10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2015.
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________.

Commission File No. 0-13375

LSI Industries Inc.

State of Incorporation - Ohio        IRS Employer I.D. No. 31-0888951

10000 Alliance Road

Cincinnati, Ohio  45242

(513) 793-3200

Indicate by checkmark 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 checkmark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES    X      NO ____

Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [    ]	Accelerated filer [ X ]
Non-accelerated filer [    ]	Smaller reporting company [    ]

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ____  NO    X

As of February 2, 2016 there were 24,689,131 shares of the Registrant's common stock, no par value per share, outstanding.

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2015

INDEX

			Begins on Page
PART I.  Financial Information
	ITEM 1.	Financial Statements
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	ITEM 4.	Controls and Procedures	36
PART II.  Other Information
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds of Proceeds	37
	ITEM 6.	Exhibits	37
Signatures			38

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This Form 10-Q contains certain forward-looking statements that are subject to numerous assumptions, risks or uncertainties.  The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements.  Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “intends,” “believes,” “seeks,” “may,” “will,” “should” or the negative versions of those words and similar expressions, and by the context in which they are used.  Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made.  Actual results could differ materially from those contained in or implied by such forward-looking statements as a result of a variety of risks and uncertainties over which the Company may have no control.  These risks and uncertainties include, but are not limited to, the impact of competitive products and services, product demand and market acceptance risks, potential costs associated with litigation and regulatory compliance, reliance on key customers, financial difficulties experienced by customers, the cyclical and seasonal nature of our business, the adequacy of reserves and allowances for doubtful accounts, fluctuations in operating results or costs whether as a result of uncertainties inherent in tax and accounting matters or otherwise, unexpected difficulties in integrating acquired businesses, the ability to retain key employees of acquired businesses, unfavorable economic and market conditions, the results of asset impairment assessments and the other risk factors that are identified herein.  You are cautioned to not place undue reliance on these forward-looking statements.  In addition to the factors described in this paragraph, the risk factors identified in our Form 10-K and other filings the Company may make with the SEC constitute risks and uncertainties that may affect the financial performance of the Company and are incorporated herein by reference.  The Company does not undertake and hereby disclaims any duty to update any forward-looking statements to reflect subsequent events or circumstances.

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PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended December 31						Six Months Ended December 31
(In thousands, except per share data)	2015			2014			2015			2014
Net sales	$	84,687		$	84,715		$	170,612		$	163,181
Cost of products and services sold		60,761			64,160			123,337			124,018
Gross profit		23,926			20,555			47,275			39,163
Loss on sale of subsidiary (see Note 13)		--			--			--			565
(Gain) on sale of building		--			--			--			(343	)
Selling and administrative expenses		18,546			18,331			36,132			34,183
Operating income		5,380			2,224			11,143			4,758
Interest (income)		(17	)		(6	)		(25	)		(9	)
Interest expense		9			12			17			23
Income before income taxes		5,388			2,218			11,151			4,744
Income tax expense		1,606			630			3,619			1,629
Net income	$	3,782		$	1,588		$	7,532		$	3,115
Earnings per common share (see Note 4)
Basic	$	0.15		$	0.06		$	0.30		$	0.13
Diluted	$	0.15		$	0.06		$	0.30		$	0.13
Weighted average common shares outstanding
Basic		24,911			24,449			24,838			24,442
Diluted		25,624			24,507			25,405			24,506

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except shares)	December 31, 2015			June 30, 2015
ASSETS
Current Assets
Cash and cash equivalents	$	28,763		$	26,409
Accounts receivable, less allowance for doubtful accounts of $372 and $317, respectively		43,122			43,661
Inventories		45,885			43,083
Refundable income taxes		574			99
Other current assets		7,448			7,562
Total current assets		125,792			120,814
Property, Plant and Equipment, at cost
Land		6,980			6,952
Buildings		38,162			37,706
Machinery and equipment		77,570			76,383
Construction in progress		1,514			588
		124,226			121,629
Less accumulated depreciation		(80,510	)		(78,441	)
Net property, plant and equipment		43,716			43,188
Goodwill		10,508			10,508
Other Intangible Assets, net		5,839			6,092
Other Long-Term Assets, net		1,679			1,777
Total assets	$	187,534		$	182,379

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 4

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except shares)	December 31, 2015		June 30, 2015
LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	8,829	$	14,721
Accrued expenses		23,307		22,126
Total current liabilities		32,136		36,847
Other Long-Term Liabilities		2,099		2,580
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 24,685,777 and 24,392,938 shares, respectively		110,891		106,353
Retained earnings		42,408		36,599
Total shareholders’ equity		153,299		142,952
Total liabilities & shareholders’ equity	$	187,534	$	182,379

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)	Six Months Ended December 31
	2015			2014
Cash Flows from Operating Activities
Net income	$	7,532		$	3,115
Non-cash items included in net income
Depreciation and amortization		3,174			3,138
Deferred income taxes		(448	)		(101	)
Deferred compensation plan		310			94
Stock option expense		2,150			882
Issuance of common shares as compensation		113			96
(Gain) on disposition of building		--			(343	)
(Gain) Loss on disposition of fixed assets		1			(1	)
Loss on sale of subsidiary		--			565
Allowance for doubtful accounts		131			176
Inventory obsolescence reserve		699			753
Changes in certain assets and liabilities:
Accounts receivable		387			(2,021	)
Inventories		(3,480	)		1,757
Refundable income taxes		(475	)		1,801
Accounts payable		(5,962	)		(784	)
Accrued expenses and other		920			1,792
Customer prepayments		438			(201	)
Net cash flows provided by operating activities		5,490			10,718
Cash Flows from Investing Activities
Purchases of property, plant and equipment		(3,384	)		(2,404	)
Proceeds from sale of subsidiary, net of cash sold		--			1,494
Proceeds from sale of fixed assets		4			952
Net cash flows provided by (used in) investing activities		(3,380	)		42
Cash Flows from Financing Activities
Cash dividends paid		(1,721	)		(1,688	)
Exercise of stock options		2,195			108
Purchase of treasury shares		(277	)		(139	)
Issuance of treasury shares		47			--
Net cash flows provided by (used in) financing activities		244			(1,719	)
Increase in cash and cash equivalents		2,354			9,041
Cash and cash equivalents at beginning of period		26,409			9,013
Cash and cash equivalents at end of period	$	28,763		$	18,054

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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 LSI INDUSTRIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of December 31, 2015, the results of its operations for the three and six month periods ended December 31, 2015 and 2014, and its cash flows for the six month periods ended December 31, 2015 and 2014. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2015 Annual Report on Form 10-K.  Financial information as of June 30, 2015 has been derived from the Company’s audited consolidated financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

The condensed consolidated financial statements include the accounts of LSI Industries Inc. (an Ohio corporation) and its subsidiaries (collectively, the “Company”), all of which are wholly owned.  All intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition:

Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectability is reasonably assured.  Revenue is typically recognized at time of shipment.  In certain arrangements with customers, as is the case with the sale of some of our solid-state LED video screens, revenue is recognized upon customer acceptance of the video screen at the job site.  Sales are recorded net of estimated returns, rebates and discounts.  Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has five sources of revenue:  revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting; revenue from the management of media content and digital hardware related to active digital signage; and revenue from shipping and handling.

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment.  However, product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed.  The company provides product warranties and certain post-shipment service, support and maintenance of certain solid state LED video screens and billboards.

Installation revenue is recognized when the products have been fully installed.  The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products at each customer site have been installed.

Revenue from the management of media content and digital hardware related to active digital signage is recognized evenly over the service period with the customer. Media content service periods with most customers range from 1 month to 1 year.

Shipping and handling revenue coincides with the recognition of revenue from the sale of the product.

In situations where the Company is responsible for re-imaging programs with multiple sites, each site is viewed as a separate unit of accounting and has stand-alone value to the customer. Revenue is recognized upon the Company’s complete performance at the location, which may include a site survey, graphics products, lighting products, and installation of products. The selling price assigned to each site is based upon an agreed upon price between the Company and its customer and reflects the estimated selling price for that site relative to the selling price for sites with similar image requirements.

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The Company also evaluates the appropriateness of revenue recognition in accordance with the accounting standard on software revenue recognition. Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental.

Credit and Collections:

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments.  If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income.  The Company determines its allowance for doubtful accounts by first considering all known collectability problems of customers’ accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables.  The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, and historical trends.  The Company also establishes allowances, at the time revenue is recognized, for returns, discounts, pricing and other possible customer deductions.  These allowances are based upon historical trends.

The following table presents the Company’s net accounts receivable at the dates indicated.

(In thousands)	December 31, 2015			June 30, 2015
Accounts receivable	$	43,494		$	43,978
Less: Allowance for doubtful accounts		(372	)		(317	)
Accounts receivable, net	$	43,122		$	43,661

Cash and Cash Equivalents:

The cash balance includes cash and cash equivalents which have original maturities of less than three months.  The Company maintains balances at financial institutions in the United States. The FDIC limit for insurance coverage on non-interest bearing accounts is $250,000. As of December 31, 2015 and June 30, 2015, the Company had bank balances of $31,602,000 and $28,494,000, respectively, without insurance coverage.

Inventories:

Inventories are stated at the lower of cost or market.  Cost of inventories includes the cost of purchased raw materials and components, direct labor, as well as manufacturing overhead which is generally applied to inventory based on direct labor and material content. Cost is determined on the first-in, first-out basis.

Property, Plant and Equipment and Related Depreciation:

Property, plant and equipment are stated at cost.  Major additions and betterments are capitalized while maintenance and repairs are expensed.  For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful lives of the assets as follows:

Buildings (in years)	28	-	40
Machinery and equipment (in years)	3	-	10
Computer software (in years)	3	-	8

Costs related to the purchase, internal development, and implementation of the Company’s fully integrated enterprise resource planning/business operating software system are either capitalized or expensed in accordance with accounting guidance on internal use software.  Leasehold improvements are amortized over the shorter of fifteen years or the remaining term of the lease.

The Company recorded $1,471,000 and $1,425,000 of depreciation expense in the second quarter of fiscal 2016 and 2015, respectively, and $2,921,000 and $2,863,000 of depreciation expense in the first half of fiscal 2016 and 2015, respectively.

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Intangible Assets:

Intangible assets consisting of customer relationships, trade names and trademarks, patents, technology and software, and non-compete agreements are recorded on the Company's balance sheet.  The definite-lived intangible assets are being amortized to expense over periods ranging between five and twenty years.  The Company evaluates definite-lived intangible assets for permanent impairment when triggering events are identified. Neither indefinite-lived intangible assets nor the excess of cost over fair value of assets acquired ("goodwill") are amortized, however they are subject to review for impairment.  See additional information about goodwill and intangibles in Note 7.

