |      |  |   | 285    |   |  |   | 32     |  
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|                                   |  | $                                | 1,640  |   |                               | $ | 1,122  |      |  | $ | 3,302  |   |  | $ | 2,222  |  
|                                   |  |                                  |        |   |                               |   |        |      |  |   |        |   |  |   |        |  



|                     |  |                   |         |               |   |        
|-------------------- |  | ----------------- | ------- | ------------- | - | -------
|                     |  | September 30,2005 |         | March 31,2005
|Total assets:        |  |                   |         |               |   |        
|Decorating Solutions |  | $                 | 93,653  |               | $ | 94,286 
|Packaging Services   |  |                   | 12,202  |               |   | 10,264 
|Corporate            |  |                   | 8,436   |               |   | 3,678  
|                     |  |                   |         |               |   |        
|                     |  | $                 | 114,291 |               | $ | 108,228
|                     |  |                   |         |               |   |        





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##### Table of Contents

6. Acquisitions:



On January 25, 2005, the Company, through its wholly owned subsidiaries MCC-Norway, Inc. and MCC-Wisconsin, LLC, completed the purchase of NorthStar
Print Group (NSPG), a subsidiary of Journal Communications, Inc. Specializing in the production of glue-applied, in-mold and pressure sensitive labels for the beverage and consumer markets, NSPG has been integrated into the Companys Decorating
Solutions segment. The Company acquired specific assets and assumed certain liabilities of NSPG, including gravure and flexographic printing equipment, inventory, accounts receivable, real estate and accounts payable. The total preliminary purchase
price of approximately $27,777 was based upon a multiple of earnings and the estimated book value of the assets acquired and assumed liabilities, subject to a post-closing working capital adjustment which resulted in a cash receipt of approximately
$272 in May 2005. The proceeds paid at closing were obtained through available cash, $20,000 in borrowings under the Non-Revolver and $2,000 borrowed under the Revolver. In addition to the purchase price, the Company recorded approximately $1,100
for estimated acquisition related costs including legal, accounting and advisory services. The acquisition was accounted for as an asset purchase, and accordingly, the preliminary purchase price was allocated to the assets and liabilities based on
their fair market value as of the date of acquisition. The following represents a preliminary condensed balance sheet of the assets acquired and liabilities assumed at the acquisition date:



|                              |  |   |       
|----------------------------- |  | - | ------
|Assets Acquired:              |  |   |       
|Accounts receivable           |  | $ | 5,056 
|Inventory                     |  |   | 6,634 
|Property, plant and equipment |  |   | 18,605
|Intangible assets             |  |   | 1,821 
|Other assets                  |  |   | 54    
|                              |  |   |       
|Total assets                  |  | $ | 32,170
|                              |  |   |       
|Liabilities Assumed:          |  |   |       
|Accounts payable              |  | $ | 2,875 
|Accrued liabilities           |  |   | 1,517 
|                              |  |   |       
|Total liabilities             |  | $ | 4,392 
|                              |  |   |       



The following table
summarizes, on an unaudited proforma basis, the estimated combined results of the Company and NSPG for the three and six month periods ended September 30, 2004, assuming the acquisition had occurred on April 1, 2004. The results include
certain adjustments, primarily depreciation, amortization and interest expense, and are not necessarily indicative of what results would have been had the Company owned NSPG during the period presented.



|                    |  |                                       |        |                                     |   |       
|------------------- |  | ------------------------------------- | ------ | ----------------------------------- | - | ------
|                    |  | Three Months Ended September 30, 2004 |        | Six Months Ended September 30, 2004
|                    | 
|Net sales           |  | $                                     | 46,772 |                                     | $ | 91,481
|Net income          |  |                                       | 2,106  |                                     |   | 3,948 
|Earnings per share: |  |                                       |        |                                     |   |       
|Basic               |  | $                                     | 0.33   |                                     | $ | 0.63  
|Diluted             |  | $                                     | 0.32   |                                     | $ | 0.60  



In addition to the
working capital adjustment discussed above, the preliminary NSPG purchase price is also subject to adjustment based on the sales volumes of certain products during the period July 2005 to July 2006.



Also in conjunction with the NSPG acquisition, the Company entered into a
lease agreement with the seller for a manufacturing facility located in Green Bay, WI, whereby the seller has an irrevocable option to sell such facility to the Company for $1,050 upon the satisfactory completion (as defined) of certain
environmental cleanup activities.



