Information included in this Quarterly Report on Form 10-Q contains certain forward-looking statements that involve potential risks and uncertainties. Multi-Color Corporation'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, 2012. 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.

Refer to "Forward-Looking Statements" following the index in this Form 10-Q. In the discussion that follows, all amounts are in thousands (both tables and text), except per share data and percentages.

Executive Overview

We are a leader in global label solutions supporting a number of the world's most prominent brands including leading producers of home & personal care, wine & spirit, food & beverage, healthcare and specialty consumer products. MCC serves international brand owners in North, Central and South America, Europe, Australia, New Zealand, South Africa and China with a comprehensive range of the latest label technologies in Pressure Sensitive, Glue-Applied (Cut and Stack), In-Mold, Shrink Sleeve and Heat Transfer.

Results of Operations

Three Months Ended September 30, 2012 compared to the Three Months Ended September 30, 2011:

Net Revenues

Net revenues increased 66% to $169,870 from $102,626 compared to the three months ended September 30, 2011. Net revenues increased 61% or $62,324 due to acquisitions occurring after September 30, 2011. Of this acquisition-related revenue increase, $56,130 is attributable to the acquisition of York Label Group (York). Net revenues increased by 6% due to higher North American sales volumes and 2% due to a favorable impact of pricing and sales mix. Net revenues decreased 3% compared to the prior year quarter due to the unfavorable impact of foreign exchange rates primarily driven by depreciation in the Australian dollar and the Euro.

Cost of Revenues and Gross Profit



                                     % of                         % of            $            %
                      2012         Revenues         2011        Revenues        Change      Change
 Cost of Revenues   $ 139,434             82 %    $ 81,559             79 %    $ 57,875          71 %
 Gross Profit       $  30,436             18 %    $ 21,067             21 %    $  9,369          44 %

Cost of revenues increased 71% or $57,875 compared to the prior year quarter due primarily to acquisitions that occurred after September 30, 2011. The cost of revenues was also impacted by the unfavorable impact of foreign exchange rates and integration inefficiencies in North and Latin America.

Gross profit increased 44% or $9,369 compared to the prior year quarter due primarily to acquisitions that occurred after September 30, 2011 partially offset by a decrease related to the unfavorable impact of foreign exchange rates in the current quarter. Gross margins decreased from 21% to 18% of net revenues in the current quarter due primarily to lower international sales and integration inefficiencies in North and Latin America.

Selling, General and Administrative Expenses



                                                        % of                         % of            $           %
                                           2012       Revenues         2011        Revenues       Change      Change
Selling, General and Administrative
Expenses                                 $ 13,443             8 %    $ 10,573             10 %    $ 2,870          27 %

Selling, general and administrative (SG&A) expenses increased $2,870 compared to the prior year quarter due primarily to the impact of new acquisitions. In addition, SG&A expenses increased due to $460 of costs related to the consolidation of plants and $488 of severance costs related to the integration of York partially offset by the impact of foreign exchange rates in the current quarter. SG&A expenses, as a percent of sales, decreased from 10% to 8% compared to the prior year quarter.

Interest Expense and Other (Income) Expense, Net



                                                                  $            %
                                       2012         2011       Change       Change
        Interest Expense              $ 5,598      $ 2,522     $ 3,076          122 %
        Other (Income) Expense, net   $  (535 )    $   145     $  (680 )       (469 %)

Interest expense increased by $3,076 compared to the prior year quarter due to the increase in debt borrowings to finance acquisitions (primarily York). The Company had $427,092 of debt at September 30, 2012 compared to $150,794 of debt at September 30, 2011.

Income Tax Expense

Our effective tax rate decreased from 39% in the three months ending September 30, 2011 to 38% in the three months ending September 30, 2012 due primarily to a decrease in discrete tax expenses recorded in the second quarter of fiscal 2013 as compared to the second quarter of fiscal 2012 partially offset by an increase due to income mix in domestic and foreign jurisdictions. The Company expects its annual effective tax rate to be approximately 35% in fiscal year 2013.

Six Months Ended September 30, 2012 compared to the Six Months Ended September 30, 2011:

Net Revenues

Net revenues increased 65% to $334,880 from $203,261 compared to the six months ended September 30, 2011. Net revenues increased 63% or $128,512 due to acquisitions occurring after the beginning of the prior year period. Of this acquisition-related revenue increase, $114,673 is attributable to the acquisition of York Label Group (York). Net revenues increased by 3% compared to the prior year due to higher sales volumes and 2% due to a favorable impact of pricing and sales mix. Net revenues decreased 3% compared to the prior year due to the unfavorable impact of foreign exchange rates primarily driven by depreciation in the Australian dollar and the Euro.