Fair Value:

The Company has financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and on occasion, long-term debt.  The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.  The Company has no financial instruments with off-balance sheet risk.

Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in goodwill and other intangible asset impairment analyses, in the purchase price of acquired companies (if any), and in the valuation of the contingent earn-out. The accounting guidance was used to measure the fair value of these nonfinancial assets and nonfinancial liabilities.

Product Warranties:

The Company offers a limited warranty that its products are free from defects in workmanship and materials.  The specific terms and conditions vary somewhat by product line, but generally cover defective products returned within one to five years, with some exceptions where the terms extend to 10 years, from the date of shipment.  The Company records warranty liabilities to cover the estimated future costs for repair or replacement of defective returned products as well as products that need to be repaired or replaced in the field after installation.  The Company calculates its liability for warranty claims by applying estimates to cover unknown claims, as well as estimating the total amount to be incurred for known warranty issues.  The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, during the periods indicated below were as follows:

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	3,408		$	2,662		$	2,662
Additions charged to expense		2,259			1,557			3,185
Deductions for repairs and replacements		(1,357	)		(971	)		(2,439	)
Balance at end of the period	$	4,310		$	3,248		$	3,408

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Research and Development Costs:

Research and development expenses are costs directly attributable to new product development, including the development of new technology for both existing and new products, and consist of salaries, payroll taxes, employee benefits, materials, outside legal costs and filing fees related to obtaining patents, supplies, depreciation and other administrative costs. The Company expenses as research and development all costs associated with development of software used in solid-state LED products.  All costs are expensed as incurred and are included in selling and administrative expenses.  Research and development costs related to both product and software development totaled $1,320,000 and $1,450,000 for the three months ended December 31, 2015 and 2014, respectively, and $2,631,000 and $3,301,000 for the six months ended December 31, 2015 and 2014, respectively.

Cost of Products and Services Sold:

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacture of products, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity. Cost of services sold is primarily comprised of the internal and external labor costs required to support the Company’s service revenue along with the management of media content.

Earnings Per Common Share:

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period net of treasury shares held in the Company’s non-qualified deferred compensation plan.  The computation of diluted earnings per share is based on the weighted average of common shares outstanding for the period and includes common share equivalents.  Common share equivalents include the dilutive effect of stock options, restricted stock units, contingently issuable shares and common shares to be issued under a deferred compensation plan, all of which totaled 987,000 shares and 383,000 shares for the three months ended December 31, 2015 and 2014, respectively, and 836,000 shares and 383,000 shares for the six months ended December 31, 2015 and 2014, respectively See further discussion of earnings per common share in Note 4.

New Accounting Pronouncements:

In June 2014, the Financial Accounting Standards Board issued ASU 2014-09, “Revenue from Contracts with Customers.” This amended guidance supersedes and replaces all existing U.S. GAAP revenue recognition guidance. The guidance established a new revenue recognition model, changes the basis for deciding when revenue is recognized over a point in time, provides new and more detailed guidance on specific revenue topics, and expands and improves disclosures about revenue. The amended guidance is effective for fiscal years and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal year 2019. The Company has not yet determined the impact the amended guidance will have on its financial statements.

In July 2015, the Financial Accounting Standards Board issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amended guidance requires an entity to measure in scope inventory at lower of cost and net realizable value. The amended guidance is effective for fiscal years beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

In December 2015, the Financial Accounting Standards Board issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes.” The amended guidance eliminates the requirements for organizations to present deferred tax liabilities and assets as current and noncurrent. Instead, all deferred tax assets and liabilities will be classified as noncurrent. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

Comprehensive Income:

The Company does not have any comprehensive income items other than net income. The functional currency of the Company’s former Canadian operation was the U.S. dollar.

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Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the condensed consolidated financial statements were filed.  No items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements.

Use of Estimates:

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

NOTE 3 - SEGMENT REPORTING INFORMATION

The accounting guidance on segment reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. In the third quarter of fiscal 2015, the Company realigned its operating segments to be in alignment with the financial information received by the then new Chief Executive Officer. The Company’s three operating segments are Lighting, Graphics, and Technology, each of which has a president who is responsible for that business and reports to the CODM. An All Other Category as well as Corporate and Eliminations will also be reported in the segment information. As a result of the realignment of the Company’s operating segments in the third quarter of fiscal 2015, all prior period segment information has been revised so as to be comparable with the new segment reporting structure.

The changes made and realignment of the Company’s operating segments involved the following:

1) The segment formerly known as the Electronic Components Segment was renamed as the Technology Segment.

2) The LED Video Screen product line was moved out of the Lighting Segment and into the Technology Segment.

3) The Company’s installation management business (LSI Adapt) and the menu board business (LSI Images) were moved out of the All Other Category and into the Graphics Segment.

The Lighting Segment includes outdoor, indoor, and landscape lighting utilizing both traditional and LED light sources, that have been fabricated and assembled for the commercial, industrial and multi-site retail lighting markets, the Company’s primary niche markets (petroleum / convenience store market, automotive dealership market, and quick service restaurant market).

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements related to traditional graphics, active digital signage along with the management of media content related to digital signage, and menu board systems that are either digital or traditional by design. These products are used in visual image programs in several markets, including the petroleum / convenience store market, multi-site retail operations, banking, and restaurants. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.

The Technology Segment designs and manufactures electronic circuit boards, assemblies and sub-assemblies, various control system products used in other applications (including the control of solid-state LED lighting and metal halide lighting), and solid state LED video screens, scoreboards and advertising ribbon boards. This operating segment sells its products directly to customers (primarily in the transportation, original equipment manufacturers and medical markets) and also has significant inter-segment sales to the Lighting Segment.

The All Other Category includes only the Company’s former subsidiary that designed and produced high-performance light engines, large format video screens using solid-state LED technology, and certain specialty LED lighting. This subsidiary was sold on September 30, 2014 (See Note 13).

The Company’s corporate administration activities are reported in a line item titled Corporate and Eliminations.  This primarily includes intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes, and deferred income tax assets.

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The Company’s Lighting Segment and Graphics Segment net sales to a petroleum / convenience store customer represented approximately $17,045,000 or 10% of consolidated net sales in the six months ended December 31, 2015. There was no concentration of consolidated net sales in the three months ended December 31, 2015 or in the three and six months ended December 31, 2014.  The Company’s Graphics Segment accounts receivable balance related to this customer at December 31, 2015 was $4,690,000 or 11% of consolidated net accounts receivable. There was no concentration of accounts receivable at June 30, 2015.

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of December 31, 2015 and December 31, 2014:

(In thousands)	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Net Sales:
Lighting Segment	$	59,601		$	59,796		$	118,676		$	115,517
Graphics Segment		21,034			20,269			42,787			36,293
Technology Segment		4,052			4,650			9,149			11,330
All Other Category		--			--			--			41
	$	84,687		$	84,715		$	170,612		$	163,181
Operating Income (Loss):
Lighting Segment	$	5,182		$	4,090		$	10,864		$	8,317
Graphics Segment		2,035			1,065			4,196			1,118
Technology Segment		993			499			2,333			1,131
All Other Category		--			--			--			(183	)
Corporate and Eliminations		(2,830	)		(3,430	)		(6,250	)		(5,625	)
	$	5,380		$	2,224		$	11,143		$	4,758
Capital Expenditures:
Lighting Segment	$	1,160		$	599		$	1,849		$	1,181
Graphics Segment		604			533			1,109			867
Technology Segment		108			241			224			285
All Other Category		--			--			--			4
Corporate and Eliminations		150			61			202			67
	$	2,022		$	1,434		$	3,384		$	2,404
Depreciation and Amortization:
Lighting Segment	$	717		$	729		$	1,422		$	1,451
Graphics Segment		213			256			428			506
Technology Segment		364			325			719			663
All Other Category		--			--			--			31
Corporate and Eliminations		304			242			605			487
	$	1,598		$	1,552		$	3,174		$	3,138

	December 31, 2015		June 30, 2015
Identifiable Assets:
Lighting Segment	$	87,209	$	90,713
Graphics Segment		36,306		29,477
Technology Segment		29,956		28,423
All Other Category		--		--
Corporate and Eliminations		34,063		33,766
	$	187,534	$	182,379

Page 12

The segment net sales reported above represent sales to external customers.  Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses including impairment of goodwill, but excluding interest expense and interest income. Identifiable assets are those assets used by each segment in its operations. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes, and deferred income tax assets.

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In thousands)	2015		2014		2015		2014
Lighting Segment inter-segment net sales	$	814	$	445	$	1,428	$	1,497
Graphics Segment inter-segment net sales	$	562	$	125	$	1,006	$	256
Technology inter-segment net sales	$	8,932	$	7,675	$	18,316	$	14,947
All Other Category inter-segment net sales	$	--	$	--	$	--	$	308

The Company considers its geographic areas to be:  1) the United States, and 2) Canada.  The Company’s operations are in the United States, with one operation previously in Canada.  As a result of the sale of a subsidiary on September 30, 2014, the Company no longer has a presence in Canada (See Note 13). The geographic distribution of the Company’s net sales and long-lived assets are as follows:

(In thousands)	Three Months Ended December 31				Six Months Ended December 31
	2015		2014		2015		2014
Net Sales (a):
United States	$	84,687	$	84,715	$	170,612	$	163,140
Canada		--		--		--		41
	$	84,687	$	84,715	$	170,612	$	163,181

	December 31, 2015		June 30, 2015
Long-lived Assets (b):
United States	$	45,395	$	44,965
Canada		--		--
	$	45,395	$	44,965

a. Net sales are attributed to geographic areas based upon the location of the operation making the sale.

b. Long-lived assets include property, plant and equipment, and other long-term assets.  Goodwill and intangible assets are not included in long-lived assets.

Page 13

NOTE 4 - EARNINGS PER COMMON SHARE

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data) :

	Three Months Ended December 31				Six Months Ended December 31
	2015		2014		2015		2014
BASIC EARNINGS PER SHARE
Net income	$	3,782	$	1,588	$	7,532	$	3,115
Weighted average shares outstanding during the period, net of treasury shares (a)		24,637		24,124		24,569		24,123
Weighted average vested restricted stock units outstanding		25		--		26		--
Weighted average shares outstanding in the Deferred Compensation Plan during the period		249		325		243		319
Weighted average shares outstanding		24,911		24,449		24,838		24,442
Basic earnings per share	$	0.15	$	0.06	$	0.30	$	0.13
DILUTED EARNINGS PER SHARE
Net income	$	3,782	$	1,588	$	7,532	$	3,115
Weighted average shares outstanding
Basic		24,911		24,449		24,838		24,442
Effect of dilutive securities (b): Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		713		58		567		64
Weighted average shares outstanding (c)		25,624		24,507		25,405		24,506
Diluted earnings per share	$	0.15	$	0.06	$	0.30	$	0.13

(a) Includes shares accounted for as treasury stock according to accounting standards.

