(In thousands, except per share data)

The following discussion and analysis should be read in conjunction with Multi-Color's consolidated financial statements and notes thereto appearing elsewhere herein.

RESULTS OF OPERATIONS

The following table shows for the periods indicated, certain components of Multi-Color's consolidated statements of income as a percentage of net revenues.

                                                              Percentage of Net Revenues
                                                           2009           2008         2007
Net revenues                                                100.0 %        100.0 %     100.0 %
Cost of revenues                                             81.8 %         81.5 %      80.7 %

Gross profit                                                 18.2 %         18.5 %      19.3 %
Selling, general & administrative expenses                    9.5 %         10.2 %      10.5 %
Plant closure costs                                           0.9 %           -           -
Acquisition expenses                                           -              -          1.6 %

Operating income                                              7.8 %          8.3 %       7.2 %
Interest expense                                              2.4 %          0.4 %       0.5 %
Net gain on foreign currency forward contracts                 -            (3.6 )%       -
Other (income) expense, net                                  (0.1 )%        (0.3 )%     (0.2 )%

Income from continuing operations before income tax           5.5 %         11.8 %       6.9 %
Income tax expense                                            1.7 %          4.2 %       2.4 %

Income from continuing operations                             3.8 %          7.6 %       4.5 %
Income from discontinued operations, net of tax                -             3.3 %       1.2 %

Net income                                                    3.8 %         10.9 %       5.7 %

EXECUTIVE SUMMARY

We provide a complete line of innovative decorative label solutions and offer a variety of technical and graphic services to our customers based on their specific needs and requirements. Our customers include a wide range of consumer product companies and we supply labels for many of the world's best known brands and products, including laundry detergent, fabric care, food, beverages, and wine and spirits.

Prior to June 2007, the Company was organized into two business segments:
Decorating Solutions and Packaging Services. The Decorating Solutions segment's primary operations involved the design and printing of labels, while the Packaging Services segment provided promotional packaging, assembling and fulfillment services. On July 2, 2007, we completed the sale of Quick Pak, whose operating results were reported as the Packaging Services segment (see Note 4 to the Company's Consolidated Financial Statements). Accordingly, the results of Quick Pak have been presented as discontinued operations for all periods in the consolidated financial statements and the Company no longer reports any segment results.

In October 2007, we announced the expansion of our North American manufacturing operations with the purchase of two new presses for our newly acquired manufacturing facility in Batavia, Ohio. Our Troy and Batavia, Ohio plants were consolidated into this new facility to both reduce costs and provide needed capacity for long-term growth.

On February 29, 2008, we acquired Collotype International Holdings Pty. Ltd. (Collotype) which is headquartered in Adelaide, South Australia. Collotype is the world's leading and highly awarded pressure sensitive wine and spirits label manufacturer and a growing provider of labels in the fast-moving consumer goods marketplace in Australia. Collotype has manufacturing operations in Australia, South Africa and the United States (See Note 3 to the Company's Consolidated Financial Statements).

In January 2009, we announced plans to consolidate our heat transfer label (HTL) manufacturing business located in Framingham, Massachusetts into our other existing facilities. The transition began immediately, with final plant closure expected in August 2009. In connection with the closure of the Framingham facility, the Company recorded a total pre-tax charge of $2,553 during the fourth quarter period ending March 31, 2009, consisting of $1,407 in cash charges for employee severance and other termination benefits related to 62 associates and $1,146 in non-cash charges related to asset impairments.

Our vision is to be a premier global resource of decorating solutions. We currently serve customers located throughout North, Central and South America, Australia, South Africa and New Zealand. We continue to monitor and analyze new trends in the packaging and consumer products industries to ensure that we are providing appropriate services and products to our customers. Certain factors that influence our business include consumer spending, new product introductions, new packaging technologies and demographics.

During fiscal 2009, the Company achieved record revenues of $289.8 compared to $210.3 in the prior year. The increase in revenues was due to the Collotype acquisition completed in February 2008, which generated $106.4 million in revenues for the year. This increase was partially offset by a 9% reduction in North American organic revenues due to lower volumes as a result of the current recessionary impact on consumer spending.

Gross profit increased 36% or $13.9 million in 2009 compared to 2008 due to the Collotype acquisition, partially offset by the impact of the decrease in North American organic revenues and plant start-up costs incurred during the first half of the year for our new Batavia, Ohio manufacturing facility.

Operating income increased 31% to $22.9 million in 2009 primarily due to the acquisition of Collotype and lower SG&A costs due to cost reduction actions and lower incentive pay as a result of not meeting our financial targets.

