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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 June 30, 2006

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



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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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.

Large accelerated Filer ̈Accelerated Filer  x    Non-accelerated Filer ̈

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  6,585,366 (as of July 31, 2006)



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##### Table of Contents

MULTI-COLOR CORPORATION

FORM 10-Q

CONTENTS



|                               |  |                                                                                                            |  |   
|------------------------------ |  | ---------------------------------------------------------------------------------------------------------- |  | --
|PART I  FINANCIAL INFORMATION |  | Page                                                                                                      
|                               |  |                                                                                                           
|Item 1.                        |  | Financial Statements (Unaudited)                                                                           |  |   
|                               |  |                                                                                                           
|                               |  | Condensed Consolidated Statements of Income for the Three Months Ended June 30, 2006 and June 30, 2005     |  | 1 
|                               |  |                                                                                                           
|                               |  | Condensed Consolidated Balance Sheets at June 30, 2006 and March 31, 2006                                  |  | 2 
|                               |  |                                                                                                           
|                               |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2006 and June 30, 2005 |  | 3 
|                               |  |                                                                                                           
|                               |  | Notes to Condensed Consolidated Financial Statements                                                       |  | 4 
|                               |  |                                                                                                           
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 13
|                               |  |                                                                                                           
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                 |  | 18
|                               |  |                                                                                                           
|Item 4.                        |  | Controls and Procedures                                                                                    |  | 18
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                           
|                               |  |                                                                                                           
|Item 1.                        |  | Legal Proceedings                                                                                          |  | 20
|                               |  |                                                                                                           
|Item 1a.                       |  | Risk Factors                                                                                               |  | 20
|                               |  |                                                                                                           
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                |  | 20
|                               |  |                                                                                                           
|Item 3.                        |  | Defaults upon Senior Securities                                                                            |  | 20
|                               |  |                                                                                                           
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                        |  | 20
|                               |  |                                                                                                           
|Item 5.                        |  | Other Information                                                                                          |  | 20
|                               |  |                                                                                                           
|Item 6.                        |  | Exhibits                                                                                                   |  | 20
|                               | 
|Signatures                     |  | 21                                                                                                        



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##### Table of Contents

MULTI-COLOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share
data)



|                                                        |  |                    |        |   |               |   |        |  
|------------------------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                                        |  | Three Months Ended |       
|                                                        |  | June 30, 2006      |        |   | June 30, 2005 |  
|Net revenues                                            |  |                    |        |   |               |   |        |  
|Decorating Solutions                                    |  | $                  | 46,150 |   |               | $ | 43,018 |  
|Packaging Services                                      |  |                    | 5,736  |   |               |   | 3,711  |  
|Intersegment                                            |  |                    | (140   | ) |               |   | (12    | )
|                                                        |  |                    |        |   |               |   |        |  
|Total net revenues                                      |  |                    | 51,746 |   |               |   | 46,717 |  
|                                                        |  |                    |        |   |               |   |        |  
|Cost of revenues                                        |  |                    |        |   |               |   |        |  
|Decorating Solutions                                    |  |                    | 37,266 |   |               |   | 34,884 |  
|Packaging Services                                      |  |                    | 5,534  |   |               |   | 4,056  |  
|Intersegment                                            |  |                    | (140   | ) |               |   | (12    | )
|                                                        |  |                    |        |   |               |   |        |  
|Total cost of revenues                                  |  |                    | 42,660 |   |               |   | 38,928 |  
|                                                        |  |                    |        |   |               |   |        |  
|Gross profit                                            |  |                    | 9,086  |   |               |   | 7,789  |  
|Selling, general and administrative expenses            |  |                    | 4,806  |   |               |   | 4,135  |  
|                                                        |  |                    |        |   |               |   |        |  
|Operating income                                        |  |                    | 4,280  |   |               |   | 3,654  |  
|Interest expense                                        |  |                    | 394    |   |               |   | 514    |  
|Other (income) expense, net                             |  |                    | (57    | ) |               |   | (26    | )
|                                                        |  |                    |        |   |               |   |        |  
|Income before income taxes                              |  |                    | 3,943  |   |               |   | 3,166  |  
|Income tax expense                                      |  |                    | 1,457  |   |               |   | 1,257  |  
|                                                        |  |                    |        |   |               |   |        |  
|Net income                                              |  | $                  | 2,486  |   |               | $ | 1,909  |  
|                                                        |  |                    |        |   |               |   |        |  
|Basic earnings per common share                         |  | $                  | 0.38   |   |               | $ | 0.29   |  
|Diluted earnings per common and common equivalent share |  | $                  | 0.37   |   |               | $ | 0.29   |  
|Dividends per common share                              |  | $                  | 0.05   |   |               | $ | 0.05   |  
|                                                        |  |                    |        |   |               |   |        |  
|Weighted average shares and equivalents outstanding:    |  |                    |        |   |               |   |        |  
|Basic                                                   |  |                    | 6,578  |   |               |   | 6,496  |  
|Diluted                                                 |  |                    | 6,793  |   |               |   | 6,700  |  
|                                                        |  |                    |        |   |               |   |        |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