(b) Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

(c) Options to purchase 1,115,250 common shares and 2,377,900 common shares at December 31, 2015 and 2014, respectively, and options to purchase 1,506,800 common shares and 2,371,900 common shares at December 31, 2015 and 2014, respectively, were not included in the computation of the three month and six month periods for diluted earnings per share, respectively, because the exercise price was greater than the average fair market value of the common shares.

Page 14

NOTE 5 – INVENTORIES

The following information is provided as of the dates indicated:

(In thousands)	December 31, 2015		June 30, 2015
Inventories:
Raw materials	$	27,414	$	27,920
Work-in-process		4,498		4,658
Finished goods		13,973		10,505
Total Inventories	$	45,885	$	43,083

NOTE 6 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

(In thousands)	December 31, 2015		June 30, 2015
Accrued Expenses:
Compensation and benefits	$	11,097	$	11,614
Customer prepayments		1,762		1,324
Accrued sales commissions		2,021		1,982
Accrued warranty		4,310		3,408
Other accrued expenses		4,117		3,798
Total Accrued Expenses	$	23,307	$	22,126

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with the accounting standard on goodwill and intangible assets. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level, that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.  Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing.  The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing.  These include operating results, forecasts, anticipated future cash flows and marketplace data, to name a few.  There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

Page 15

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

Goodwill
(In thousands)	Lighting Segment			Graphics Segment			Technology Segment			All Other Category			Total
Balance as of June 30, 2015
Goodwill	$	34,913		$	28,690		$	11,621		$	--	$	75,224
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		--		(64,716	)
Goodwill, net as of June 30, 2015	$	135		$	1,165		$	9,208		$	--	$	10,508
Balance as of December 31, 2015
Goodwill	$	34,913			28,690			11,621			--		75,224
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		--		(64,716	)
Goodwill, net as of December 31, 2015	$	135			1,165			9,208		$	--	$	10,508

In the first quarter of fiscal 2015, the Company sold LSI Saco Technologies Inc. A customer relationship intangible asset with a gross carrying amount of $1,036,000 and accumulated amortization of $428,000 was sold as a result of the sale of LSI Saco Technologies (See Note 13).

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

	December 31, 2015
	Gross
Other Intangible Assets	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	9,316		7,436		1,880
Patents		338		136		202
LED technology firmware, software		11,228		10,950		278
Trade name		460		460		--
Non-compete agreements		710		653		57
Total Amortized Intangible Assets		22,052		19,635		2,417
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	25,474		19,635		5,839

Page 16

	June 30, 2015
Other Intangible Assets (In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	9,316	$	7,290	$	2,026
Patents		338		120		218
LED technology firmware, software		11,228		10,910		318
Trade name		460		460		--
Non-compete agreements		710		602		108
Total Amortized Intangible Assets		22,052		19,382		2,670
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	25,474	$	19,382	$	6,092

(In thousands)	Amortization Expense of Other Intangible Assets
	December 31, 2015		December 31, 2014
Three Months Ended	$	127	$	127
Six Months Ended	$	253	$	275

The Company expects to record annual amortization expense as follows:

(In thousands)
2016	$	505
2017	$	409
2018	$	400
2019	$	400
2020	$	327
After 2020	$	629

NOTE 8 - REVOLVING LINE OF CREDIT

In March 2015, the Company renewed its $30 million unsecured revolving credit line. The line of credit expires in the third quarter of fiscal 2018. Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, or at the bank’s base lending rate, at the Company’s option.  The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between 150 and 190 basis points depending upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the credit facility.  The fee on the unused balance of the $30 million committed line of credit is 12.5 basis points.  Under the terms of this credit facility, the Company has agreed to a negative pledge of assets and is required to comply with financial covenants that limit the amount of debt obligations, require a minimum amount of tangible net worth, and limit the ratio of indebtedness to EBITDA. There are no borrowings against the line of credit as of December 31, 2015.

The Company is in compliance with all of its loan covenants as of December 31, 2015.

Page 17

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of $1,721,000 and $1,688,000 in the six months ended December 31, 2015 and 2014, respectively. Dividends on restricted stock units in the amount of $4,690 were accrued in the six months ended December 31, 2015. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In January 2016, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 16, 2016 to shareholders of record as of February 8, 2016. The new indicated annual cash dividend rate is $0.20 per share.

NOTE 10 - EQUITY COMPENSATION

Stock Based Compensation 

The Company has an equity compensation plan that was approved by shareholders in November 2012 and that covers all of its full-time employees, outside directors and certain advisors.  This 2012 Stock Incentive Plan replaced all previous equity compensation plans of the Company. The options granted and stock awards made pursuant to this Plan are granted at fair market value at the date of grant or award.  Service-based options granted to non-employee directors become exercisable 25% each ninety days (cumulative) from the date of grant and options granted to employees generally become exercisable 25% per year (cumulative) beginning one year after the date of grant. Performance-based options granted to employees become exercisable 33.3% per year (cumulative) beginning one year after the date of grant. The maximum contractual term of the Company’s stock options is ten years.  If a stock option holder’s employment with the Company terminates by reason of death, disability or retirement, as defined in the Plan, the Plan generally provides for acceleration of vesting.  The number of shares reserved for issuance is 1,522,593 shares, all of which were available for future grant or award as of December 31, 2015.  This Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, performance stock awards, and other stock awards. Service based and performance based stock options were granted and restricted stock units (“RSUs”) were awarded during the six months ended December 31, 2015. As of December 31, 2015, a total of 3,340,462 options for common shares were outstanding from this Plan as well as one previous stock option plan (which has also been approved by shareholders), and of these, a total of 1,628,976 options for common shares were vested and exercisable.  As of December 31, 2015, the approximate unvested stock option expense that will be recorded as expense in future periods is $3,110,463.  The weighted average time over which this expense will be recorded is approximately 32 months. Additionally, as of December 31, 2015 a total of 67,000 RSUs were outstanding. The approximate unvested stock compensation expense that will be recorded as expense in future periods for the RSUs is $332,454. The weighted average time over which this expense will be recorded is approximately 36 months.

Stock Options

The fair value of each option on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for grants in the periods indicated.

	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Dividend yield		1.33	%		1.17	%		1.28	%		1.17	%
Expected volatility		43	%		56	%		44	%		56	%
Risk-free interest rate		1.38	%		1.64	%		1.67	%		1.64	%
Expected life (in years)		6.0			6.0			6.0			6.0

At December 31, 2015, the 1,016,800 options granted during the first six months of fiscal 2016 to employees had exercise prices ranging from $8.84 to $11.82 per share, fair values ranging from $3.28 to $4.48 per share, and remaining contractual lives of between nine years, six months and nine years, eleven months.

At December 31, 2014, the 593,400 options granted during the first six months of fiscal 2015 to employees had exercise prices ranging from $5.96 to $6.94 per share, fair values ranging from $2.19 to $3.48 per share, and remaining contractual lives of between nine years, nine months and nine years, eleven months.

Page 18

The Company calculates stock option expense using the Black-Scholes model.  Stock option expense is recorded on a straight line basis, or sooner if the grantee is retirement eligible as defined in the 2012 Stock Incentive Plan, with an estimated 3.1% forfeiture rate effective October 1, 2015. Previous estimated forfeiture rates were between 2.0% and 3.3% for the period January 1, 2013 through September 30, 2015. The expected volatility of the Company’s stock was calculated based upon the historic monthly fluctuation in stock price for a period approximating the expected life of option grants.  The risk-free interest rate is the rate of a five year Treasury security at constant, fixed maturity on the approximate date of the stock option grant.  The expected life of outstanding options is determined to be less than the contractual term for a period equal to the aggregate group of option holders’ estimated weighted average time within which options will be exercised.  It is the Company’s policy that when stock options are exercised, new common shares shall be issued.  The Company recorded $342,134 and $796,192 of expense related to stock options in the three months ended December 31, 2015 and 2014, respectively, and $1,830,707 and $881,825 of expense related to stock options in the six months ended December 31, 2015 and 2014, respectively.  As of December 31, 2015, the Company had 3,287,071 stock options that were vested and that were expected to vest, with a weighted average exercise price of $9.12 per share, an aggregate intrinsic value of $12,468,545 and weighted average remaining contractual terms of 6.8 years.

Information related to all stock options for the three months ended December 31, 2015 and 2014 is shown in the following tables:

	Six Months Ended December 31, 2015
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at 6/30/15		2,677,436		$	8.85		6.1	$	4,914,601
Granted		1,016,800		$	9.38
Forfeitures		(55,050	)	$	11.65
Exercised		(298,724	)	$	7.20
Outstanding at 12/31/15		3,340,462		$	9.11		6.8	$	12,661,470
Exercisable at 12/31/15		1,628,976		$	9.95		4.5	$	6,032,985

	Six Months Ended December 31, 2014
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at 6/30/14		2,677,464		$	9.57		5.4	$	1,674,010
Granted		593,400		$	6.66
Forfeitures		(378,525	)	$	9.99
Exercised		(24,725	)	$	5.84
Outstanding at 12/31/14		2,867,614		$	8.95		6.3	$	558,591
Exercisable at 12/31/14		1,778,589		$	10.24		4.6	$	438,785

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The following table presents information related to unvested stock options:

	Shares			Weighted-Average Grant Date Fair Value
Non-vested at June 30, 2015		1,080,198		$	2.99
Granted		1,016,800		$	3.63
Vested		(355,462	)	$	2.91
Forfeited		(30,050	)	$	3.30
Non-vested at December 31, 2015		1,711,486		$	3.38

The weighted average grant date fair value of options granted during the six month periods ended December 31, 2015 and 2014 was $3.63 and $3.23, respectively. The aggregate intrinsic value of options exercised during the six month periods ended December 31, 2015 and 2014 was $852,596 and $22,383, respectively. The aggregate grant date fair value of options that vested during the six month periods ended December 31, 2015 and 2014 was $1,035,041 and $598,316, respectively. The Company received $2,149,606 and $144,352 of cash from employees who exercised options in the six month periods ended December 31, 2015 and 2014, respectively. In the first six months of fiscal 2016 the Company recorded $300,868 as a reduction of federal income taxes payable, $46,066 as an increase in common stock, $84,781 as a reduction of income tax expense, and $170,021 as a reduction of the deferred tax asset related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise. In the first six months of fiscal 2015 the Company recorded $7,834 as a reduction of federal income taxes payable, $36,575 as a reduction in common stock, $7,690 as a reduction of income tax expense, and $36,718 as a reduction of the deferred tax asset related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise.