The label markets we serve continue to experience a competitive environment and price pressures. 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. During 2009, 2008 and 2007, sales to major customers (those exceeding 10% of the Company's net revenues) approximated 32%, 51% and 54%, respectively of the Company's consolidated net revenues. Approximately 19%, 33% and 34% of sales in 2009, 2008 and 2007, respectively, were to the Procter & Gamble Company; approximately 13%, 18% and 20% of sales in 2009, 2008 and 2007, respectively, were to the Miller Brewing Company. Sales concentration with our major customers has been significantly reduced since we have added new customers and products with our acquisition of Collotype which has manufacturing operations in Australia, South Africa and California.

Our key objectives for fiscal year 2010 include winning new customers, growing with existing customers, improving our low cost manufacturing market position and selective acquisitions.

COMPARISON OF FISCAL YEARS ENDED MARCH 31, 2009 AND MARCH 31, 2008

The increase in revenues was due to the Collotype acquisition completed in February 2008, which generated $106.4 million in revenues in 2009 compared to $9.3 million in revenues for the year ended March 31, 2008. This increase was partially offset by a 9% reduction in North American organic revenues due to lower volumes as a result of the recessionary impact on consumer spending. 60% of the North American organic sales volume decline is attributable to our largest customer and the remaining 40% to our smaller regional customers.

                                                               $         %
                                    2009         2008        Change    Change
              Gross Profit        $ 52,806     $ 38,926     $ 13,880       36 %
              % of Net Revenues       18.2 %       18.5 %

Gross profit increased 36% or $13.9 million in 2009 compared to 2008 due to the Collotype acquisition, partially offset by the impact of the decrease in North American organic revenues and plant start-up costs incurred during the first half of the year for the new Batavia, Ohio manufacturing facility.

Selling, General & Administrative (SG&A), Plant Closure and Acquisition Expense



                                                                                    $         %
                                                       2009          2008        Change     Change
Selling, General & Administrative (SG&A) Expense     $ 27,196      $ 21,427      $ 5,769        27 %
% of Net Revenues                                         9.5 %        10.2 %
Plant Closure Costs                                  $  2,553      $     -       $ 2,553       100 %
% of Net Revenues                                         0.9 %         N/A
Acquisition Expense                                  $    192      $     -       $   192       100 %
% of Net Revenues                                          -  %         N/A

SG&A expenses increased $5.8 million due to comparable expenses from the Collotype acquisition. As a percent of sales, SG&A expenses were lower due to cost reduction actions and lower incentive pay as a result of not meeting our financial targets.

In connection with the closure of the Framingham facility, the Company recorded a charge in plant closure costs of $2.6 million consisting of $1.4 million in cash charges for employee severance and other termination benefits related to 62 associates and $1.2 million in non-cash charges related to asset impairments.

In the third quarter of fiscal 2009, negotiations were terminated related to a potential acquisition. As a result, we recorded a pre-tax charge of $192 related to legal and other transaction costs.

Interest, Net Gain on Foreign Currency Forward Contracts and Other (Income)
Expense



                                                                             $        %
                                                  2009         2008       Change    Change
Interest Expense                                 $ 6,841     $    962     $ 5,879       NM
Net Gain on Foreign Currency Forward Contracts   $    -      $ (7,659 )   $ 7,659     (100 )%
Other (Income) Expense, net                      $  (378 )   $   (631 )   $   253      (40 )%

Interest expense increased $5.9 million due to the debt incurred to finance the Collotype acquisition. During fiscal year 2009, the Company repaid $25 million or 19% of long-term debt due to strong cash flow and lower capital expenditures.

During 2008, the Company recorded $7.7 million of net gains on foreign currency forward contracts. The contracts were entered into in connection with the Collotype acquisition in order to purchase Australian dollars and were settled upon the completion of the acquisition in February 2008.

The decrease in other income was due primarily to lower investment income as a result of lower cash balances on hand during 2009.

$ % 2009 2008 Change Change Income Tax Expense $ 4,967 $ 8,820 $ (3,853 ) (44 )%

The Company's effective tax rate was 30% in 2009 compared to 36% in 2008 due to income in lower tax jurisdictions and the finalization of the acquisition tax structure related to the Company's international operations. The Company expects its annual effective tax rate to be approximately 30% in fiscal year 2010.

$ % 2009 2008 Change Change Income (Loss) from Discontinued Operations, Net of Tax $ (137 ) $ 6,977 $ (7,114 ) NM

The sale of Quick Pak was completed in July 2007 and therefore, there were 3 months of operations included in 2008 as compared to no operations in fiscal 2009. In addition, the sale of Quick Pak resulted in an after-tax gain of approximately $6.9 million recorded during the second quarter of fiscal 2008. During fiscal year 2009, additional income tax expense was recorded related to the sale of Quick Pak.