Cost of Revenues and Gross Profit



                                    % of                          % of             $            %
                     2012         Revenues         2011         Revenues        Change       Change
Cost of Revenues   $ 273,521             82 %    $ 159,999             79 %    $ 113,522          71 %
Gross Profit       $  61,359             18 %    $  43,262             21 %    $  18,097          42 %

Cost of revenues increased 71% or $113,522 compared to the prior year due primarily to acquisitions that occurred after the beginning of the prior year period. Included in the impact of the acquisition increase is a charge of $458 for an adjustment related to the step-up of finished goods and work-in-process inventory in the purchase price accounting for Labelgraphics. The cost of revenues was also impacted by the unfavorable impact of foreign exchange rates and integration inefficiencies in North and Latin America.

Gross profit increased 42% or $18,097 compared to the prior year due primarily to acquisitions that occurred after the beginning of the prior year period partially offset by a decrease related to the unfavorable impact of foreign exchange rates in the current year. Gross margins decreased from 21% to 18% of net revenues in the current year due primarily to lower international sales and integration inefficiencies in North and Latin America.

Selling, General and Administrative Expenses



                                                        % of                        % of            $           %
                                           2012       Revenues         2011       Revenues       Change      Change
Selling, General and Administrative
Expenses                                 $ 27,095             8 %    $ 18,592             9 %    $ 8,503          46 %

Selling, general and administrative (SG&A) expenses increased $8,503 compared to the prior year due primarily to the impact of new acquisitions. In addition, SG&A expenses increased due to $1,034 of costs related to the consolidation of plants and $760 of severance costs related to the integration of York partially offset by the impact of foreign exchange rates in the current year. SG&A expenses, as a percent of sales, decreased from 9% to 8% compared to the prior year.

Interest Expense and Other (Income) Expense, Net



                                                                   $            %
                                        2012         2011       Change       Change
        Interest Expense              $ 11,163      $ 4,286     $ 6,877          160 %
        Other (Income) Expense, net   $   (636 )    $    95     $  (731 )       (769 %)

Interest expense increased by $6,877 compared to the prior year due to the increase in debt borrowings to finance acquisitions (primarily York). The Company had $427,092 of debt at September 30, 2012 compared to $150,794 of debt at September 30, 2011.

Income Tax Expense

Our effective tax rate increased from 33% in the six months ending September 30, 2011 to 36% in the six months ending September 30, 2012 due primarily to a shift in the geographical mix of worldwide earnings between domestic and foreign jurisdictions. The Company expects its annual effective tax rate to be approximately 35% in fiscal year 2013.

Liquidity and Capital Resources

Comparative Cash Flow Analysis

Through the six months ended September 30, 2012, net cash provided by operating activities was $27,025 compared to $16,972 in the same period of the prior year. The increase in operating cash flow is primarily due to the impact of acquisitions since September 30, 2011. The consolidated days sales outstanding (DSO) at September 30, 2012 was approximately 53 days.

Through the six months ended September 30, 2012, net cash used in investing activities was $25,347 compared to net cash used of $21,576 in the same period of the prior year. Investing activities include cash used for the acquisition of Labelgraphics in the first quarter of fiscal 2013 and the acquisition of La Cromografica, two label operations in Latin America and WDH in fiscal 2012. Capital expenditures in the six months ended September 30, 2012 were $11,046 and were partially offset by proceeds from the sale of the Kansas City facility of $625 and proceeds from the sale of other property, plant and equipment of $1,053. The majority of these capital expenditures were made to purchase new presses. Cash used in investing activities in the prior year included capital expenditures of $8,960 partially offset by proceeds from the sale of plant and equipment of $2,688. The projected amount of capital expenditures for fiscal year 2013 is $28,000.

Through the six months ended September 30, 2012, net cash provided by financing activities was $3,567 compared to $2,847 of net cash used in financing activities in the same period of the prior year. During the six months ended September 30, 2012, we had net debt additions of $24,371 compared to net debt additions of $15,773 in the prior year. The increase in net debt compared to the same period of the prior year was primarily due to an increase in borrowings to finance the Labelgraphics acquisition and deferred payments related to the Labelgraphics and York acquisitions. Net cash provided by financing activities for the six months ended September 30, 2012 was reduced by the deferred payments related to the Labelgraphics acquisition of $5,049 and the York acquisition of $14,380, which the Company paid on July 2, 2012 and April 1, 2012, respectively.