Restricted Stock Units

A total of 72,000 RSUs with a weighted average fair value of $9.39 per share were awarded to employees during the six months ended December 31, 2015. The Company determined the fair value of the awards based on the closing price of the Company’s common stock on the date the restricted stock units were awarded. The RSUs have a four year ratable vesting period. The RSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. Dividends on RSUs in the amount of $5,040 were accrued or paid in the six months ended December 31, 2015. Accrued dividends are paid to the holder upon vesting of the RSUs and issuance of shares. As of December 31, 2015, the 67,000 restricted stock units outstanding had a remaining contractual life of 9 years, 6 months. Of the 67,000 RSUs outstanding, 64,434 are expected to vest as of December 31, 2015. An estimated forfeiture rate of 3.3% was used in the calculation of expense related to the restricted stock units. The Company recorded $33,276 and $319,533 of expense related to RSUs in the three and six month periods ended December 31, 2015. There were no RSUs awarded prior to July 1, 2015.

Director and Employee Stock Compensation Awards

The Company awarded a total of 12,590 and 13,800 common shares in the six months ended December 31, 2015 and 2014, respectively, as stock compensation awards. These common shares were valued at their approximate $113,400 and $96,000 fair market values based on their stock price at dates of issuance multiplied by the number of common shares awarded, respectively, pursuant to the compensation programs for non-employee directors who receive a portion of their compensation as an award of Company stock and for employees who received a nominal recognition award in the form of company stock. Stock compensation awards are made in the form of newly issued common shares of the Company.

Deferred Compensation Plan 

The Company has a Non-qualified Deferred Compensation Plan providing for both Company contributions and participant deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in common shares of the Company. As of December 31, 2015 there were 28 participants, all with fully vested account balances. A total of 250,075 common shares with a cost of $2,375,242, and 226,600 common shares with a cost of $2,145,100 were held in the plan as of December 31, 2015 and June 30, 2015, respectively, and, accordingly, have been recorded as treasury shares. The change in the number of shares held by this plan is the net result of share purchases and sales on the open stock market for compensation deferred into the plan and for distributions to terminated employees. The Company does not issue new common shares for purposes of the non-qualified deferred compensation plan. The company accounts for assets held in the non-qualified deferred compensation plan according to accounting guidance. The Company used approximately $276,800 and $139,100 to purchase 29,021 and 20,034 common shares of the Company in the open stock market during the six months ended December 31, 2015 and 2014, respectively, for either employee salary deferrals or Company contributions into the non-qualified deferred compensation plan. For fiscal year 2016, the Company estimates the Rabbi Trust for the Nonqualified Deferred Compensation Plan will make net repurchases in the range of 35,000 to 39,000 common shares of the Company. The Company does not currently repurchase its own common shares for any other purpose.

Page 20

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

(In thousands)	Six Months Ended December 31
	2015		2014
Cash payments:
Interest	$	23	$	36
Income taxes	$	4,650	$	21
Issuance of common shares as compensation	$	113	$	96

NOTE 12 - COMMITMENTS AND CONTINGENCIES

As part of the acquisition of Virticus Corporation on March 19, 2012, a contingent Earn-Out liability was established. This discounted liability was to be paid over a five year period, contingent upon reaching certain sales in each year over the five year period (fiscal year 2013 through fiscal year 2017). In fiscal 2013, as a result of modified sales forecasts for LSI Controls (fka, LSI Virticus), the fair value of the Earn-Out liability was adjusted to zero. As of December 31, 2015, the maximum potential undiscounted liability related to the Earn-Out is $2 million. This would be based upon the achievement of a defined level of sales of lighting control systems in fiscal years 2016 through 2017. The likelihood of this occurring is not considered probable.

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

The Company may occasionally issue a standby letter of credit in favor of third parties. As of December 31, 2015, there were no standby letter of credit agreements.

NOTE 13 – SALE OF SUBSIDIARY

On September 30, 2014, the Company sold the stock of its wholly owned subsidiary LSI Saco Technologies Inc., located in Montreal, Canada, for $1.9 million cash. The sale resulted in a pre-tax loss of $565,000. As a result of the sale, the Company terminated the $5 million unsecured revolving line of credit for this Canadian operation. LSI Saco reported $41,000 of net customer sales and a $(183,000) operating loss in the first quarter of fiscal 2015 prior to the sale. LSI Saco was reported in the All Other Category. The sale of LSI Saco was not considered the sale of a discontinued operation because the Company migrated most of its manufacturing, research and development, and selling activities from LSI Saco to the Company’s Cincinnati, Ohio location.

NOTE 14 – SEVERANCE COSTS

Pursuant to a management succession agreement entered into in fiscal 2004 as subsequently amended, the Company’s former Chief Executive Officer, Robert J. Ready, relinquished this title and related management responsibilities when the Company hired and appointed a new Chief Executive Officer in October 2014. Mr. Ready remained on the Company’s Board of Directors until his death in March 2015, but was no longer Chairman of the Board following the November 2014 Annual Meeting of Shareholders. The management succession agreement provided for 18 months of compensation to be paid to Mr. Ready, which resulted in a severance charge in the second quarter of fiscal 2015 of $800,000. Severance payments totaling $224,000 were made in the second and third quarters of fiscal 2015. The remaining $576,000 severance liability was recognized as income when Mr. Ready died in March 2015. Pursuant to the management succession agreement a $1 million self-insured death benefit was paid to Mr. Ready’s beneficiary in the fourth quarter of fiscal 2015.

In January 2015, the Company initiated a reduction in force and recorded severance charges of $340,000 and facility exit charges of $21,200 in the third quarter of fiscal 2015. This reduction in force and employee retirements that occurred early in the third quarter of fiscal 2015 represented approximately 8.3% of the Company’s total salaried workforce and approximately $3.7 million of annual total compensation and benefit reductions. The Company recorded severance charges of $223,000 during the first half of fiscal year 2016 in the Graphics Segment.

Page 21

The activity in the Company’s Accrued Severance Liability is as follows for the periods indicated:

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	379		$	--		$	--
Accrual of expense		223			944			1,718
Payments		(314	)		(213	)		(704	)
Adjustments		(58	)		--			(635	)
Balance at end of the period	$	230		$	731		$	379

NOTE 15 – INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate		33.3	%		36.1	%		34.5	%		41.0	%
Impact of foreign operations		--			--			--			(0.2	)
Enactment of tax law changes		(2.0	)		(6.1	)		(1.0	)		(2.9	)
Uncertain tax positions		(0.3	)		(1.3	)		(0.3	)		(1.2	)
Other		(1.2	)		(0.3	)		(0.7	)		(2.4	)
Effective tax rate		29.8	%		28.4	%		32.5	%		34.3	%

The Protecting Americans from Tax Hike Act of 2015 that made permanent the tax credit for research and development (“R&D”), retroactive back to January 1, 2015, was signed into law in December 2015. Therefore, the Company recorded an estimated R&D tax credit benefit of $111,000 in December 2015 for the second half of fiscal year 2015, and estimated an R&D tax credit in its calculation of the estimated income tax rate for fiscal 2016. Other items in this December 2015 tax bill will have little impact on the Company’s income tax expense.

Page 22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Net Sales by Business Segment	Three Months Ended				Six Months Ended
(In thousands)	December 31				December 31
	2015		2014		2015		2014
Lighting Segment	$	59,601	$	59,796	$	118,676	$	115,517
Graphics Segment		21,034		20,269		42,787		36,293
Technology Segment		4,052		4,650		9,149		11,330
All Other Category		--		--		--		41
	$	84,687	$	84,715	$	170,612	$	163,181

Operating Income (Loss) by Business Segment	Three Months Ended						Six Months Ended
(In thousands)	December 31						December 31
	2015			2014			2015			2014
Lighting Segment	$	5,182		$	4,090		$	10,864		$	8,317
Graphics Segment		2,035			1,065			4,196			1,118
Technology Segment		993			499			2,333			1,131
All Other Category		--			--			--			(183	)
Corporate and Eliminations		(2,830	)		(3,430	)		(6,250	)		(5,625	)
	$	5,380		$	2,224		$	11,143		$	4,758

Summary Comments

Fiscal 2016 second quarter net sales of $84,687,000 decreased slightly as compared to second quarter fiscal 2015 net sales of $84,715,000. Net sales were favorably influenced by increased net sales of the Graphics Segment (up $0.8 million or 3.8%). Net sales were unfavorably influenced by decreased net sales of the Lighting Segment (down $0.2 million or 0.3%) and decreased net sales of the Technology Segment (down $0.6 million or 12.9%).

Fiscal 2016 first half net sales of $170,612,000 increased $7.4 million or 4.6% as compared to the same period of fiscal 2015. Net sales were favorably influenced by increased net sales of the Lighting Segment (up $3.2 million or 2.7%) and increased net sales of the Graphics Segment (up $6.5 million or 17.9%). Net sales were unfavorably influenced by decreased net sales of the Technology Segment (down $2.2 million or 19.3%).

Fiscal 2016 second quarter operating income of $5,380,000 increased $3.2 million or 142% from operating income of $2,224,000 in the same period the prior year. The $3.2 million increase in operating income was the net result of an increase in gross profit and an increase in gross profit as a percentage of net sales from 24.3% in the second quarter of fiscal 2015 to 28.3% in the second quarter of fiscal 2016, on relatively similar sales year-over-year, and an increase in selling and administrative expenses.

Page 23

Fiscal 2016 first half operating income of $11,143,000 increased $6.4 million or 134% from operating income of $4,758,000 in the same period the prior year. The $6.4 million increase in operating income was the net result of increased net sales, an increase in gross profit and an increase in gross profit as a percentage of net sales from 24.0% in the first half of fiscal 2015 to 27.7% in the first half of fiscal 2016, an increase in selling and administrative expenses, and the net effect of the gain on the sale of a facility more than offset by the loss on the sale of a subsidiary in fiscal 2015 with no comparable events in fiscal 2016.

The Company’s total net sales of products related to solid-state LED technology in light fixtures, in certain elements of graphics products, and video screens have been recorded as indicated in the table below.