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7. Major Customers:



During the three months ended September 30, 2005 and 2004, sales to major customers (those exceeding 10% of the Companys net sales)
approximated 46% and 51%, respectively, of the Companys consolidated net sales. Approximately 30% and 34% of sales for the three months ended September 30, 2005 and 2004, respectively, were to the Procter and Gamble Company (recorded
primarily in the Decorating Solutions segment). Approximately 16% of sales for the three months ended September 30, 2005 were to the Miller Brewing Company (recorded in the Decorating Solutions segment), which became a customer in January 2005
in connection with the NSPG acquisition (see footnote 6).



During the six months ended September 30, 2005 and 2004, sales to major customers (those exceeding 10% of the Companys net sales) approximated 45% of the Companys consolidated net sales. Approximately 30% and 34% of sales
for the six months ended September 30, 2005 and 2004, respectively, were to the Procter and Gamble Company (recorded primarily in the Decorating Solutions segment). Approximately 15% of sales for the six months ended September 30, 2005
were to the Miller Brewing Company (recorded in the Decorating Solutions segment), which became a customer in January 2005 in connection with the NSPG acquisition (see footnote 6).



The loss or substantial reduction of the business of any of the major customers could have a material adverse impact on the
Companys results of operations.



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

(Amounts in Thousands)



Information included
in this Quarterly Report on Form 10-Q contains certain forward-looking statements that involve potential risks and uncertainties. The Companys future results could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed herein and those discussed in the Company Annual Report on Form 10-K for the year ended March 31, 2005. Readers are cautioned not to place undue reliance on
these forward-looking statements that speak only as of the date thereof. Results for interim periods may not be indicative of annual results.



Critical Accounting Policies and Estimates



The preparation of condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses. The Company continually evaluates its estimates, including, but not limited to, those related to revenue recognition, bad debts, inventories and any related reserves, income taxes, fixed assets, goodwill
and intangible assets. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the facts and circumstances. Actual results may differ from these estimates under different assumptions
or conditions.



The Company believes the following critical
accounting policies impact the more significant judgments and estimates used in the preparation of its condensed consolidated financial statements. Additionally, the Companys senior management has discussed the critical accounting policies and
estimates with the Board of Directors Audit and Finance Committee. For a more detailed discussion of the application of these and other accounting policies, refer to Note 1 of the Notes to Consolidated Financial Statements in the
Companys Annual Report on Form 10-K for the year ended March 31, 2005.



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Revenue Recognition



The Decorating Solutions segment recognizes revenue on sales of products when the customer receives title to the goods,
which is generally upon delivery. The Packaging Services segment recognizes revenue upon completion of the service provided to the customer. All revenues are denominated in U.S. dollars.



Inventories



Inventories are stated at the lower of FIFO (first-in, first-out) cost or market. Excess and obsolete cost reductions are generally established based on
inventory age.



Accounts Receivable



Our customers are primarily major consumer brand companies and container
manufacturers. Accounts receivable consist of amounts due from customers in connection with our normal business activities. Accounts receivable include an allowance for doubtful accounts to reflect the expected losses of accounts receivable based on
past collection history and specific individual risks identified. Losses may also depend to some degree on future economic conditions. Although these conditions are unknown to us and may result in additional credit losses, we do not anticipate
significant adverse credit circumstances in fiscal 2006.



Goodwill and Other Acquired Intangible Assets



We test goodwill and other intangible assets for impairment annually and/or whenever events or circumstances make it more likely than not that an impairment may have occurred. The impairment test is completed based upon our assessment of
the estimated fair value of goodwill and other intangible assets. For purposes of these tests, we have determined that each segment of Multi-Color is one reporting unit.



The annual review for impairment of goodwill requires the use of estimates and assumptions which we believe are appropriate.
Application of different estimates and assumptions or reviewing goodwill at a different reporting unit level could produce different results.



Impairment of Long-Lived Assets



We review long-lived assets for impairment whenever events or changes in circumstances indicate that assets might be impaired and the related carrying
amounts may not be recoverable. The determination of whether an impairment has occurred involves various estimates and assumptions, including the determination of the undiscounted cash flows estimated to be generated by the assets involved in the
review. The cash flow estimates are based upon our historical experience, adjusted to reflect estimated future market and operating conditions. Measurement of an impairment loss requires a determination of fair value. We base our estimates of fair
values on quoted market prices when available, independent appraisals as appropriate and industry trends or other market knowledge.