MULTI-COLOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share
data)



|                                                                                                                                                                |  |              |         |   |               |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                |  | June 30,2006 |         |   | March 31,2006 |  
|ASSETS                                                                                                                                                          |  |              |         |   |               |   |         |  
|Current assets:                                                                                                                                                 |  |              |         |   |               |   |         |  
|Cash                                                                                                                                                            |  | $            | 3,426   |   |               | $ | 3,179   |  
|Accounts receivable, net                                                                                                                                        |  |              | 22,649  |   |               |   | 24,248  |  
|Inventories                                                                                                                                                     |  |              | 18,452  |   |               |   | 16,891  |  
|Deferred tax assets                                                                                                                                             |  |              | 2,063   |   |               |   | 1,856   |  
|Prepaid and refundable income taxes                                                                                                                             |  |              |        |   |               |   | 396     |  
|Prepaid expenses and other                                                                                                                                      |  |              | 2,931   |   |               |   | 2,516   |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|Total current assets                                                                                                                                            |  |              | 49,521  |   |               |   | 49,086  |  
|Property, plant and equipment, net                                                                                                                              |  |              | 48,948  |   |               |   | 50,083  |  
|Goodwill                                                                                                                                                        |  |              | 11,759  |   |               |   | 11,759  |  
|Intangible assets, net                                                                                                                                          |  |              | 1,986   |   |               |   | 2,104   |  
|Other                                                                                                                                                           |  |              | 572     |   |               |   | 602     |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|Total assets                                                                                                                                                    |  | $            | 112,786 |   |               | $ | 113,634 |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                            |  |              |         |   |               |   |         |  
|Current liabilities:                                                                                                                                            |  |              |         |   |               |   |         |  
|Current portion of long-term debt                                                                                                                               |  | $            | 5,701   |   |               | $ | 5,876   |  
|Current portion of deferred income                                                                                                                              |  |              | 83      |   |               |   | 191     |  
|Accounts payable                                                                                                                                                |  |              | 15,066  |   |               |   | 14,606  |  
|Accrued income taxes                                                                                                                                            |  |              | 2,179   |   |               |   | 1,708   |  
|Accrued liabilities                                                                                                                                             |  |              | 2,619   |   |               |   | 2,618   |  
|Accrued payroll and benefits                                                                                                                                    |  |              | 3,245   |   |               |   | 4,516   |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|Total current liabilities                                                                                                                                       |  |              | 28,893  |   |               |   | 29,515  |  
|Long-term debt                                                                                                                                                  |  |              | 18,906  |   |               |   | 21,925  |  
|Deferred tax liability                                                                                                                                          |  |              | 8,221   |   |               |   | 7,899   |  
|Deferred compensation and other                                                                                                                                 |  |              | 1,346   |   |               |   | 1,291   |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|Total liabilities                                                                                                                                               |  |              | 57,366  |   |               |   | 60,630  |  
|Commitments and contingencies                                                                                                                                   |  |              |         |   |               |   |         |  
|Stockholders equity:                                                                                                                                           |  |              |         |   |               |   |         |  
|Common stock, no par value, stated value of $.10 per share; 15,000 shares authorized, 6,614 and 6,604 shares issued at June 30 and
March 31, 2006, respectively |  |              | 335     |   |               |   | 334     |  
|Paid-in capital                                                                                                                                                 |  |              | 16,701  |   |               |   | 16,319  |  
|Treasury stock, 29 shares at cost                                                                                                                               |  |              | (119    | ) |               |   | (119    | )
|Retained earnings                                                                                                                                               |  |              | 38,201  |   |               |   | 36,047  |  
|Accumulated other comprehensive income                                                                                                                          |  |              | 302     |   |               |   | 423     |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|Total stockholders equity                                                                                                                                      |  |              | 55,420  |   |               |   | 53,004  |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                                      |  | $            | 112,786 |   |               | $ | 113,634 |  
|                                                                                                                                                                |  |              |         |   |               |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