	LED Net Sales
(In thousands)	FY 2016		FY 2015		% Change
First Quarter	$	38,911	$	30,898		25.9	%
Second Quarter		42,325		37,432		13.1	%
First Half		81,236		68,330		18.9	%
Third Quarter				30,878
Nine Months				99,208
Fourth Quarter				35,779
Full Year			$	134,987

Second quarter fiscal 2016 LED net sales of $42,325,000 were up $4.9 million or 13.1% from the same period of the prior year. The $42,325,000 total LED net sales and the $4.9 million increase is the net result of Lighting Segment LED net sales of $41.6 million (up $4.5 million or 12.3%), Graphics Segment LED net sales of $0.6 million (up $0.3 million or 96.5%), and Technology Segment LED net sales of LED video screens of $0.1 million. First half fiscal 2015 total LED net sales of $81,236,000 were $12.9 million or 18.9% higher than the same period of the prior year. The $81,236,000 total LED net sales and the $12.9 million increase are primarily the net result of Lighting Segment LED net sales of $79.0 million (up $12.3 million or 18.5%), and Graphics Segment LED net sales of $1.7 million (up $0.9 million or 107%).

Non-GAAP Financial Measures

The Company believes it is appropriate to evaluate its performance after making adjustments to the as-reported U.S. GAAP operating income, net income, and earnings per share. Adjusted operating income, net income and earnings per share, which exclude the impact of severance costs, the gain on the sale of the manufacturing facility, the loss on the sale of the subsidiary, and the income tax effect of the utilization of a long-term capital loss are non-GAAP financial measures. We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business. These supplemental measures are used by our management, including our chief operating decision maker, to evaluate business results. We exclude these items because they are not representative of the ongoing results of operations of our business. Below is a reconciliation of these non-GAAP measures to operating income, net income, and earnings per share for the periods indicated.

(in thousands, unaudited)	Second Quarter
	FY 2016		FY 2015
Reconciliation of operating income to adjusted operating income:
Operating Income as reported	$	5,380	$	2,224
Adjustment for severance costs		223		800
Adjusted Operating Income	$	5,603	$	3,024

Page 24

(in thousands, except per share data; unaudited)	Second Quarter
	FY 2016			Diluted EPS		FY 2015			Diluted EPS
Reconciliation of net income to adjusted net income:
Net income and earnings per share as reported	$	3,782		$	0.15	$	1,588		$	0.06
Adjustment for severance costs, inclusive of the income tax effect		146	(1)		0.01		517	(2)		0.02
Adjusted net income and earnings per share	$	3,928		$	0.15	$	2,105		$	0.09

The income tax effects of the adjustments in the tables above were calculated using the estimated U.S. effective income tax rates for the periods indicated. The income tax effects were as follows (in thousands):

⁽¹⁾ 77

⁽²⁾ 283

(in thousands, unaudited)	First Half
	FY 2016		FY 2015
Reconciliation of operating income to adjusted operating income:
Operating Income as reported	$	11,143	$	4,758
Adjustment for severance costs		223		800
Adjustment for the gain on the sale of a manufacturing facility	$	--	$	(343	)
Adjustment for the loss on sale of a subsidiary		--		565
Adjusted Operating Income	$	11,366	$	5,780

Page 25

(in thousands, except per share data; unaudited)	First Half
	FY 2016			Diluted EPS		FY 2015			Diluted EPS
Reconciliation of net income to adjusted net income:
Net income and earnings per share as reported	$	7,532		$	0.30	$	3,115		$	0.13
Adjustment for severance costs, inclusive of the income tax effect		146	(1)		0.01		517	(2)		0.02
Adjustment for the gain on the sale of a manufacturing facility, inclusive of the income tax effect		--			--		(224	)(3)		(0.01	)
Adjustment for the loss on sale of a subsidiary		--			--		565	(4)		0.02
Income tax effect of utilization of a long-term capital loss		--			--		(101	)(5)		0.00
Adjusted net income and earnings per share	$	7,678		$	0.30	$	3,872		$	0.16

The income tax effects of the adjustments in the tables above were calculated using the estimated U.S. effective income tax rates for the periods indicated. The income tax effects were as follows (in thousands):

⁽¹⁾ 77

⁽²⁾ 283

⁽³⁾ (119)

⁽⁴⁾ 0

⁽⁵⁾ 0

Results of Operations

THREE MONTHS ENDED DECEMBER 31, 2015 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2014

Lighting Segment
(In thousands)	Three Months Ended December 31
	2015		2014
Net Sales	$	59,601	$	59,796
Gross Profit	$	15,669	$	14,791
Operating Income	$	5,182	$	4,090

Lighting Segment net sales of $59,601,000 in the second quarter of fiscal 2016 decreased slightly from fiscal 2015 same period net sales of $59,796,000. The Lighting Segment’s net sales of light fixtures having solid-state LED technology totaled $41.6 million in the second quarter of fiscal 2016, representing a $4.5 million or 12.3% increase from fiscal 2015 second quarter net sales of solid-state LED light fixtures of $37.1 million. Net sales of light fixtures having solid-state LED technology accounted for 69.5% of total Lighting Segment net sales. There was a reduction in the Company’s traditional lighting sales (metal halide and fluorescent light sources) from second quarter fiscal 2015 to second quarter fiscal 2016 as customers converted from traditional lighting to light fixtures having solid-state LED technology.

Page 26

Gross profit of $15,669,000 in the second quarter of fiscal 2016 increased $0.9 million or 5.9% from the same period of fiscal 2015, and increased from 24.6% to 25.9% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales). The $0.9 million increase in the amount of gross profit at a higher gross margin as a percentage of net sales is due to the net effect of improved procurement of material, competitive pricing pressures, and improved manufacturing efficiencies as a result of the Company’s lean initiatives. The Company has also taken a more strategic approach with its customer base by pursuing more profitable programs. Also contributing to the change in gross profit is decreased outside service expense ($0.1 million) and increased warranty expense ($0.8 million).

Selling and administrative expenses of $10,487,000 in the second quarter of fiscal year 2016 decreased $0.2 million or 2.0% from the same period of fiscal 2015 primarily as the net result of decreased employee compensation and benefits expense ($0.2 million), decreased outside service expense ($0.1 million), decreased research and development expense ($0.4 million), partially offset by an increase in corporate shared service costs ($0.4 million) and small increases in expense on other cost categories.

The Lighting Segment second quarter fiscal 2016 operating income of $5,182,000 increased $1.1 million or 26.7% from operating income of $4,090,000 in the same period of fiscal 2015. This increase of $1.1 million was primarily the net result of an increase in the gross profit and gross margin as a percentage of sales, and decreased selling and administrative expenses.

Graphics Segment
(In thousands)	Three Months Ended  December 31
	2015		2014
Net Sales	$	21,034	$	20,269
Gross Profit	$	6,207	$	4,129
Operating Income	$	2,035	$	1,065

Graphics Segment net sales of $21,034,000 in the second quarter of fiscal 2016 increased $0.8 million or 3.8% from fiscal 2015 same period net sales of $20,269,000. The $0.8 million increase in Graphics Segment net sales is the net result of image conversion programs and sales to several petroleum / convenience store customers ($2.4 million net increase), one grocery retailer ($0.6 million increase), one national drug store retailer ($0.3 million decrease), several quick service restaurant chains ($0.6 million net decrease), four commercial market customers ($0.3 million net decrease), one banking customer ($0.2 million decrease), and changes in volume or completion of several other graphics programs ($0.8 million net decrease). The Graphics Segment net sales of graphic identification products that contain solid-state LED light sources and LED lighting for signage totaled $0.6 million in the second quarter of fiscal 2016, representing a $0.3 million or 96.5% increase from fiscal 2015 net sales of $0.3 million.

Gross profit of $6,207,000 in the second quarter of fiscal 2016 increased $2.1 million or 50.3% from the same period of fiscal 2015. Gross profit as a percentage of Graphics Segment net sales (customer plus inter-segment net sales) increased from 20.2% in the second quarter of fiscal 2015 to 28.7% in the second quarter of fiscal 2016. The change in the amount of gross profit is due to the net effect of increased net sales, a lower gross profit margin on installation net sales, an increase in gross profit on product net sales, decreased freight costs, decreased supplies expense ($0.1 million), and increased employee compensation and benefit expense ($0.4 million).

Selling and administrative expenses of $4,172,000 in the second quarter of fiscal 2016 increased $1.1 million or 36.2% from the same period of fiscal 2015 primarily as the net result of increased employee compensation and benefits expense ($0.9 million) and increased outside service expense ($0.1 million).

The Graphics Segment second quarter fiscal 2016 operating profit of $2,035,000 increased $1.0 million or 91% from the same period of fiscal 2015. The $1.0 million increase from fiscal 2015 was the net result of increased net sales, an increase in gross profit and an increase in gross profit as a percentage of net sales, and increased selling and administrative expenses.

Technology Segment
(In thousands)	Three Months Ended December 31
	2015		2014
Net Sales	$	4,052	$	4,650
Gross Profit	$	2,088	$	1,554
Operating Income	$	993	$	499

Page 27

Technology Segment net sales of $4,052,000 in the second quarter of fiscal 2016 decreased $0.6 million or 12.9% from fiscal 2015 same period net sales of $4,650,000. The $0.6 million decrease in Technology Segment net sales is primarily the net result of a $0.8 million decrease in sales to the transportation market, a $0.1 million increase in sales to the telecommunication market, a $0.3 million decrease in sales to medical market, a $0.1 million increase in sales to the sports market, and a $0.3 million increase in sales to various other markets. While the net customer sales decreased, the Technology Segment inter-segment sales increased $1.3 million or 16.4%. The increase in inter-segment sales is the direct result of the increase in net sales of light fixtures having solid-state LED technology along with light fixtures with integrated controls. The Technology Segment’s intercompany support of electronic circuit boards and lighting control systems to the Lighting Segment is core to the strategic growth of the Company.

Gross profit of $2,088,000 in the second quarter of fiscal 2016 increased $0.5 million or 34.4% from the same period in fiscal 2015, and increased from 12.6% to 16.1% as a percentage of net sales (customer plus inter-segment net sales). The $0.5 million increase in gross profit is due to the net effect of decreased customer net sales more than offset by increased inter-segment sales, and decreased employee compensation and benefit expense ($0.1 million).

Selling and administrative expenses of $1,095,000 in the second quarter of fiscal 2016 increased 3.8% from fiscal 2015 selling and administrative expenses of $1,055,000. A decrease in research and development expense of $0.1 million was more than offset by an increase in employee compensation and benefit expense of $0.2 million.

The Technology Segment second quarter fiscal 2016 operating income of $993,000 increased $0.5 million or 99.0% from operating income of $499,000 in the same period of fiscal 2015. The $0.5 million increase in operating income was primarily the net result of decreased customer net sales more than offset by increased inter-segment sales along with a slight increase in selling and administrative expenses.