Income Taxes



According to the provisions of SFAS No. 109 Accounting for Income Taxes, income taxes are recorded based on the current year amounts
payable or refundable, as well as the consequences of events that give rise to deferred tax assets and liabilities. Deferred tax assets and liabilities result from temporary differences between the tax basis and reported book basis of assets and
liabilities and result in taxable or deductible amounts in future years. Our accounting for deferred taxes involves certain estimates and assumptions that we believe are appropriate. Future changes in regulatory tax laws and/or different positions
held by taxing authorities may affect the value recorded for deferred taxes.



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##### Table of Contents

Executive Overview



We provide a wide range of products and services for the packaging needs of our customers through two segments. Our Decorating Solutions segment provides
a complete line of label solutions for consumer product and food and beverage companies. Our Packaging Services segment provides promotional packaging design, sourcing and custom assembly services to consumer product companies and national
retailers. Our vision is to be a premier global resource of packaging services and decorating solutions. Currently, our customers are located throughout North, Central and South America. We monitor and analyze trends in the packaging industry in
order to ensure that we are providing appropriate products and services to our customers. Certain factors that influence our business include consumer spending, new product introductions, new packaging technologies and demographics.



Consolidated net sales were up $17,928 to $49,663 in the second quarter
compared to the same period of the prior year. The Decorating Solutions segment experienced an increase in net sales for the quarter of $17,907, of which $15,109 was generated by the North Star Print Group (NSPG) acquisition. The 11% organic growth
rate in the Decorating Solutions segment was generated from gaining new customers and growth with existing customers. Net sales for the Packaging Services segment increased $224 from the second quarter of the prior year to $6,866. Although the
Packaging Services segment experienced a slight increase in sales for the quarter, profitability was substantially lower due to a less favorable mix of customer orders and productivity issues. For the six month period ended September 30, 2005,
Multi-Colors consolidated net sales of $96,391 were 59% higher than the prior year. The consolidated organic growth rate was 9% which contributed $5,624 or 16% of the increase. The NSPG acquisition within our Decorating Solutions segment
accounted for $30,282 or 84% of the sales increase for the period.



The label markets we serve through our Decorating Solutions segment continue to experience a competitive environment and price pressures. We have initiated many cost reduction programs to meet the demands of the market while minimizing the
impact on our margins. We continually search for ways to reduce our costs through improved production and labor efficiencies, reduced substrate waste, new substrate options and lower substrate pricing.



We have continued to make progress in expanding our customer base and
portfolio of products, services and manufacturing locations in order to address issues related to customer concentration. We continue to examine business strategies to diversify our business.



During the quarter we continued the implementation of a new $2,000 business
management information system. We have completed the implementation of this new system in all of the Decorating Solutions segment locations with the exception of the three locations acquired through the NSPG acquisition. The system allows visibility
to real-time production data across all machine centers and allows improved control of inventory, order tracking, and production scheduling. The system will be our most significant cost-reduction and continuous improvement tool implemented to date.



Key objectives for fiscal year 2006 continue to be winning
new customers, growing existing customers, generating meaningful cost reductions, and pursuing selective acquisitions.



Results of Operations



Three Months Ended September 30, 2005 compared to the Three Months Ended September 30, 2004



|                             |  |      |        |      |   |        |  |        |        |  |   
|---------------------------- |  | ---- | ------ | ---- | - | ------ |  | ------ | ------ |  | --
|                             |  |      |        |      |   | $      |  | %     
|                             |  | 2005 |        | 2004 |   | Change |  | Change
|Consolidated Net Sales       |  | $    | 49,663 |      | $ | 31,735 |  | $      | 17,928 |  | 56
|Decorating Solutions Segment |  |      | 43,023 |      |   | 25,116 |  |        | 17,907 |  | 71
|Packaging Services Segment   |  |      | 6,866  |      |   | 6,642  |  |        | 224    |  | 3 



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The Decorating Solutions segments sales for the three months ended September 30, 2005 as
compared to the same period of the prior year increased primarily due to the acquisition of NSPG, which contributed sales of $15,109 for the second quarter. The additional sales within the Decorating Solutions segment were as a result of gaining new
customers and increasing volume with existing customers. The Packaging Services segment experienced a slight increase in net sales for the second quarter as this segment continued to diversify the customer base which it serves.