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MULTI-COLOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                                  |  |                    |        |   |               |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ------------- | - | ------ | -
|                                                                                  |  | Three Months Ended |       
|                                                                                  |  | June 30, 2006      |        |   | June 30, 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                    |        |   |               |   |        |  
|Net income                                                                        |  | $                  | 2,486  |   |               | $ | 1,909  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                    |        |   |               |   |        |  
|Depreciation                                                                      |  |                    | 1,501  |   |               |   | 1,499  |  
|Amortization                                                                      |  |                    | 117    |   |               |   | 155    |  
|Gain on interest rate swap termination                                            |  |                    | (7     | ) |               |   |       |  
|Net loss on disposal of equipment                                                 |  |                    | 30     |   |               |   |       |  
|Increase in non-current deferred compensation                                     |  |                    | 55     |   |               |   | 39     |  
|Stock based compensation expense                                                  |  |                    | 192    |   |               |   |       |  
|Tax benefit from stock option exercises                                           |  |                    |       |   |               |   | 229    |  
|Excess tax benefit from stock based compensation                                  |  |                    | (77    | ) |               |   |       |  
|Impairment loss on long-lived assets                                              |  |                    | 15     |   |               |   |       |  
|Deferred Taxes                                                                    |  |                    | (77    | ) |               |   |       |  
|Net (increase) decrease in accounts receivable                                    |  |                    | 1,598  |   |               |   | 1,989  |  
|Net (increase) decrease in inventories                                            |  |                    | (1,561 | ) |               |   | (2,753 | )
|Net (increase) decrease in prepaid expenses and other                             |  |                    | 89     |   |               |   | (65    | )
|Net increase (decrease) in accounts payable                                       |  |                    | 460    |   |               |   | 3,131  |  
|Net increase (decrease) in accrued liabilities                                    |  |                    | (720   | ) |               |   | 283    |  
|Net increase (decrease) in deferred income                                        |  |                    | (108   | ) |               |   | 478    |  
|                                                                                  |  |                    |        |   |               |   |        |  
|Net cash provided by operating activities                                         |  |                    | 3,993  |   |               |   | 6,894  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                    |        |   |               |   |        |  
|Capital expenditures                                                              |  |                    | (411   | ) |               |   | (1,706 | )
|Refund on acquisition purchase price                                              |  |                    |       |   |               |   | 272    |  
|Proceeds from sale of plant and equipment                                         |  |                    | 1      |   |               |   |       |  
|                                                                                  |  |                    |        |   |               |   |        |  
|Net cash used in investing activities                                             |  |                    | (410   | ) |               |   | (1,434 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                    |        |   |               |   |        |  
|(Decrease) in revolving line of credit, net                                       |  |                    |       |   |               |   | (1,000 | )
|Proceeds relating to issuance of common stock                                     |  |                    | 110    |   |               |   | 164    |  
|Excess tax benefit from stock based compensation                                  |  |                    | 77     |   |               |   |       |  
|Repayment of long-term debt                                                       |  |                    | (3,194 | ) |               |   | (3,045 | )
|Dividends paid                                                                    |  |                    | (329   | ) |               |   | (325   | )
|Repayment of capital lease obligations                                            |  |                    |       |   |               |   | (6     | )
|                                                                                  |  |                    |        |   |               |   |        |  
|Net cash used in financing activities                                             |  |                    | (3,336 | ) |               |   | (4,212 | )
|                                                                                  |  |                    |        |   |               |   |        |  
|Net increase in cash                                                              |  |                    | 247    |   |               |   | 1,248  |  
|Cash, beginning of period                                                         |  |                    | 3,179  |   |               |   | 345    |  
|Cash, end of period                                                               |  | $                  | 3,426  |   |               | $ | 1,593  |  
|                                                                                  |  |                    |        |   |               |   |        |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                    |        |   |               |   |        |  
|Interest paid                                                                     |  |                    | 392    |   |               |   | 425    |  
|Income taxes paid, net of refund received                                         |  |                    | 579    |   |               |   | 151    |  
|SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:                                   |  |                    |        |   |               |   |        |  
|Interest rate swap fair value                                                     |  |                    | 78     |   |               |   | 240    |  
|                                                                                  |  |                    |        |   |               |   |        |  

The accompanying notes are an integral part of the consolidated financial statements.



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MULTI-COLOR CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands except per share
data)

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 and 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 (SEC). 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 consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Companys 2006 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.

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.

Revenue Recognition:

The Decorating Solutions segment recognizes revenue on sales of products when the customer receives title to the goods, which is generally upon shipment or delivery depending on sales terms. The Packaging Services segment recognizes revenue
upon completion of the service provided to the customer or in certain circumstances, when the customer receives title to the goods upon shipment. All revenues are denominated in U.S. dollars and net of applicable returns and discounts.

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:

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized and
the Company tests goodwill annually as of February 28th of 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 reporting unit basis and the Company has
determined that each of its segments is one reporting unit. 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, which approximates the economic benefit, 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 basis of assets and liabilities that
will result in taxable or deductible amounts in future years.

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 manages interest costs using a mixture of fixed rate and variable rate debt. Additionally, the Company enters into interest rate swaps whereby
it agrees to exchange with a counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

The Companys interest rate swaps have been designated as effective cash flow hedges at inception and on an ongoing quarterly basis and therefore,
any changes in fair value are recorded in other comprehensive income. If a hedge or portion thereof is determined to be ineffective, any changes in fair value would be recorded in the consolidated income statement.



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New Pronouncements:

In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements No. 133 and 140. SFAS 155 allows financial instruments that contain an
embedded derivative and that otherwise would require bifurcation to be accounted for as a whole on a fair value basis, at the holders election. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and SFAS 140. This
statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006, which for the Company is April 1, 2007. The Company is currently evaluating the impact of SFAS 155 on the
Companys consolidated financial position, results of operations and cash flows.

In March 2006, the FASB issued SFAS 156,
Accounting for Servicing of Financial Assetsan amendment of FASB Statement No. 140. SFAS 156 provides guidance on the accounting for servicing assets and liabilities when an entity undertakes an obligation to service a financial asset by
entering into a servicing contract. This statement is effective for all transactions in fiscal years beginning after September 15, 2006, which for the Company is April 1, 2007. The Company is currently evaluating the impact of SFAS 156 on
the Companys consolidated financial position, results of operations and cash flows.

In July 2006, the FASB issued FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that the Company recognizes in
the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of April 1, 2007, with the
cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on the Companys financial position, results of operations and
cash flows.



|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 Company excluded 160 options in the three months ended June 30, 2006 computation of diluted EPS because these options would have an anti-dilutive effect.