Corporate and Eliminations
(In thousands)	Three Months Ended December 31
	2015			2014
Gross Profit (Loss)	$	(38	)	$	81
Operating Income (Loss)	$	(2,830	)	$	(3,430	)

 

The gross profit (loss) relates to the change in the intercompany profit in inventory elimination.

Administrative expenses of $2,792,000 in the second quarter of fiscal 2016 decreased $0.7 million or 20.5% from the same period of the prior year. The $0.7 million decrease in expense is primarily the result of decreased employee compensation and benefit expense ($0.4 million), a decrease in legal fee expense ($0.2 million), decreased outside service expense ($0.2 million), an increase in research and development costs ($0.4 million), an increase in telephone expense ($0.1 million), and an increase in corporate shared services allocated to the reportable segments ($0.5 million).

Consolidated Results

The Company reported net interest income of $8,000 in the second quarter of fiscal 2016 as compared to net interest expense of $6,000 in the same period of fiscal 2015. Commitment fees related to the unused portions of the Company’s lines of credit and interest income on invested cash are included in both fiscal years. The change from net interest expense in the second quarter of fiscal year 2015 to net interest income in the second quarter of fiscal 2016 is directly related to the increase in invested cash.

The $1,606,000 income tax expense in the second quarter of fiscal 2016 represents a consolidated effective tax rate of 32.5%. This is the net result of an income tax rate of 34.5% influenced by certain permanent book-tax differences, a $111,000 tax benefit related to the retroactive reinstatement of the R&D tax credit, and by a benefit related to uncertain income tax positions. The $630,000 income tax expense in the second quarter of fiscal 2015 represents a consolidated effective tax rate of 28.4%. This is the net result of a year-to-date income tax rate of 35.4% for the Company’s U.S. operations influenced by certain permanent book-tax differences that were significant relative to the amount of taxable income, a valuation reserve against New York State tax credits, by a benefit related to uncertain income tax positions, and a $136,000 tax benefit related to the retroactive reinstatement of the R&D tax credit.

The Company reported net income of $3,782,000 in the second quarter of fiscal 2016 as compared to net income of $1,588,000 in the same period of the prior year. The change in net income is primarily the net result of increased gross profit on similar sales, a small increase in selling and administrative expense, and a higher effective tax rate in fiscal 2016 compared to fiscal 2015. Diluted earnings per share of $0.15 were reported in the second quarter of fiscal 2016 as compared to diluted earnings per share of $0.06 in the same period of fiscal 2015. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the second quarter of fiscal 2016 were 25,624,000 shares as compared to 24,507,000 shares in the same period last year.

Page 28

SIX MONTHS ENDED DECEMBER 31, 2015 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2014

Lighting Segment
(In thousands)	Six Months Ended December 31
	2015		2014
Net Sales	$	118,676	$	115,517
Gross Profit	$	31,341	$	28,818
Operating Income	$	10,864	$	8,317

Lighting Segment net sales of $118,676,000 in the first half of fiscal 2016 increased 2.7% from fiscal 2015 same period net sales of $115,517,000. The Lighting Segment’s net sales of light fixtures having solid-state LED technology totaled $79.0 million in the first half of fiscal 2016, representing an 18.5% increase from first half fiscal 2015 net sales of solid-state LED light fixtures of $66.7 million. Net sales of light fixtures having solid-state LED technology accounted for 63.3% of total Lighting Segment net sales. There was a reduction in the Company’s traditional lighting sales (metal halide and fluorescent light sources) from fiscal 2015 to fiscal 2016 as customers converted from traditional lighting to light fixtures having solid-state LED technology.

Gross profit of $31,341,000 in the first half of fiscal 2016 increased $2.5 million or 8.8% from the same period of fiscal 2015, and increased from 24.6% to 26.1% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales).  The Company was able to leverage its sales growth with a larger percentage growth in gross profit compared to sales growth. The increase in amount of gross profit is due to the net effect of increased net sales, the improved procurement of material, competitive pricing pressures, and improved manufacturing efficiencies as a result of the Company’s lean initiatives. The Company has also taken a more strategic approach with its customer base by pursuing more profitable programs. Also contributing to the change in gross profit is increased freight expense, increased employee compensation and benefits expense ($0.7 million), increased warranty costs ($0.7 million), increased repairs and maintenance expense ($0.1 million), and decreased outside service expense ($0.2 million).

Selling and administrative expenses of $20,477,000 in the first half of fiscal 2016 were comparable to selling and administrative expenses for the same period of fiscal 2015 primarily as the net result of decreased employee compensation and benefit expense ($0.1 million), increased travel expense ($0.2 million), decreased convention and trade show expense ($0.1 million), decreased outside service expense ($0.1 million), increased sales commission expense ($0.4 million), decreased research and development expense ($1.1 million), and an increase in corporate shared service costs ($0.9 million).

Lighting Segment first half fiscal 2016 operating income of $10,864,000 increased $2.5 million or 30.6% from operating income of $8,317,000 in the same period of fiscal 2015.  This increase of $2.5 million was the net result of increased net sales, an increase in gross profit, and an increase in the gross margin as a percentage of sales.

Graphics Segment
(In thousands)	Six Months Ended December 31
	2015		2014
Net Sales	$	42,787	$	36,293
Gross Profit	$	11,556	$	6,756
Operating Income	$	4,196	$	1,118

Graphics Segment net sales of $42,787,000 in the first half of fiscal 2016 increased 17.9% from fiscal 2015 same period net sales of $36,293,000.  The $6.5 million increase in Graphics Segment net sales is primarily the net result of image conversion programs and sales to several petroleum / convenience store customers ($9.2 million net increase), one grocery retailer ($0.9 million increase), one national drug retailer ($0.1 million decrease), several quick-service restaurant chains ($2.1 million net decrease), two commercial market customers ($0.4 million net decrease), one banking customer ($0.3 million decrease), several retail customers ($0.1 million decrease), and changes in volume or completion of several other graphics programs ($0.6 million net decrease). The Graphics Segment net sales of graphic identification products that contain solid-state LED light sources and LED lighting for signage totaled $1.7 million in the first half of fiscal 2016, representing a 107% increase from first half fiscal 2015 net sales of $0.8 million.

Page 29

Gross profit of $11,556,000 in the first half of fiscal 2016 increased $4.8 million or 71.0% from the same period in fiscal 2015, and increased from 18.5% to 26.4% as a percentage of Graphics Segment net sales (customer plus inter-segment net sales). The increase in the amount of gross profit is due to the net effect of increased net sales, a large improvement in gross profit as a percentage of sales, lower margins on installation sales, increased freight expense, increased outside service expense ($0.1 million), increased customer relations expense ($0.1 million), decreased depreciation expense ($0.1 million), and increased compensation and benefit expense ($0.6 million).  

Selling and administrative expenses of $7,360,000 in the first half of fiscal 2016 increased $1.4 million or 23.1% from the same period of fiscal 2015 primarily as a result of increased compensation and benefit expense ($1.3 million). In fiscal 2015, the Graphics Segment recorded a gain on the sale of one of its facilities in Woonsocket, Rhode Island of $343,000, with no comparable event in fiscal 2016.

Graphics Segment first half fiscal 2016 operating income of $4,196,000 increased $3.1 million or 275% from the same period of fiscal 2015 and is the net result of increases net sales, increased gross profit as a percentage of net sales, increased selling and administrative expenses, and a gain on the sale of a facility in fiscal 2015 with no corresponding event in fiscal 2016.

Technology Segment
(In thousands)	Six Months Ended December 31
	2015		2014
Net Sales	$	9,149	$	11,330
Gross Profit	$	4,474	$	3,558
Operating Income	$	2,333	$	1,131

Technology Segment net sales of $9,149,000 in the first half of fiscal 2016 decreased $2.2 million or 19.3% from fiscal 2015 same period net sales of $11,330,000.  The $2.2 million decrease in Technology Segment net sales is primarily the net result of a $0.5 million decrease in sales to the medical market, a $2.0 million decrease in sales to the transportation market, a $0.3 million increase in sales to original equipment manufacturers, a $0.1 million increase in sales to the telecommunication market, a $0.1 million decrease in sales to the sports market, and a $0.1 million increase in sales to various other markets. While net customer sales decreased, Technology Segment inter-segment sales increased $3.4 million or 22.5%. The increase in inter-segment sales is the direct result of the increase in net sales of light fixtures having solid-state LED technology and light fixtures with integrated controls. The Technology Segment’s intercompany support of electronic circuit boards and lighting control systems to the Lighting Segment is core to the strategic growth of the Company.

Gross profit of $4,474,000 in the first half of fiscal 2016 increased $0.9 million or 25.7% from the same period of fiscal 2015, and increased from 13.5% to 16.3% as a percentage of Technology Segment net sales (customer plus inter-segment net sales). The $0.9 million increase in amount of gross profit is due to the net effect of decreased customer net sales more than offset by increased inter-segment sales, and decreased employee compensation and benefits expense ($0.4 million).

Selling and administrative expenses of $2,141,000 in the first half of fiscal 2016 decreased $286,000 or 11.8% from the same period of fiscal 2015 primarily as the result of an increase in employee compensation and benefit expense ($0.2 million) and a decrease in research and development expense ($0.4 million).

Technology Segment first half fiscal 2016 operating income of $2,333,000 increased $1.2 million or 106% from operating income of $1,131,000 in the same period of fiscal 2015. The increase of $1.2 million was the net result of decreased net customer sales more than offset by increased inter-segment sales, increased gross profit from the net increase in total net sales (customer and intersegment net sales), and decreased selling and administrative expenses.

Page 30

All Other Category
(In thousands)	Six Months Ended December 31
	2015		2014
Net Sales	$	--	$	41
Gross Profit	$	--	$	21
Operating (Loss)	$	--	$	(183	)

Due to the sale of Saco on September 30, 2014, there is no longer comparable data for the All Other Category.

Corporate and Eliminations
(In thousands)	Six Months Ended December 31
	2015			2014
Gross Profit (Loss)	$	(96	)	$	10
Operating (Loss)	$	(6,250	)	$	(5,625	)

The gross profit (loss) relates to the change in the intercompany profit in inventory elimination.

Administrative expenses of $6,154,000 in the first half of fiscal 2016 increased $1.1 million or 21.4% from the same period of the prior year. The increase in expense is primarily the net result of increased employee compensation and benefit expense ($1.3 million), a decrease in legal fee expense ($0.2 million), increased outside service expense ($0.1 million), increased depreciation expense ($0.1 million), increased research and development expense ($0.8 million), and an increase in corporate shared service costs allocated to the segments ($1.2 million). The increase in employee compensation and benefit expense is primarily the result of an increase in salary expense related to the strengthening of the corporate staff and an increase in stock compensation expense. Performance based stock options and restricted stock awards, were granted and awarded, respectively, in the first half of fiscal 2016 with no corresponding grant of performance based stock options or award of restricted stock awards in the first half of fiscal 2015. The increase in research and development spending is the result of the creation of a corporate research and development department with its sole purpose to develop leading edge products utilizing: 1) the latest energy saving controls; 2) LED light source technology; 3) the “internet of things” connectivity; and 4) beacons and new display technology to enhance the retail experience.In fiscal 2015, the Company recognized a $565,000 loss on the sale of its Montreal subsidiary, LSI Saco, with no corresponding event in fiscal 2016.