|                             |  |      |       |   |      |   |       |        |  |   |        |   |  |     |  
|---------------------------- |  | ---- | ----- | - | ---- | - | ----- | ------ |  | - | ------ | - |  | --- | -
|                             |  |      |       |   |      |   |       | $      |  |   | %      |  
|                             |  | 2005 |       |   | 2004 |   |       | Change |  |   | Change |  
|Consolidated Gross Profit    |  | $    | 7,996 |   |      | $ | 5,626 |        |  | $ | 2,370  |   |  | 42  |  
|% of Sales                   |  |      | 16    | % |      |   | 18    | %      |  |   |        |   |  |     |  
|Decorating Solutions Segment |  |      | 7,696 |   |      |   | 4,227 |        |  |   | 3,469  |   |  | 82  |  
|% of Sales                   |  |      | 18    | % |      |   | 17    | %      |  |   |        |   |  |     |  
|Packaging Services Segment   |  |      | 300   |   |      |   | 1,399 |        |  |   | (1,099 | ) |  | (79 | )
|% of Sales                   |  |      | 4     | % |      |   | 21    | %      |  |   |        |   |  |     |  



Consolidated gross
profit increased $2,370 or 42% as compared to the same period in the prior year as a result of the NSPG acquisition and higher volumes within the Decorating Solutions segment, offset by the decrease in the Packaging Services segment which is
attributable to a change in customer mix. Gross profit within the Decorating Solutions segment increased $3,469 of which $2,405 was due to NSPG. The remaining increase was due to organic sales growth and reduced costs realized through improved labor
and production efficiencies. Gross profit in the Packaging Services segment decreased $1,099 because of the changes in customer mix and productivity issues related to the delay in receiving customer components for the holiday gift set season.



|                                               |  |      |       |   |      |   |       |        |  |        |       |  |   
|---------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ------ |  | ------ | ----- |  | --
|                                               |  |      |       |   |      |   |       | $      |  | %     
|                                               |  | 2005 |       |   | 2004 |   |       | Change |  | Change
|Consolidated Selling, General & Administrative |  | $    | 4,177 |   |      | $ | 2,758 |        |  | $      | 1,419 |  | 51
|% of Sales                                     |  |      | 8     | % |      |   | 9     | %      |  |        |       |  |   



Consolidated selling,
general and administrative (SG&A) expenses increased $1,419 or 51% from the prior year, but decreased slightly as a percent of sales. We incurred $565 of SG&A expenses due to NSPG. The remaining increase in SG&A is primarily attributed
to staff increases associated with our growth and expenses incurred in connection with our compliance with the Sarbanes-Oxley Act of 2002.



|                 |  |      |     |      |   |        |  |        |     |  |    
|---------------- |  | ---- | --- | ---- | - | ------ |  | ------ | --- |  | ---
|                 |  |      |     |      |   | $      |  | %     
|                 |  | 2005 |     | 2004 |   | Change |  | Change
|Interest Expense |  | $    | 475 |      | $ | 223    |  | $      | 252 |  | 113



Interest expense
increased $252 as compared to the same period of the prior year as a result of additional debt. In conjunction with the NSPG acquisition, the Company borrowed an additional $20 million under the Non-Revolver portion of our credit facility. The
interest on the Non-Revolver is payable at LIBOR plus 1.25%.



|                   |  |      |       |      |   |        |  |        |     |  |   
|------------------ |  | ---- | ----- | ---- | - | ------ |  | ------ | --- |  | --
|                   |  |      |       |      |   | $      |  | %     
|                   |  | 2005 |       | 2004 |   | Change |  | Change
|Income Tax Expense |  | $    | 1,316 |      | $ | 1,009  |  | $      | 307 |  | 30



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Income tax expense increased $307 from the second quarter of the prior year because of an increase in
earnings and in increase in the effective tax rate. The effective rate increased to 39.4% from 37.5% in the prior year due to a higher federal rate as the Company anticipates exceeding $10 million in annual taxable income and increased state taxes
as the Company operates in more jurisdictions.