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



|                                 |  |                             |  |                 |      |        |       |                 |   |     
|-------------------------------- |  | --------------------------- |  | --------------- | ---- | ------ | ----- | --------------- | - | ----
|                                 |  | Three Months Ended June 30,
|                                 |  | 2006                        |  | 2005           
|                                 |  | Shares                      |  | Per ShareAmount |      | Shares |       | Per ShareAmount
|Basic EPS                        |  | 6,578                       |  | $               | 0.38 |        | 6,496 |                 | $ | 0.29
|Effect of dilutive stock options |  | 215                         |  |                 | 0.01 |        | 204   |                 |   |    
|                                 |  |                             |  |                 |      |        |       |                 |   |     
|Diluted EPS                      |  | 6,793                       |  | $               | 0.37 |        | 6,700 |                 | $ | 0.29
|                                 |  |                             |  |                 |      |        |       |                 |   |     



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|3. | Inventories:
|-- | ------------

Inventories are stated at the lower
of FIFO cost or market and are comprised of the following:



|                   |  |              |        |   |               |   |        |  
|------------------ |  | ------------ | ------ | - | ------------- | - | ------ | -
|                   |  | June 30,2006 |        |   | March 31,2006 |  
|Finished goods     |  | $            | 13,281 |   |               | $ | 11,195 |  
|Work in process    |  |              | 2,504  |   |               |   | 2,174  |  
|Raw materials      |  |              | 4,751  |   |               |   | 5,112  |  
|                   |  |              |        |   |               |   |        |  
|                   |  |              | 20,536 |   |               |   | 18,481 |  
|Inventory reserves |  |              | (2,084 | ) |               |   | (1,590 | )
|                   |  |              |        |   |               |   |        |  
|                   |  | $            | 18,452 |   |               | $ | 16,891 |  
|                   |  |              |        |   |               |   |        |  



|4. | Debt:
|-- | -----

The components of the Companys debt
consisted of the following:



|                                                                                                                                                                                        |  |              |        |   |               |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ------------- | - | ------ | -
|                                                                                                                                                                                        |  | June 30,2006 |        |   | March 31,2006 |  
|Scottsburg Industrial Revenue Bonds, floating weekly rate (4.1% at June 30, 2006), monthly interest payments, principal due October
2009                                                |  | $            | 2,365  |   |               | $ | 2,365  |  
|Clermont County Industrial Revenue Bonds, floating weekly rate (3.2% at June 30, 2006), monthly interest payments, principal due March
2016                                             |  |              | 2,785  |   |               |   | 2,785  |  
|Note payable to Avery Dennison Corporation, annual principal payments of $1,099 plus interest at 5%, due each January, final payment due
January 2007                                   |  |              | 1,099  |   |               |   | 1,099  |  
|Mortgage note payable, interest at LIBOR plus 1.50%, (6.61% at June 30, 2006), quarterly principal payments of $45 plus interest,
scheduled balloon payment of $1,800 due November 2013 |  |              | 3,150  |   |               |   | 3,195  |  
|Bank term note payable, interest at LIBOR plus 1.25%, (6.36% at June 30, 2006), quarterly principal payments of $435 plus interest, due
August 2007                                     |  |              | 1,565  |   |               |   | 2,000  |  
|Bank term note payable, interest at LIBOR plus 1.25%, (6.36% at June 30, 2006), quarterly principal payments of $714 plus interest due
August 2007                                      |  |              | 13,643 |   |               |   | 16,357 |  
|                                                                                                                                                                                        |  |              |        |   |               |   |        |  
|                                                                                                                                                                                        |  |              | 24,607 |   |               |   | 27,801 |  
|Less-current portion of debt                                                                                                                                                            |  |              | (5,701 | ) |               |   | (5,876 | )
|                                                                                                                                                                                        |  |              |        |   |               |   |        |  
|                                                                                                                                                                                        |  | $            | 18,906 |   |               | $ | 21,925 |  
|                                                                                                                                                                                        |  |              |        |   |               |   |        |  

The following is a schedule of future annual principal payments as of June 30, 2006.



|           |  |   |       
|---------- |  | - | ------
|Year 1     |  | $ | 5,701 
|2          |  |   | 10,966
|3          |  |   | 180   
|4          |  |   | 2,545 
|5          |  |   | 180   
|Thereafter |  |   | 5,035 
|           |  |   |       
|Total      |  | $ | 24,607
|           |  |   |       

The Company maintains a credit facility with a consortium of lenders consisting of a revolving
line of credit (Revolver), a non-revolving line of credit (Non-Revolver), a swing-line note (Swing-Line) and a Term Note. The Revolver provides for borrowings up to a maximum of $10,000 and interest rates are based upon prime or LIBOR plus certain
margin amounts based upon the Companys leverage ratio.



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##### Table of Contents

The Company had no outstanding borrowings under the Revolver at June 30, 2006. At June 30,
2006, the Company had outstanding borrowings of $13,643 under the Non-Revolver in conjunction with the acquisition of the NorthStar Print Group in January 2005. The Swing-Line provides for borrowings of up to $2,000 with one of the lenders and
interest is based on the prime rate. The Company had no outstanding borrowings under the Swing-Line at June 30, 2006 and had $1,565 of outstanding borrowings under the Term Note.