Consolidated Results

The Company reported net interest income of $8,000 in the first half of fiscal 2016 as compared to net interest expense of $14,000 in the same period of fiscal 2015. Commitment fees related to the unused portions of the Company’s lines of credit and interest income on invested cash are included in both fiscal years. The change from net interest expense in the second quarter of fiscal year 2015 to net interest income in the second quarter of fiscal 2016 is directly related to the increase in invested cash.

The $3,619,000 income tax expense in the first half of fiscal 2016 represents a consolidated effective tax rate of 32.5%. This is the net result of an income tax rate of 34.5% influenced by certain permanent book-tax differences, an $111,000 tax benefit related to the retroactive reinstatement of the R&D tax credit, and by a benefit related to uncertain income tax positions. The $1,629,000 income tax expense in the first half of fiscal 2015 represents a consolidated effective tax rate of 34.3%. This is the net result of an income tax rate of 35.4% for the Company’s U.S. operations, influenced by certain permanent book-tax differences that were significant relative to the amount of taxable income, by certain U.S. federal tax credits, by a benefit related to uncertain income tax positions, by a full valuation reserve on the Company’s Canadian tax position and certain Canadian tax credits both occurring in the first quarter, and a $136,000 tax benefit related to the retroactive reinstatement of the R&D tax credit

Page 31

The Company reported net income of $7,532,000 in the first half of fiscal 2016 compared to net income of $3,115,000 in the same period of the prior year.  The $4.4 million increase in net income is primarily the net result of increased net sales, increased gross profit, increased operating expenses, the gain on the sale of a facility more than offset by the loss on the sale of a subsidiary in fiscal 2015 with no comparable events in fiscal 2016,and increased income tax expense.  Diluted earnings per share of $0.30 was reported in the first half of fiscal 2016 as compared to diluted earnings per share of $0.13 in the same period of fiscal 2015. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the first half of fiscal 2016 was 25,405,000 shares as compared to 24,506,000 shares in the same period last year.

Liquidity and Capital Resources 

The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and its historical levels of net cash flows from operating activities to be the most important measures.

At December 31, 2015, the Company had working capital of $93.7 million, compared to $84.0 million at June 30, 2015. The ratio of current assets to current liabilities was 3.91 to 1 as compared to a ratio of 3.28 to 1 at June 30, 2015. The $9.7 million increase in working capital from June 30, 2015 to December 31, 2015 was primarily related to the net effect of increased cash and cash equivalents ($2.4 million), an increase in net inventory ($2.8 million), an increase in refundable income taxes ($0.5 million), and decreased accounts payable ($5.9 million), partially offset by an increase in accrued expenses ($1.2 million), a decrease in net accounts receivable ($0.5 million), and a decrease in other current assets ($0.1 million). The Company has a strategy of aggressively managing working capital, including reduction of the accounts receivable days sales outstanding (DSO) and reduction of inventory levels, without reducing service to its customers.

The Company provided $5.5 million of cash from operating activities in the first half of fiscal 2016 as compared to a generation of cash of $10.7 million in the same period of the prior year. This $5.2 million decrease in net cash flows from operating activities is primarily the net result of an increase rather than a decrease in inventory (unfavorable change of $5.2 million), an increase rather than a decrease in refundable income tax (unfavorable change of $2.3 million), a smaller decrease in customer prepayments (favorable change of $0.6 million), a smaller increase in accrued expenses and other (unfavorable change of $0.9 million), a larger decrease in accounts payable (unfavorable change of $5.2), a decrease rather than an increase in accounts receivable (favorable change of $2.4 million), an increase in net income (favorable change of $4.4 million), an increase in stock option expense (favorable change of $1.3 million), a loss on the sale of a subsidiary in fiscal 2015 with no comparable event in fiscal 2016 (unfavorable change of $0.6 million), a larger increase in the deferred compensation liability (favorable change of $0.2 million), a greater increase in net deferred tax assets (unfavorable change of $0.3 million), and a decrease in the gain recognized on the sale of fixed assets, which includes the sale of a facility (favorable change of $0.3 million).

Net accounts receivable were $43.1 million and $43.7 million at December 31, 2015 and June 30, 2015, respectively. DSO increased to 50 days at December 31, 2015 from 49 days at June 30, 2015. The Company believes that its receivables are ultimately collectable or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate.

Net inventories of $45.9 million at December 31, 2015 increased $2.8 million from June 30, 2015 levels. Based on a strategy of balancing inventory reductions with customer service and the timing of shipments, net inventory increases occurred in the first half of fiscal 2016 in the Lighting Segment of approximately $0.4 million, in the Graphics Segment of approximately $1.9 million, and in the Technology Segment of approximately $0.7 million.

Cash generated from operations and borrowing capacity under the Company’s line of credit facility is the Company’s primary source of liquidity. The Company has an unsecured $30 million revolving line of credit with its bank, with all of the $30 million of the credit line available as of January 29, 2016. This line of credit is a $30 million three year committed credit facility expiring in the third quarter of fiscal 2018. The Company believes that its $30 million line of credit plus cash flows from operating activities are adequate for the Company’s fiscal 2016 operational and capital expenditure needs. The Company is in compliance with all of its loan covenants.

The Company used cash of $3.4 million related to investing activities in the first half of fiscal 2016 as compared to a source of less than $0.1 million in the same period of the prior year, resulting in an unfavorable change of $3.4 million. Capital expenditures for the first half of fiscal 2016 increased $1.0 million to $3.4 million from the same period in fiscal 2015. The largest components of the first half of fiscal 2016 capital expenditures are tooling and equipment related to the Company’s Lighting and Graphics Segments. The Company recorded proceeds from the sale of one of its Woonsocket, Rhode Island facilities of $950,000 in the first half of fiscal 2015 with no proceeds from the sale of fixed assets in the first half of fiscal 2016. The Company also recorded net proceeds from the sale of its subsidiary in Montreal of $1.5 million in the first half of fiscal 2015 with no comparable transaction in the first half of fiscal 2016. The combination of the proceeds from the sales of the subsidiary and the proceeds from the sale of the Woonsocket facility approximated the fiscal 2015 capital expenditures.

Page 32

The Company generated $0.2 million of cash related to financing activities in the first half of fiscal 2016 compared to a use of cash of $1.7 million in the first half of fiscal 2015. The favorable change in cash flow was primarily the result of a $2.1 million increase in the exercise of stock options in the first half of fiscal 2016 compared to the exercises of stock options in first half of fiscal 2015.

The Company has, or could have, on its balance sheet financial instruments consisting primarily of cash and cash equivalents, short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.

Off-Balance Sheet Arrangements

The Company has no financial instruments with off-balance sheet risk and has no off-balance sheet arrangements.

Cash Dividends

In January 2016, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 16, 2016 to shareholders of record as of February 8, 2016. The indicated annual cash dividend rate for fiscal 2016 is $0.20 per share, up from the previous $0.16 per share indicated annual rate, representing an increase of 25%. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.

Critical Accounting Policies and Estimates

The Company is required to make estimates and judgments in the preparation of its financial statements that affect the reported amounts of assets, liabilities, revenues and expenses, and related footnote disclosures.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.  The Company continually reviews these estimates and their underlying assumptions to ensure they remain appropriate.  The Company believes the items discussed below are among its most significant accounting policies because they utilize estimates about the effect of matters that are inherently uncertain and therefore are based on management’s judgment.  Significant changes in the estimates or assumptions related to any of the following critical accounting policies could possibly have a material impact on the financial statements.

Revenue Recognition

Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectability is reasonably assured.  Revenue is typically recognized at time of shipment.  In certain arrangements with customers, as is the case with the sale of some of our solid-state LED video screens, revenue is recognized upon customer acceptance of the video screen at the job site.  Sales are recorded net of estimated returns, rebates and discounts.  Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has five sources of revenue:  revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting; revenue from the management of media content and digital hardware related to active digital signage; and revenue from shipping and handling.

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment.  However, product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed.  The company provides product warranties and certain post-shipment service, support and maintenance of certain solid state LED video screens and billboards.

Installation revenue is recognized when the products have been fully installed.  The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Page 33

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products at each customer site have been installed.

Revenue from the management of media content and digital hardware related to active digital signage is recognized evenly over the service period with the customer. Media content service periods with most customers range from 1 month to 1 year.

Shipping and handling revenue coincides with the recognition of revenue from the sale of the product.

In situations where the Company is responsible for re-imaging programs with multiple sites, each site is viewed as a separate unit of accounting and has stand-alone value to the customer. Revenue is recognized upon the Company’s complete performance at the location, which may include a site survey, graphics products, lighting products, and installation of products. The selling price assigned to each site is based upon an agreed upon price between the Company and its customer and reflects the estimated selling price for that site relative to the selling price for sites with similar image requirements.

The Company also evaluates the appropriateness of revenue recognition in accordance with the accounting standard on software revenue recognition. Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental.

Income Taxes

The Company accounts for income taxes in accordance with the accounting guidance for income taxes.  Accordingly, deferred income taxes are provided on items that are reported as either income or expense in different time periods for financial reporting purposes than they are for income tax purposes.  Deferred income tax assets and liabilities are reported on the Company’s balance sheet.  Significant management judgment is required in developing the Company’s income tax provision, including the estimation of taxable income and the effective income tax rates in the multiple taxing jurisdictions in which the Company operates, the estimation of the liability for uncertain income tax positions, the determination of deferred tax assets and liabilities, and any valuation allowances that might be required against deferred tax assets.

The Company operates in multiple taxing jurisdictions and is subject to audit in these jurisdictions.  The Internal Revenue Service and other tax authorities routinely review the Company’s tax returns.  These audits can involve complex issues which may require an extended period of time to resolve.  In management’s opinion, adequate provision has been made for potential adjustments arising from these examinations.

In September 2013, the Internal Revenue Service issued Treasury Decision 9636, which enacted final tax regulations regarding the capitalization and expensing of amounts paid to acquire, produce, or improve tangible property. The regulations also include guidance regarding the retirement of depreciable property. The regulations were effective in taxable years beginning on or after January 1, 2014, or the Company’s fiscal year 2015. The impact to the Company’s financial statements was immaterial.