Six Months Ended
September 30, 2005 Compared to the Six Months Ended September 30, 2004



|                             |  |      |        |      |   |        |  |   |        |   |  |    |  
|---------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | - |  | -- | -
|                             |  |      |        |      |   | $      |  |   | %      |  
|                             |  | 2005 |        | 2004 |   | Change |  |   | Change |  
|Consolidated Net Sales       |  | $    | 96,391 |      | $ | 60,485 |  | $ | 35,906 |   |  | 59 |  
|Decorating Solutions Segment |  |      | 86,118 |      |   | 49,611 |  |   | 36,507 |   |  | 74 |  
|Packaging Services Segment   |  |      | 10,577 |      |   | 10,897 |  |   | (320   | ) |  | (3 | )



The Decorating
Solutions segments sales for the six months ended September 30, 2005 as compared to the same period of the prior year increased primarily due to the acquisition of NSPG, which contributed sales of $30,282 for the first half of the year.
The additional sales within the Decorating Solutions segment were as a result of gaining new customers and increasing volume with existing customers. The Packaging Services segment experienced a decrease in net sales for the first six months of the
year as a result of less promotional programs from existing customers.



|                             |  |      |        |    |      |   |        |        |  |   |        |   |  |      |  
|---------------------------- |  | ---- | ------ | -- | ---- | - | ------ | ------ |  | - | ------ | - |  | ---- | -
|                             |  |      |        |    |      |   |        | $      |  |   | %      |  
|                             |  | 2005 |        |    | 2004 |   |        | Change |  |   | Change |  
|Consolidated Gross Profit    |  | $    | 15,791 |    |      | $ | 10,353 |        |  | $ | 5,438  |   |  | 53   |  
|% of Sales                   |  |      | 16     | %  |      |   | 17     | %      |  |   |        |   |  |      |  
|Decorating Solutions Segment |  |      | 15,834 |    |      |   | 8,504  |        |  |   | 7,330  |   |  | 86   |  
|% of Sales                   |  |      | 18     | %  |      |   | 17     | %      |  |   |        |   |  |      |  
|Packaging Services Segment   |  |      | (43    | )  |      |   | 1,849  |        |  |   | (1,892 | ) |  | (102 | )
|% of Sales                   |  |      | (.41   | )% |      |   | 17     | %      |  |   |        |   |  |      |  



Consolidated gross
profit increased $5,438 or 53% as compared to the same period in the prior year as a result of the NSPG acquisition and higher volumes within the Decorating Solutions segment, offset by the decrease in the Packaging Services segment due to the
change in customer mix. Gross profit within the Decorating Solutions segment increased $7,330 of which $4,868 was due to NSPG. The remaining increase was due to organic sales growth and reduced costs realized through improved labor and production
efficiencies. Conversely, during the first half of fiscal year 2005, the gross profit of the Decorating Solutions segment was negatively impacted by difficulties integrating the Las Vegas shrink sleeve business into the Scottsburg facility. Gross
profit in the Packaging Services segment decreased $1,892 because of lower sales volume, changes in customer mix to less profitable services and productivity issues related to delays in receiving customer components for the holiday gift season.



|                                               |  |      |       |   |      |   |       |        |  |        |       |  |   
|---------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ------ |  | ------ | ----- |  | --
|                                               |  |      |       |   |      |   |       | $      |  | %     
|                                               |  | 2005 |       |   | 2004 |   |       | Change |  | Change
|Consolidated Selling, General & Administrative |  | $    | 8,321 |   |      | $ | 5,508 |        |  | $      | 2,813 |  | 51
|% of Sales                                     |  |      | 9     | % |      |   | 9     | %      |  |        |       |  |   



Consolidated selling,
general and administrative (SG&A) expenses increased $2,813 or 51% from the prior year, but remained flat as a percent of sales. We incurred $1,260 of SG&A expenses due to NSPG. The remaining increase in SG&A is primarily attributed to
staff increases associated with our growth and expenses incurred in connection with our compliance with the Sarbanes-Oxley Act of 2002.