The credit facility also contains various financial and operating covenants which, among others, require 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. As of June 30, 2006, the Company was in compliance with all debt covenants.

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 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 related letters of credit expire on August 1, 2007.

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, assembling and fulfillment services. Both segments sell to major consumer product companies. Effective April 1, 2006, all corporate administrative expenses have been allocated to the Companys segments based upon methods that
the Company believes are reasonable, such as formulas based on revenues and number of employees. As a result, the Decorating Solutions and Packaging Services income (loss) before income taxes for the three months ended June 30, 2005 have been
recast to conform to the current period presentation with no net impact to operating results.



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Financial information by operating segment is as follows:



|                                   |  |                             |         |   |                |   |         |  
|---------------------------------- |  | --------------------------- | ------- | - | -------------- | - | ------- | -
|                                   |  | Three Months Ended June 30, |        
|                                   |  | 2006                        |         |   | 2005           |  
|Sales:                             |  |                             |         |   |                |   |         |  
|Decorating Solutions               |  | $                           | 46,150  |   |                | $ | 43,018  |  
|Packaging Services                 |  |                             | 5,736   |   |                |   | 3,711   |  
|Intersegment                       |  |                             | (140    | ) |                |   | (12     | )
|                                   |  |                             |         |   |                |   |         |  
|                                   |  | $                           | 51,746  |   |                | $ | 46,717  |  
|                                   |  |                             |         |   |                |   |         |  
|Income (loss) before income taxes: |  |                             |         |   |                |   |         |  
|Decorating Solutions               |  | $                           | 4,128   |   |                | $ | 3,898   |  
|Packaging Services                 |  |                             | (185    | ) |                |   | (732    | )
|                                   |  |                             |         |   |                |   |         |  
|                                   |  | $                           | 3,943   |   |                | $ | 3,166   |  
|                                   |  |                             |         |   |                |   |         |  
|Capital expenditures:              |  |                             |         |   |                |   |         |  
|Decorating Solutions               |  | $                           | 343     |   |                | $ | 605     |  
|Packaging Services                 |  |                             | 51      |   |                |   | 874     |  
|Corporate                          |  |                             | 17      |   |                |   | 227     |  
|                                   |  |                             |         |   |                |   |         |  
|                                   |  | $                           | 411     |   |                | $ | 1,706   |  
|                                   |  |                             |         |   |                |   |         |  
|Depreciation and amortization:     |  |                             |         |   |                |   |         |  
|Decorating Solutions               |  | $                           | 1,463   |   |                | $ | 1,519   |  
|Packaging Services                 |  |                             | 155     |   |                |   | 135     |  
|                                   |  |                             |         |   |                |   |         |  
|                                   |  | $                           | 1,618   |   |                | $ | 1,654   |  
|                                   |  |                             |         |   |                |   |         |  
|                                   |  |                            
|                                   |  | June 30, 2006               |         |   | March 31, 2006 |  
|Total assets:                      |  |                             |         |   |                |   |         |  
|Decorating Solutions               |  | $                           | 90,520  |   |                | $ | 91,441  |  
|Packaging Services                 |  |                             | 11,334  |   |                |   | 11,514  |  
|Corporate                          |  |                             | 10,932  |   |                |   | 10,679  |  
|                                   |  |                             |         |   |                |   |         |  
|                                   |  | $                           | 112,786 |   |                | $ | 113,634 |  
|                                   |  |                             |         |   |                |   |         |  



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##### Table of Contents

|6. | Stock Based Compensation:
|-- | -------------------------

Effective April 1,
2006, the Company adopted SFAS No. 123 (R), Share-Based Payment, which requires compensation costs related to share-based transactions to be measured at the grant date, based on the fair value of the award, and recognized as expense over the
requisite service period. Prior to April 1, 2006, the Company applied Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and accounted for stock options under the intrinsic method. Accordingly, the
Company did not recognize expense related to employee stock options because the exercise price of such options equaled the fair value of the underlying stock on the grant date. The Company previously disclosed the fair value of its stock options
under the provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123).

The Company elected to adopt the modified
prospective application method as provided by SFAS 123 (R), and accordingly, the financial statements for prior periods presented have not been restated.

The Companys compensation expense for stock-based incentive awards was $192 pre-tax for the three months ended June 30, 2006 of which $181 was recorded in selling, general and administrative expenses, with
an associated tax benefit of $74, which resulted in a $0.02 impact on basic and diluted EPS.

Prior to the adoption of SFAS 123(R), tax
benefits resulting from tax deductions in excess of the compensation cost recognized for those options were classified as operating cash flows. These excess tax benefits are now classified as financing cash flows. As a result of adopting SFAS 123
(R), $77 of excess tax benefits for the three months ended June 30, 2006 have been classified as a financing inflow.