Capital Resources

On February 29, 2008, the Company executed a five year $200,000 credit agreement with a consortium of bank lenders (Credit Facility) with an original expiration date in 2013. The Company completed the first amendment to the Credit Facility in June 2010 and the second amendment in March 2011. In August 2011, the Company executed the third amendment to the Credit Facility. The third amendment increased the aggregate principal amount to $500,000 with an additional $315,000 term loan to be made available to the Company in a single drawing. The third amendment extended the expiration date of the Credit Facility from April 2014 to August 2016, updated the financial covenants and increased the interest rate margins over the applicable Eurocurrency or Australian Bank Bill Swap Rate (BBSY) and increased the commitment fee. In October 2011, the Company drew down on the additional term loan in conjunction with the York acquisition. Upon drawing down on the additional term loan, the maximum leverage ratio permitted increased to 4.25 to 1.00 with scheduled step downs and the consolidated interest coverage ratio is not to be less than 4.00 to 1.00. The interest rate margins for loans based on LIBOR and BBSY range from 2.00% to 3.50%. The Credit Facility contains an election to increase the facility by up to an additional $100,000 subject to agreement by one or more lenders to increase its commitment. At September 30, 2012, the aggregate principal amount of $487,625 under the Credit Facility is comprised of the following: (i) a $130,000 revolving Credit Facility that allows the Company to borrow in alternative currencies up to the equivalent of $50,000 (U.S. Revolving Credit Facility); (ii) the Australian dollar equivalent of a $40,000 revolving Credit Facility (Australian Sub-Facility); and (iii) a $317,625 term loan facility (Term Loan Facility) which amortizes quarterly based on an escalating percentage of the initial

aggregate value of the Term Loan Facility. The Term Loan Facility amortizes quarterly based on the following schedule: (i) September 30, 2012 through December 31, 2013 - amortization of $4,125, (ii) March 31, 2014 through December 31, 2015 - amortization of $8,250 and (iii) March 31, 2016 through June 30, 2016 - amortization of $12,375, with the balance due at maturity. In September 2011, the Company entered into the fourth amendment to the Credit Facility. The fourth amendment excludes certain subsidiaries of York from the requirements to become guarantors under the Credit Facility.

The Company incurred $8,562 of debt issuance costs related to the debt modification which are being deferred and amortized over the life of the amended Credit Facility. In conjunction with the modification to our debt in the third amendment to the Credit Facility, we analyzed the new loan costs related to the amended Credit Facility and the existing unamortized loan costs related to the prior agreement allocated to the revolving line of credit, prior term loan and amended term loan separately to determine the amount of costs to be capitalized and the amount to be expensed. As a result of the analysis, the Company recorded a charge to interest expense of $490 to write-off certain deferred financing fees, which were paid to originate the prior agreement, including the unamortized portion of the loan costs allocated to creditors no longer participating in the amended Credit Facility. The unamortized portion of loan costs allocated to creditors participating in both the original and amended Credit facility are being amortized over the term of the modified agreement.

The Company recorded $494 and $306 in interest expense for the three months ending September 30, 2012 and 2011, respectively, in the condensed consolidated statements of income to amortize deferred financing costs. The Company recorded $989 and $486 in interest expense for the six months ending September 30, 2012 and 2011, respectively, in the condensed consolidated statements of income to amortize deferred financing costs.

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 bear interest either at: (i) base rate (as defined in the credit agreement) plus the applicable margin for such loans which range from 1.00% to 2.50%; or (ii) the applicable London interbank offered rate, plus the applicable margin for such loans which ranges from 2.00% to 3.50% based on the Company's leverage ratio at the time of the borrowing. Loans under the Australian Sub-Facility bear interest at the BBSY Rate plus the applicable margin for such loans, which ranges from 2.00% to 3.50% based on the Company's leverage ratio at the time of the borrowing.

Available borrowings under the Credit Facility at September 30, 2012 consisted of $30,900 under the U.S. Revolving Credit Facility and $40,000 under the Australian Sub-Facility. The Company also has various uncommitted lines of credit available at September 30, 2012 in the amount of $9,910.

The Credit Facility contains customary representations and warranties as well as customary negative and affirmative covenants which require the Company to maintain the following financial covenants at September 30, 2012: (i) a minimum consolidated net worth; (ii) a maximum consolidated leverage ratio of 4.00 to 1.00 and (iii) a minimum consolidated interest charge coverage ratio of 4.00 to
1.00. The Credit Facility contains customary mandatory and optional prepayment provisions, customary events of default, and is secured by the capital stock of subsidiaries, intercompany debt and all of the Company's property and assets, but excluding real property. The Company is in compliance with all covenants under the Credit Facility as of September 30, 2012.

We believe that we have both sufficient short and long-term liquidity and financing. We had a working capital position of $67,379 and $34,869 at September 30, 2012 and March 31, 2012, respectively, and were in compliance with our loan covenants and current in our principal and interest payments on all debt.