COMPARISON OF FISCAL YEARS ENDED MARCH 31, 2008 AND MARCH 31, 2007

Approximately one-half of the total increase in revenues was due to increased volume with existing customers and winning new customers. Our organic growth rate was 4% in 2008 compared to 9% in 2007. The lower organic growth rate in 2008 resulted primarily from inventory adjustments by two major customers during the fourth quarter. In addition, the acquisition of Collotype was completed on February 29, 2008 which contributed $9.3 million in revenues.

                                                                $        %
                                     2008         2007       Change    Change
               Gross Profit        $ 38,926     $ 37,149     $ 1,777        5 %
               % of Net Revenues       18.5 %       19.3 %

Gross profit increased 5% or $1.8 million in 2008 compared to 2007 as a result of higher revenue volumes due to organic sales growth and the acquisition of Collotype. Gross margins decreased to 18.5% of sales in 2008 from 19.3% in 2007 due to costs incurred in connection with our North American manufacturing expansion.

Selling, General & Administrative (SG&A) and Acquisition Expense



                                                                          $           %
                                               2008         2007        Change      Change
 Selling, General & Administrative Expense   $ 21,427     $ 20,255     $  1,172          6 %
 % of Net Revenues                               10.2 %       10.5 %
 Acquisition Expense                         $     -      $  3,048     $ (3,048 )     (100 )%
 % of Net Revenues                                N/A          1.6 %

SG&A expenses increased primarily due to the acquisition of Collotype in February 2008, while decreasing slightly as a percent of sales.

In the third quarter of 2007, negotiations were terminated related to two potential acquisitions. As a result, we recorded pre-tax charges totaling $3,048 related to accounting, legal, and investment bank fees and other transaction costs.

Interest, Net Gain on Foreign Currency Forward Contracts and Other (Income)
Expense



                                                                                   $           %
                                                       2008         2007        Change       Change
Interest Expense                                     $    962      $ 1,036      $   (74 )        (7 )%
Net Gain on Foreign Currency Forward Contracts       $ (7,659 )    $    -       $ 7,659         100 %
Other (Income) Expense, net                          $   (631 )    $  (427 )    $   204          48 %

Interest expense decreased as compared to the prior year as a result of a decrease in the average outstanding debt. All outstanding debt at March 31, 2007 was repaid in the first quarter of fiscal 2008. On February 29, 2008, however, approximately $132 million of new debt was borrowed or assumed to complete the acquisition of Collotype.

During 2008, the Company recorded $7.7 million of net gains on foreign currency forward contracts. The contracts were entered into in connection with the Collotype acquisition in order to purchase Australian dollars and were settled upon the completion of the acquisition in February 2008.

The increase in other income was due to increased investment income resulting from the $19 million of cash proceeds from the sale of Quick Pak in July 2007 (See Note 4 to the Company's Consolidated Financial Statements).

$ % 2008 2007 Change Change Income Tax Expense $ 8,820 $ 4,625 $ 4,195 91 %

The increase in income tax expense is due to increased pre-tax earnings from continuing operations and a slight increase in the effective tax rate to 35.5% in 2008 as compared to 34.9% in 2007. The increase in effective tax rate was due to the expiration of the Research and Experimental Credit (R&D Credit) and the extra-territorial income exclusion benefits and an increase in state tax expense due to statutory changes, somewhat offset by an increase in the Section 199 benefit for domestic manufacturing operations.

$ % 2008 2007 Change Change Income from Discontinued Operations, Net of Tax $ 6,977 $ 2,414 $ 4,563 NM

The sale of Quick Pak was completed on July 2, 2007 and therefore there were three months of operations included in 2008 as compared to a full year of operations in 2007. In addition, the sale of Quick Pak resulted in an after-tax gain of approximately $6.9 million recorded during the second quarter of fiscal 2008.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We continually evaluate our 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. We base our 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.

We believe the following critical accounting policies impact the more significant judgments and estimates used in the preparation of our consolidated financial statements. Additionally, our 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 Consolidated Financial Statements.

Revenue Recognition

The Company 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. Revenues are generally denominated in the currency of the country from which the product is shipped and are net of applicable returns and discounts.

Inventories

Inventories are valued at the lower of cost or market value and are maintained using the FIFO (first-in, first-out) or specific identification method. Excess and obsolete cost reductions are generally established based on inventory age.