Upon adoption of
SFAS 123 (R), the Company continued to calculate the value of each employee stock option, estimated on the date of grant, using the Black-Scholes model, using the following assumptions for the three months ended June 30, 2006:



|                        |  |      |  
|----------------------- |  | ---- | -
|Expected life (years)   |  | 5.0  |  
|Risk-free interest rate |  | 4.92 | %
|Expected volatility     |  | 37.8 | %
|Dividend yield          |  | 0.63 | %

The Company estimated volatility based on the historical volatility of its common stock. The
risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the options in effect at the time of the grant. The dividend yield assumption is based on the Companys history and expectation for
dividend payouts. The expected life of the options represents the weighted-average period the stock options are expected to remain outstanding. The expected life assumption is established through the review of historical exercise behavior of option
grants with similar vesting periods. Beginning in the first quarter of 2007, the Company began using an estimated forfeiture rate of 2%, based on historical data. Prior to 2007, the Company used the actual forfeiture method allowed under SFAS 123,
which assumed that all options would vest and pro forma expense was adjusted when options were forfeited prior to the vesting dates. SFAS 123 (R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.



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As of June 30, 2006, the Company reserved 237 shares 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 and will
expire not more than ten years after the date of grant. The applicable options vest ratably over a three to five year period. A summary of the changes in the options outstanding for the three months ended June 30, 2006 is shown below:



| |  |                               |  |         |  |                                |       |                                        |     |                           |   |      
| |  | ----------------------------- |  | ------- |  | ------------------------------ | ----- | -------------------------------------- | --- | ------------------------- | - | -----
| |  |                               |  | Options |  | Weighted AverageExercise Price |       | Weighted AverageRemaining life (Years) |     | Aggregate Intrinsic Value
| |  | Outstanding at March 31, 2006 |  | 459     |  | $                              | 15.64 |                                        |     |                           |   |      
| |  | Granted                       |  | 160     |  | $                              | 31.75 |                                        |     |                           |   |      
| |  | Exercised                     |  | 10      |  | $                              | 10.47 |                                        |     |                           |   |      
| |  | Forfeited                     |  |        |  |                                |      |                                        |     |                           |   |      
| |  |                               |  |         |  |                                |       |                                        |     |                           |   |      
| |  | Outstanding at June 30, 2006  |  | 609     |  | $                              | 19.97 |                                        | 8.2 |                           | $ | 4,753
| |  |                               |  |         |  |                                |       |                                        |     |                           |   |      
| |  | Exercisable at June 30, 2006  |  | 261     |  | $                              | 14.29 |                                        | 7.2 |                           | $ | 1,739
| |  |                               |  |         |  |                                |       |                                        |     |                           |   |      

As of June 30, 2006, the total compensation cost related to nonvested options not yet
recognized and the weighted-average period over which it is expected to be recognized is $3,014 and 2.2 years, respectively.

The weighted
average grant-date fair value of options granted during the three months ended June 30, 2006 was $12.46. The total intrinsic value of options exercised during the three months ended June 30, 2006 was $50. Cash received from options
exercised during the three months ended June 30, 2006 was $110, with a tax benefit of $77.

Prior to the adoption of SFAS 123(R), the
Company measured compensation expense for its stock options plans using the intrinsic method prescribed by APB No. 25. The Company applied the disclosure provisions of SFAS 123, as if the fair-value based method had been applied in measuring
compensation expense. The following table illustrates the effect on net income and earnings per share for the three months ended June 30, 2005 as if the Company applied the fair value recognition provisions of SFAS 123 to stock-based
compensation:



| |  |                                                                                                                    |  |                                 |      
| |  | ------------------------------------------------------------------------------------------------------------------ |  | ------------------------------- | -----
| |  |                                                                                                                    |  | Three MonthsEnded June 30, 2005
| |  | Net income  as reported                                                                                           |  | $                               | 1,909
| |  | Stock based compensation expense determined under the fair value method for all awards, net of income tax benefits |  |                                 | 78   
| |  |                                                                                                                    |  |                                 |      
| |  | Net income  pro forma                                                                                             |  | $                               | 1,831
| |  |                                                                                                                    |  |                                 |      
| |  | Net income per common and common equivalent share  as reported                                                    |  |                                 |      
| |  | Basic                                                                                                              |  | $                               | 0.29 
| |  | Diluted                                                                                                            |  | $                               | 0.29 
| |  | Net income per common and common equivalent share  pro forma                                                      |  |                                 |      
| |  | Basic                                                                                                              |  | $                               | 0.28 
| |  | Diluted                                                                                                            |  | $                               | 0.28 



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##### Table of Contents

|7. | Major Customers:
|-- | ----------------

During the three months ended
June 30, 2006 and 2005, sales to major customers (those exceeding 10% of the Companys net sales) approximated 48% and 46%, respectively, of the Companys consolidated net sales. Approximately 28% and 30% of sales for the three months
ended June 30, 2006 and 2005, respectively, were to the Procter & Gamble Company (recorded primarily in the Decorating Solutions segment). Approximately 20% and 16% of sales for the three months ended June 30, 2006 and 2005,
respectively were to the Miller Brewing Company (recorded in the Decorating Solutions segment). In addition, accounts receivable balances of such major customers approximated 35% and 32% of the Companys total accounts receivable balance at
June 30, 2006 and March 31, 2006, respectively.

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.



|8. | Potential Acquisition:
|-- | ----------------------

At June 30, 2006, the
Company had approximately $2,100 of capitalized acquisition costs related to a potential acquisition. Completion of any potential acquisition may or may not occur.