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|                 |  |      |     |      |   |        |  |        |     |  |    
|---------------- |  | ---- | --- | ---- | - | ------ |  | ------ | --- |  | ---
|                 |  |      |     |      |   | $      |  | %     
|                 |  | 2005 |     | 2004 |   | Change |  | Change
|Interest Expense |  | $    | 968 |      | $ | 416    |  | $      | 552 |  | 133



Interest expense
increased $552 as compared to the prior year as a result of additional debt. In conjunction with the NSPG acquisition, the Company borrowed an additional $20 million under the Non-Revolver portion of our credit facility. The interest on the
Non-Revolver is payable at LIBOR plus 1.25%.



|                   |  |      |       |      |   |        |  |        |     |  |   
|------------------ |  | ---- | ----- | ---- | - | ------ |  | ------ | --- |  | --
|                   |  |      |       |      |   | $      |  | %     
|                   |  | 2005 |       | 2004 |   | Change |  | Change
|Income Tax Expense |  | $    | 2,573 |      | $ | 1,694  |  | $      | 879 |  | 52



Income tax expense
increased $879 from the prior year because of an increase in earnings and an increase in the effective tax rate. The effective rate increased to 39.4% from 37.5% in the prior year due to a higher federal rate as the Company anticipates exceeding $10
million in annual taxable income and increased state taxes as the Company operates in more jurisdictions.



Liquidity and Capital Resources



Through the six months ended September 30, 2005 net cash provided by operating activities was $11,962 as compared to $3,921 in the same period of the prior year. The change is due primarily to an increase in accounts payable and
accrued liabilities as we are leveraging longer terms with vendors. Inventory levels were increased in order to meet customer demand while the increase in accounts receivable is attributable to timing of collections.



We expect to make capital expenditures of approximately $6,000 during fiscal
2006, consisting primarily of completing the purchase of a new business enterprise system as well as other plant equipment. We believe that cash flows from operations and availability under the revolving line of credit are sufficient to meet our
capital requirements and debt service requirements for the next twelve months.



From time to time we review potential acquisitions of businesses. Any acquisitions may require us to issue additional equity or incur additional debt.



Our credit agreement provides for a Revolving Line of Credit (Revolver) up to a maximum of $10,000 and a Non-Revolving Line
of Credit Facility (Non-Revolver) not to exceed $45,000, of which $20,000 was initially borrowed in connection with the acquisition of NSPG. The lenders have no obligation to make any advances under the Non-Revolver after the Draw
Termination date of January 24, 2006. Under the terms of the amended credit agreement, we are subject to several financial covenants. The financial covenants require us to maintain certain leverage and fixed charge ratios as well as
maintain a minimum net worth. Our amended credit agreement allows us to pay dividends up to $1,500 in any given year. A quarterly cash dividend of $325 or five cents per share was paid on May 31, 2005 and September 2, 2005 (total of $650).
Subsequent to September 30, 2005, we declared a dividend of five cents per share for shareholders of record on November 15, 2005 and payable on December 1, 2005. The amended credit agreement expires August 1, 2007.



Available borrowings under the credit agreement at
September 30, 2005 consisted of $10,000 under the Revolver and $25,715 under the Non-Revolver.



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We believe that we have both sufficient short and long term liquidity financing. We had a working capital
position of $17,302 and $17,107 at September 30 and March 31, 2005, respectively. At September 30, 2005, we were in compliance with our loan covenants and current in our principal and interest payments on all debt.



Contractual Obligations ($ in thousands)



The following table summarizes Multi-Colors contractual obligations as
of September 30, 2005:



Aggregated information about
Contractual Obligations and Other Commitments:



|                                   |  |       |        |        |   |        |  |        |       |        |   |        |  |                 |       |  |   |       |  |   |       
|---------------------------------- |  | ----- | ------ | ------ | - | ------ |  | ------ | ----- | ------ | - | ------ |  | --------------- | ----- |  | - | ----- |  | - | ------
|September 30, 2005                 |  | Total |        | Year 1 |   | Year 2 |  | Year 3 |       | Year 4 |   | Year 5 |  | Morethan 5years
|Long-Term Debt                     |  | $     | 35,398 |        | $ | 6,836  |  | $      | 6,836 |        | $ | 5,517  |  | $               | 3,982 |  | $ | 3,317 |  | $ | 8,910 
|Rent Due under Operating Leases    |  |       | 14,446 |        |   | 2,202  |  |        | 2,185 |        |   | 2,367  |  |                 | 2,107 |  |   | 1,308 |  |   | 4,277 
|Other Long-Term Obligations (1)    |  |       | 882    |        |   | 9      |  |        | 32    |        |   | 27     |  |                 | 12    |  |   | 23    |  |   | 779   
|Unconditional Purchase Obligations |  |       | 1,273  |        |   | 1,145  |  |        | 67    |        |   | 47     |  |                 | 14    |  |   |      |  |   |      
|                                   |  |       |        |        |   |        |  |        |       |        |   |        |  |                 |       |  |   |       |  |   |       
|Total Contractual Cash Obligations |  | $     | 51,999 |        | $ | 10,192 |  | $      | 9,120 |        | $ | 7,958  |  | $               | 6,115 |  | $ | 4,648 |  | $ | 13,966
|                                   |  |       |        |        |   |        |  |        |       |        |   |        |  |                 |       |  |   |       |  |   |       