Accounts Receivable

Our customers are primarily major consumer product and wine and spirit companies and container manufacturers. Accounts receivable consist of amounts due from customers in connection with our normal business activities and are carried at sales value less allowance for doubtful accounts. The allowance for doubtful accounts is established to reflect the expected losses of accounts receivable based on past collection history, age and specific individual risks identified. Losses may also depend to some degree on current and future economic conditions. Although future conditions are unknown to us and may result in additional credit losses, we do not anticipate significant adverse credit circumstances in fiscal 2010. If we are unable to collect all or part of the outstanding receivable balance, there could be a material impact on the Company's operating results and cash flows.

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 impairment may have occurred. The impairment test is completed based upon our assessment of the estimated fair value of goodwill and other intangible assets. 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 impairment exists 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 major production line could have a material impact on the consolidated statements of income.

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 amounts recorded for income taxes.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which clarified the accounting for tax positions recognized in the financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

In accordance with FIN 48, the benefits of tax positions will not be recorded unless it is more likely than not the tax position would be sustained upon challenge by the appropriate tax authorities. Tax benefits that are more likely than not to be sustained are measured at the largest amount of the benefit that is cumulatively greater than a 50% likelihood of being realized.

The Company adopted FIN 48 as of April 1, 2007 (see Note 13 to the Company's Consolidated Financial Statements).

Liquidity and Capital Resources

Net cash flows from operating activities in 2009 were $27,906, an increase of $16,129 compared to the $11,777 provided by operating activities in 2008. The increase was due to cash generated from earnings, a decrease in accounts receivable and inventories and lower income tax payments. Net cash flows from operating activities in 2008 were $11,777, a decrease of $13,501 compared to the $25,278 provided by operating activities in 2007. The decrease resulted primarily from significant income tax payments related to the gain on the sale of Quick Pak and lower deferred income taxes.

Net cash flows used in investing activities were $2,236 in 2009, $112,410 in 2008 and $1,013 in 2007. The investing activities in 2009 include capital expenditures of $10 million, partially offset by refunds from equipment deposits and proceeds from the sale of property plant and equipment. The investing activities in 2008 included the acquisition of Collotype and capital expenditures and equipment deposits relating to the Batavia, Ohio manufacturing facility expansion partially offset by proceeds from the sale of Quick Pak and proceeds on the settlement of foreign currency forward contracts.

Capital expenditures of $9,968 in 2009 and $19,315 in 2008 were funded primarily through cash received from the sale of Quick Pak in 2008 and cash flow from operations. Capital expenditures in 2009 and 2008 related primarily to the Batavia, Ohio manufacturing facility expansion.

Cash used in financing activities in 2009 was $26,241 compared to cash provided by financing activities of $99,379 in 2008. During 2009, net debt payments were $25,017 compared to net proceeds from the issuance of debt primarily related to the Collotype acquisition of $101,062 in 2008.

On February 29, 2008 and in connection with the Collotype acquisition (see Note 3 to the Company's Consolidated Financial Statements), the Company executed a new five-year $200 million credit agreement with a consortium of bank lenders (Credit Facility) that expires in 2013. The new Credit Facility contains an election to increase the facility by up to an additional $50 million and the Company terminated its previous $50 million credit facility. At March 31, 2009, the aggregate principal amount of $190 million is available under the Credit Facility through: (i) a $110 million five-year revolving credit facility ("U.S. Revolving Credit Facility"); (ii) the Australian dollar equivalent of a $40 million five-year revolving credit facility ("Australian Sub-Facility"); and
(iii) a $40 million term loan facility ("Term Loan Facility") which amortizes $10 million per year.

The Credit Facility may be used for working capital, capital expenditures and other corporate purposes. Loans under the U.S. Revolving Credit Facility and Term Loan Facility will bear interest either at: (i) the greater of (a) Bank of America's prime rate in effect from time to time; and (b) the federal funds rate in effect from time to time plus 0.5%; or (ii) the applicable London interbank offered rate plus the applicable margin for such loans which ranges from 0.75% to 2.00% based on the Company's leverage ratio at the time of the borrowing. Loans under the Australian Sub-Facility bear interest at the Bank Bill Swap Bid Rate (BBSY) plus the applicable margin for such loans which ranges from 0.75% to 2.00% based on Multi-Color's leverage ratio at the time of the borrowing.

The Credit Facility contains customary representations and warranties as well as customary negative and affirmative covenants. The Credit Facility requires Multi-Color to maintain the following financial covenants: (i) a minimum consolidated net worth; (ii) a maximum consolidated leverage ratio of 3.75 to 1.00, stepping down to 3.25 to 1.00 from June 30, 2009 to September 30, 2010 and . . .