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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s Annual Report on Form 10-K for the year ended March 31, 2006.
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 reviewed 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 2 of the Notes to Consolidated Financial Statements in the Companys Annual Report on Form 10-K for the year ended March 31, 2006.



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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 shipment or delivery depending on sales terms. The Packaging Services
segment recognizes revenue upon completion of the service provided to the customer or in certain circumstances, when the customer receives title to the goods upon shipment. All revenues are denominated in U.S. dollars and net of applicable returns
and discounts.

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. An allowance for doubtful accounts is established 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 2007. If we are unable to collect all or part of the outstanding receivable balance, there could be a material impact on the consolidated statements of
income.

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 could have a material impact on the consolidated statements of income.

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. Changes in the market condition and/or losses of a production line could have a material impact on
the consolidated statements of income.



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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 income and deferred taxes.

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 a wide variety of 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 continue to monitor and analyze new trends in the packaging and consumer product industries 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 revenues increased 11% in the first quarter to $51,746 from $46,717 in the first quarter of the prior year. The 7% organic growth rate within the Decorating Solutions segment was a result of gaining
new customers and expanding our business with existing customers. The revenue increase within our Packaging Services segment was attributed to an increase in existing customer sales due to customer promotional programs.

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.

Key objectives for fiscal year 2007 include winning new customers, growing existing customers, generating meaningful cost reductions and international business expansion.



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##### Table of Contents

Results of Operations

Three Months Ended June 30, 2006 compared to the Three Months Ended June 30, 2005:



|                             |  |      |        |   |      |   |        |         |  |         |       |  |    |  
|---------------------------- |  | ---- | ------ | - | ---- | - | ------ | ------- |  | ------- | ----- |  | -- | -
|                             |  | 2006 |        |   | 2005 |   |        | $Change |  | %Change |      
|Consolidated Net Revenues    |  | $    | 51,746 |   |      | $ | 46,717 |         |  | $       | 5,029 |  | 11 | %
|Decorating Solutions Segment |  | $    | 46,150 |   |      | $ | 43,018 |         |  | $       | 3,132 |  | 7  | %
|Packaging Services Segment   |  | $    | 5,736  |   |      | $ | 3,711  |         |  | $       | 2,025 |  | 55 | %
|Intersegment                 |  | $    | (140   | ) |      | $ | (12    | )       |  |         | NA    |  | NA |  

The Decorating Solutions segments revenues for the three months ended June 30, 2006 as
compared to the same period of the prior year increased primarily due to gaining new customers and increasing volume with existing customers. The Packaging Services segment experienced an increase in net revenues for the first quarter as a result of
strong service demand of promotional programs from existing customers.



|                                 |  |      |       |   |      |   |       |         |  |         |       |  |     |  
|-------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ------- |  | ------- | ----- |  | --- | -
|                                 |  | 2006 |       |   | 2005 |   |       | $Change |  | %Change |      
|Consolidated Gross Profit (Loss) |  | $    | 9,086 |   |      | $ | 7,789 |         |  | $       | 1,297 |  | 17  | %
|% of Revenues                    |  |      | 18    | % |      |   | 17    | %       |  |         |       |  |     |  
|Decorating Solutions Segment     |  | $    | 8,884 |   |      | $ | 8,134 |         |  |         | 750   |  | 9   | %
|% of Revenues                    |  |      | 19    | % |      |   | 19    | %       |  |         |       |  |     |  
|Packaging Services Segment       |  | $    | 202   |   |      | $ | (345  | )       |  |         | 547   |  | 159 | %
|% of Revenues                    |  |      | 4     | % |      |   | (9    | )%      |  |         |       |  |     |  

Consolidated gross profit increased $1,297 or 17% as compared to the same period in the prior year
as a result of higher volumes within the Decorating Solutions segment, as well as the increase in revenues in the Packaging Services segment. Gross profit within the Decorating Solutions segment increased $750 due to organic sales growth and reduced
costs realized through improved labor and production efficiencies. Gross profit in the Packaging Services segment increased $547 because of higher sales volume and a favorable service mix.



|                                               |  |      |       |   |      |   |       |         |  |         |     |  |    |  
|---------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ------- |  | ------- | --- |  | -- | -
|                                               |  | 2006 |       |   | 2005 |   |       | $Change |  | %Change |    
|Consolidated Selling, General & Administrative |  | $    | 4,806 |   |      | $ | 4,135 |         |  | $       | 671 |  | 16 | %
|% of Revenues                                  |  |      | 9     | % |      |   | 9     | %       |  |         |     |  |    |  

Selling, general and administrative (SG&A) expenses increased $671 or 16% from the prior year,
but remained flat as a percent of sales. The increase in SG&A is primarily attributed to increased expenses related to compliance with the Sarbanes-Oxley Act of 2002 and staff increases associated with our growth. With the adoption of Statement
of Financial Accounting Standards No. 123 (R) Share-Based Payment on April 1, 2006, we began expensing stock options, which resulted in $181 in SG&A expenses for the three months ended June 30, 2006.