Contractual Obligations

The following table summarizes the Company's contractual obligations as of
September 30, 2012:



                                                                                                                 More than
(in thousands)                     Total        Year 1       Year 2       Year 3       Year 4       Year 5        5 years
Long-term debt                   $ 421,510     $ 19,434     $ 30,329     $ 33,397     $ 338,350     $    -      $        -
Capital leases                       5,582        3,293        1,704          527            58          -               -
Interest on long-term debt (1)      66,754       18,535       17,338       16,406        14,475          -               -
Rent due under operating
leases                              61,892       10,188        9,524        8,868         7,420       5,469          20,423
Unconditional purchase
obligations                          3,068        2,929           46           46            47          -               -
Pension and post retirement
obligations                            901           23           13           45            69          82             669
Unrecognized tax benefits (2)           -            -            -            -             -           -               -
Deferred purchase price             11,933        6,929        3,955           -          1,049          -               -

Total contractual obligations    $ 571,640     $ 61,331     $ 62,909     $ 59,289     $ 361,468     $ 5,551     $    21,092

(1) Interest on floating rate debt was estimated using projected forward LIBOR and BBSY rates as of September 30, 2012.

(2) The table excludes $3,561 of liabilities related to unrecognized tax benefits as the timing and extent of such payments are not determinable.

Recent Acquisitions

On April 2, 2012, the Company acquired Labelgraphics (Holdings) Ltd., a wine & spirit label specialist located in Glasgow, Scotland, for $24,634 plus net debt assumed of $712. The purchase price includes a future performance based earn out of approximately 15% of the above total. The acquisition expanded MCC's global presence in the wine & spirit label market, particularly in the United Kingdom.

On October 3, 2011, the Company acquired York, including its joint venture in Santiago, Chile, for $329,204 plus net debt assumed of $9,870. York, which was headquartered in Omaha, Nebraska, is a leader in the home & personal care, food & beverage and wine & spirit label markets with manufacturing facilities in the U.S., Canada and Chile. The acquisition is expected to strengthen Multi-Color's presence in its core markets through the combination of the Company's existing customer relationships with York's customer base.

The Company plans to leverage York's strength in pressure sensitive label technologies to expand into new market segments. In addition, Multi-Color can offer all label technologies including IML, heat transfer and shrink sleeve to York's customers. The combined entities of Multi-Color and York anticipate opportunities to leverage raw material purchases and streamline suppliers.

On July 1, 2011, the Company acquired WDH, a consumer products and spirit label company located in Warsaw, Poland, for $7,760 plus net debt assumed of $4,019. The purchase price includes a contingent payment to be made to the selling shareholders if certain financial targets are reached. The financial targets were reached in calendar year 2011 and the contingent payment was made in the fourth quarter of fiscal 2012. WDH supplies a number of large consumer products international brand owners in home & personal care markets, consistent with MCC's largest customers in the U.S.

On May 2, 2011, the Company entered into agreements to buy 70% ownership in two label operations in Latin America; one in Santiago, Chile and the other in Mendoza, Argentina with a regional partner owning the remaining 30%. MCC's investment including debt assumed was approximately $3,900. The label operations focus on providing premium labels to the expanding Latin American wine and spirit markets. In September 2011, the Company bought the regional partner's 30% ownership interest in the two label operations in Latin America for 40 shares of Multi-Color stock. As a result, MCC now owns 100% of the acquired label operations in Chile and Argentina.

On April 1, 2011, the Company acquired La Cromografica, an Italian wine label specialist, for a purchase price of approximately $9,880 payable in cash plus net debt assumed. La Cromografica is located in Florence, Italy and specializes in high quality wine labels for premium Italian wines.

On October 1, 2010, MCC acquired Monroe Etiquette for $9,896, plus net debt assumed. The selling shareholder received approximately 89% of the proceeds in the form of cash on October 1, 2010. The remaining 11% of the purchase price will be paid in cash, but is deferred for five years after the closing date. Monroe Etiquette provides labels to the premium French wine market.

On July 1, 2010, the Company acquired CentroStampa for $58,199 less net debt assumed but including a contingent payment. The selling shareholders received approximately 80% of the proceeds in the form of cash and 20% in the form of 935 shares of MCC common stock. This stock represented approximately 8% of MCC's shares outstanding immediately prior to consummation of the acquisition. At the date of acquisition 5% of the purchase price was subject to achieving certain financial targets. On December 31, 2010, these financial targets subject to certain quantitative measures required to realize the contingent payment were satisfied in full and the entire liability was paid in July 2011.

Critical Accounting Policies and Estimates

The preparation of condensed 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 condensed 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 Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended March 31, 2012.

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.

Accounts Receivable

Our customers are primarily major consumer product, food, and wine & 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, account payment status compared to invoice payment terms and specific individual risks identified. The delinquency of an account receivable is determined based on these factors. The Company does not accrue interest on aged accounts receivable. Allowances are recorded and charged to expense when an account is determined to be uncollectible.

Losses may also depend to some degree on current and 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 2013. 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.

. . .