---

|(1) | Amounts include $310 of expected pension and post retirement benefit payments and $572 of deferred compensation obligations. The deferred compensation obligations are included in
the more than 5 years column as the timing of such payments are not determinable.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 3. Quantitative and Qualitative Disclosures About Market Risk



The Company has no material changes to the disclosures made in the Companys Form 10-K for the year ended March 31, 2005.



Item 4. Controls and Procedures



The Companys Chief Executive Officer and Chief Financial Officer evaluated the Companys disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934. Their evaluation concluded that the disclosure controls and procedures are effective in connection with the filing of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.



There have been no significant changes in the Companys internal
controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.



Forward-Looking Statements



The Company believes certain statements contained in this report that are
not historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act. Reliance should not be placed on
forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Any forward-looking statement
speaks only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which they are made.



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Statements concerning expected financial performance, on-going business strategies, and possible future
action which the Company intends to pursue in order to achieve strategic objectives constitute forward-looking information. Implementation of these strategies and the achievement of such financial performance are each subject to numerous conditions,
uncertainties and risk factors. Factors which could cause actual performance by the Company to differ materially from these forward-looking statements include, without limitation, factors discussed in conjunction with a forward-looking statement;
changes in general economic and business conditions; the ability to integrate acquisitions; the success and financial condition of the Companys significant customers; competition; acceptance of new product offerings; changes in business
strategy or plans; quality of management; the Companys ability to maintain an effective system of internal control; availability, terms and development of capital; cost and price changes; availability of raw materials; business abilities and
judgment of personnel; changes in, or the failure to comply with, government regulations, legal proceedings and developments and other factors; increases in general interest rate levels affecting the Companys interest costs; and terrorism and
political unrest. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



Part II - Other Information



Item 1. Legal Proceedings  None



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  None



Item 3. Defaults upon Senior Securities  None



Item 4. Submission of Matters to a Vote of Security Holders



The annual meeting of shareholders was held on August 18, 2005. At the meeting, the shareholders voted on the following items:



1. Election of the following directors:



|                    |  |           |  |              
|------------------- |  | --------- |  | -------------
|                    |  | Votes for |  | Voteswithheld
|David L. Abbott     |  | 5,633,478 |  | 62,897       
|Robert R. Buck      |  | 5,633,922 |  | 62,453       
|Charles B. Connolly |  | 5,310,913 |  | 385,462      
|Francis D. Gerace   |  | 5,634,958 |  | 61,417       
|Lorrence T. Kellar  |  | 5,464,827 |  | 231,548      
|Roger A. Keller     |  | 5,632,436 |  | 63,939       
|David H. Pease, Jr. |  | 5,538,932 |  | 157,443      



2. Ratification of the
appointment of Grant Thornton LLP as the Companys independent public accountants for fiscal 2006 (5,529,022 votes for, 164,699 votes against, 2,654 votes withheld).



|Item 5. | Other Information  None
|------- | ------------------------



Item 6. Exhibits



|     |  |                                                                        
|---- |  | -----------------------------------------------------------------------
|31.1 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|31.2 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|32.1 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|     | 
|32.2 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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##### Table of Contents

Signature



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



|                        |  |                         |  |                                      
|----------------------- |  | ----------------------- |  | -------------------------------------
|                        |  | Multi-Color Corporation
|                        |  | (Registrant)           
|                        |  |                        
|Date: November 14, 2005 |  | By:                     |  | /s/ Dawn H. Bertsche                 
|                        |  |                         |  | Dawn H. Bertsche                     
|                        |  |                         |  | Senior Vice President-Finance,       
|                        |  |                         |  | Chief Financial Officer and Secretary



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