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|                 |  |      |     |      |   |         |  |   |         |   |  |     |   
|---------------- |  | ---- | --- | ---- | - | ------- |  | - | ------- | - |  | --- | --
|                 |  | 2006 |     | 2005 |   | $Change |  |   | %Change |  
|Interest Expense |  | $    | 394 |      | $ | 514     |  | $ | (120    | ) |  | (23 | )%

Interest expense decreased as compared to the same period of the prior year as a result of a
decrease in the outstanding debt balance. The outstanding debt balance at June 30, 2006 was $24,607 compared to a balance of $36,737 at June 30, 2005.



|                   |  |      |       |      |   |         |  |         |     |  |    |  
|------------------ |  | ---- | ----- | ---- | - | ------- |  | ------- | --- |  | -- | -
|                   |  | 2006 |       | 2005 |   | $Change |  | %Change |    
|Income Tax Expense |  | $    | 1,457 |      | $ | 1,257   |  | $       | 200 |  | 16 | %

Income tax expense increased $200 from the first quarter of the prior year because of an increase
in earnings, which was partially offset by a decrease in the effective tax rate. The effective rate decreased from 39.7% to 36.9% due to a refund received in the first quarter 2007 that offset current tax expense as well a reduction in the tax rate
in one of the states in which we operate, which decreased state income tax expense. Our expected tax rate for fiscal year 2007 is 38.6%.

Liquidity and Capital Resources

Through the three months ended June 30, 2006 net cash provided by operating activities
was $3,993 as compared to $6,894 in the same period of the prior year. The decrease is primarily due to a decrease in accounts payable and accrued liabilities, due to the timing of payables and income tax payments and increase in inventories. This
was partially offset by a decrease in accounts receivable.

We expect to make capital expenditures of approximately $7,000 during fiscal
2007, consisting primarily of plant equipment. We believe that cash flows from operations and availability under the credit facilities 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. While there are no present commitments to acquire any businesses that
would have a material impact on our financial position or results of operations, such acquisitions may require us to issue additional equity or incur additional debt. At June 30, 2006, we had capitalized approximately $2,100 related to a
potential acquisition. Completion of potential acquisitions may or may not occur.

We maintain a credit facility with a consortium of
lenders consisting of a revolving line of credit (Revolver), a non-revolving line of credit (Non-Revolver), a swing-line note (Swing-Line) and a Term Note. The Revolver provides for borrowings up to a maximum of $10,000 and interest rates are based
upon prime or LIBOR plus certain margin amounts based on our leverage ratio. We had no outstanding borrowings under the Revolver at June 30, 2006. The Non-Revolver provided for maximum borrowings of $45,000; however the lenders have no
obligation to make any advances under the Non-Revolver after the Draw Termination date of January 24, 2006. At June 30, 2006, we had outstanding borrowings of $13,643 under the Non-Revolver. The Swing-Line provides for
borrowings of up to $2,000 with one of the lenders and interest is based on the prime rate. There were no outstanding borrowings under the Swing-Line at June 30, 2006. Under the terms of the credit facility 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 credit agreement allows us to pay dividends up to $1,500 in any given year. The credit
agreement expires August 1, 2007.



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Available borrowings under the credit agreement at June 30, 2006 consisted of $10,000 under the
Revolver and $2,000 under the Swing-Line.

We believe that we have both sufficient short and long term liquidity financing. We had a working
capital position of $20,628 and $19,571 at June 30, 2006 and March 31, 2006, respectively. At June 30, 2006, we were in compliance with our loan covenants and current in our principal and interest payments on all debt.

Contractual Obligations

The
following table summarizes Multi-Colors contractual obligations as of June 30, 2006:

Aggregated Information about Contractual
Obligations and Other Commitments:



June 30, 2006

Total

Year 1

Year 2

Year 3

Year 4

Year 5

Morethan 5yearsLong-term debt

$
24,607

$
5,701

$
10,966

$
180

$
2,545

$
180

$
5,035Interest on Long Term Debt (1)


3,601


1,051


639


401


339


336


835Rent due under Operating Leases


10,736


1,569


1,703


1,619


1,254


1,232


3,359Other Long-Term Obligations (2)


1,175


40


31


13


29


44


1,018Unconditional Purchase Obligations


284


241


36


7








Total Contractual Cash Obligations

$
40,403

$
8,602

$
13,375

$
2,220

$
4,167

$
1,792

$
10,247__________ (1)    Interest on floating rate debt was estimated using projected forward LIBOR rates as of June 30, 2006. (2)    Amounts include $540 of expected post retirement benefit payments and $635 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, 2006.

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 June 30, 2006.

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.



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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.

Statements concerning expected financial performance, on-going business strategies, and possible future
actions 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 consummate and successfully 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; 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.



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##### Table of Contents

Part II - Other Information



|         |  |                                                                                                                                      |  |                                                                        
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------
|Item 1.  |  | Legal Proceedings  None                                                                                                            
|         | 
|Item 1A. |  | Risk Factors  The Company had no material changes to the Risk Factors in the Companys Form 10-K for the year ended March 31, 2006.
|         | 
|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 - None                                                                          
|         | 
|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: August 4, 2006 |  | By:                                  |  | /s/ Dawn H. Bertsche                 
|                     |  |                                      |  | Dawn H. Bertsche                     
|                     |  |                                      |  | Senior Vice President Finance,       
|                     |  |                                      |  | Chief Financial Officer and Secretary



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