The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Condensed Consolidated Statements of Operations.  The reserve for uncertain tax positions is not expected to change significantly in the next twelve months.

Asset Impairment

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with the accounting standard on goodwill and intangible assets. The Company may first assess qualitative factors in order to determine if goodwill is impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill is not impaired, no further testing is required. If it is determined that it is more likely than not that goodwill is impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level, that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an

Page 34

impairment charge.  Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

Carrying values for long-lived tangible assets and definite-lived intangible assets, excluding goodwill and indefinite-lived intangible assets, are reviewed for possible impairment as circumstances warrant. Impairment reviews are conducted at the judgment of Company management when it believes that a change in circumstances in the business or external factors warrants a review.  Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, a history of negative operating cash flow, or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review.  The Company’s initial impairment review to determine if a potential impairment charge is required is based on an undiscounted cash flow analysis at the lowest level for which identifiable cash flows exist.  The analysis requires judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates, and discount rates.

Credit and Collections

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments.  If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income.  The Company determines its allowance for doubtful accounts by first considering all known collectability problems of customers’ accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables.  The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, and historical trends.  The amount ultimately not collected may differ from the reserve established, particularly in the case where percentages are applied against aging categories.  In all cases, it is management’s goal to carry a reserve against the Company’s accounts receivable which is adequate based upon the information available at that time so that net accounts receivable is properly stated. The Company also establishes allowances, at the time revenue is recognized, for returns and allowances, discounts, pricing and other possible customer deductions.  These allowances are based upon historical trends.

Warranty Reserves

 The Company maintains a warranty reserve which is reflective of its limited warranty policy. The warranty reserve covers the estimated future costs to repair or replace defective product or installation services, whether the product is returned, scrapped or repaired in the field. The warranty reserve is first determined based upon known claims or issues, and then by the application of a specific percentage of sales to cover general claims. The percentage applied to sales to calculate general claims is based upon historical claims as a percentage of sales. Management addresses the adequacy of its warranty reserves on a quarterly basis to ensure the reserve is accurate based upon the most current information.

Inventory Reserves

The Company maintains an inventory reserve for probable obsolescence of its inventory. The Company first determines its obsolete inventory reserve by considering specific known obsolete items, and then by applying certain percentages to specific inventory categories based upon inventory turns. The Company uses various tools, in addition to inventory turns, to identify which inventory items have the potential to become obsolete. Significant judgment is used to establish obsolescence reserves and management adjusts these reserves as more information becomes available about the ultimate disposition of the inventory item.  Management values inventory at lower of cost or market.

New Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued ASU 2014-09, “Revenue from Contracts with Customers.” This amended guidance supersedes and replaces all existing U.S. GAAP revenue recognition guidance. The guidance established a new revenue recognition model, changes the basis for deciding when revenue is recognized over a point in time, provides new and more detailed guidance on specific revenue topics, and expands and improves disclosures about revenue. The amended guidance is effective for fiscal years and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal year 2019. The Company has not yet determined the impact the amended guidance will have on its financial statements.

In July 2015, the Financial Accounting Standards Board issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amended guidance requires an entity to measure in scope inventory at lower of cost and net realizable value. The amended guidance is effective for fiscal years beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

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In December 2015, the Financial Accounting Standards Board issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes.” The amended guidance eliminates the current requirements for organizations to present deferred tax liabilities and assets as current and noncurrent. Instead, all deferred tax assets and liabilities will be classified as noncurrent. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after December 15, 2016, or the Company’s fiscal year 2018. Adoption of this standard will result in the deferred tax asset and deferred tax liability being classified as non-current.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk since June 30, 2015.  Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 14 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2015.

 ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2015, our disclosure controls and procedures were effective. Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that control objectives are met. Because of inherent limitations in all control systems, no evaluation of controls can provide assurance that all control issues and instances of fraud, if any, within a company will be detected. Additionally, controls can be circumvented by individuals, by collusion of two or more people, or by management override. Over time, controls can become inadequate because of changes in conditions or the degree of compliance may deteriorate. Further, the design of any system of controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Because of the inherent limitations in any cost-effective control system, misstatements due to errors or fraud may occur and not be detected.

Changes in Internal Control

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) The Company does not purchase into treasury its own common shares for general purposes.  However, the Company does purchase its own common shares, through a Rabbi Trust, in connection with investments of employee/participants of the LSI Industries Inc. Non-Qualified Deferred Compensation Plan.  Purchases of Company common shares for this Plan in the first quarter of fiscal 2016 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
10/1/15 to 10/31/15	--	n/a	--	(1)
11/1/15 to 11/30/15	3,046	$11.54	3,046	(1)
12/1/15 to 12/31/15	1,101	$12.55	1,101	(1)
Total	4,147	$11.81	4,147	(1)

(1) All acquisitions of shares reflected above have been made in connection with the Company's Non-Qualified Deferred Compensation Plan, which has been authorized for 575,000 shares of the Company to be held in and distributed by the Plan.  At December 31, 2015, the Plan held 250,075 common shares of the Company and had distributed 251,582 common shares.

ITEM 6.  EXHIBITS

Exhibits:

10.1	Amended and Restated 2012 Stock Incentive Plan as of November 19, 2015
31.1	Certification of Principal Executive Officer required by Rule 13a-14(a)
31.2	Certification of Principal Financial Officer required by Rule 13a-14(a)
32.1	Section 1350 Certification of Principal Executive Officer
32.2	Section 1350 Certification of Principal Financial Officer

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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.

	LSI Industries Inc.
	By:	/s/ Dennis W. Wells
		Dennis W. Wells
		Chief Executive Officer and President
		(Principal Executive Officer)
	By:	/s/ Ronald S. Stowell
		Ronald S. Stowell
		Vice President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)
February 4, 2016

Page 38 

EX-10.1

EXHIBIT 10.1

LSI INDUSTRIES INC.

AMENDED AND RESTATED

2012 STOCK INCENTIVE PLAN

AS OF NOVEMBER 19, 2015

TABLE OF CONTENTS
1.            Purposes	A-1
2.            Definitions	A-1
3.            Administration of the Plan	A-5
(a)     Authority of Committee	A-5
(b)     Binding Authority	A-6
(c)     Delegation of Authority	A-6
4.            Eligibility	A-6
5.            Common Shares Subject to the Plan	A-7
(a)     Authorized Number of Common Shares	A-7
(b)     Share Counting	A-7
(c)     Award Limitations	A-8
(d)     Shares to be Delivered	A-8
6.            Awards to Participants	A-8
(a)     Stock Options.	A-8
(b)     Stock Appreciation Rights	A-9
(c)     Restricted Shares and Restricted Share Units	A-11
(d)     Performance-Based Exception	A-12
(e)     Unrestricted Share Awards	A-13
7.            Deferred Payment	A-13
8.            Dilution and Other Adjustments	A-14
9.            Change in Control	A-14
10.          Termination	A-14
(a)     Termination by Death, Disability, or Retirement	A-14
(b)     Termination for Cause	A-14
(c)     Other Terminations	A-15
(d)     Limitation for ISOs	A-15
(e)     Transfers and Leaves of Absence	A-15
11.          Recoupment or Recovery Policy	A-15
12.          Miscellaneous Provisions	A-15
(a)     Rights as a Shareholder	A-15
(b)     No Loans	A-15
(c)     Assignment or Transfer	A-16
(d)     Withholding Taxes	A-16
(e)     No Rights to Awards	A-16

(f)     Beneficiary Designation	A-16
(g)     Fractional Shares	A-17
(h)     Unfunded Plan	A-17
(i)     Severability	A-17
(j)     Limitation of Liability	A-17
(k)     Successors	A-17
(l)     Code Section 409A Compliance	A-17
13.          Effective Date, Amendments, Governing Law and Plan Termination	A-17
(a)     Effective Date	A-17
(b)     Amendments	A-18
(c)     Governing Law	A-18
(d)     Plan Termination	A-18

LSI INDUSTRIES INC.
AMENDED AND RESTATED

2012 STOCK INCENTIVE PLAN

AS OF NOVEMBER 19, 2015

1.            Purposes

The purposes of the Plan are to provide long-term incentives to those persons with significant responsibility for the success and growth of the Company, to align the interests of such persons with those of the Company’s shareholders, to assist the Company in recruiting, retaining and motivating employees, directors and consultants on a competitive basis and to link compensation to performance.

2.            Definitions

For purposes of the Plan, the following capitalized terms shall have the meanings specified below:

(a)     “Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange Act.

(b)     “Award” means a grant of Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Share Units or unrestricted Common Shares, or any or all of them, to a Participant.

(c)     “Award Agreement” means an agreement, either in written or electronic format, between the Company and a Participant setting forth the terms and conditions of an Award granted to the Participant.

(d)     “Beneficial Owner” has the meaning given in Rule 13d-3 under the Exchange Act.

(e)     “Board” means the Board of Directors of the Company.

(f)     “Cause” means with respect to any Participant, unless otherwise provided in the applicable Award Agreement, (i) the Participant’s conviction or misappropriation of money or other property or conviction of a felony, or a guilty plea or plea of nolo contendere by Participant with respect to a felony, (ii) conduct by the Participant that is in competition with the Company, conduct by a Participant that breaches the Participant’s duty of loyalty to the Company or a Participant’s willful misconduct, any of which materially injures the Company, (iii) a willful and material breach by the Participant of his or her obligations under any agreement entered into between the Participant and the Company that materially injures the Company, or (iv) the Participant’s failure to substantially perform his or her duties with the Company (other than by reason of the Participant’s Disability). For Participants subject to Section 16 of the Exchange Act, the determination of whether any conduct, action or failure to act constitutes “Cause” shall be made by the Committee in its sole discretion.

A-1

(g)     “Change in Control” means the occurrence of any of the following events:

(i)     Any Person (including a “group” as defined in Section 14(d) of the Exchange Act) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing more than 25% of the combined voting power of the Company’s then-outstanding securities; provided, however, that no Change of Control shall be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company;

(ii)     During any one year period, individuals who at the beginning of such period constitute the Board and any new director whose election to the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two−thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority of the Board;

(iii)     A reorganization, merger or consolidation of the Company in each case, unless, following such reorganization, merger or consolidation, all or substantially all of the individuals and entities who were the Beneficial Owners of the Company’s outstanding voting securities immediately prior thereto beneficially own, directly or indirectly, more than 75% of the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership immediately prior to such reorganization, merger or consolidation of the outstanding voting securities of the Company; or

(iv)     A liquidation, dissolution, sale or other disposition of all or substantially all of the assets of the Company (other than in a transaction in which all or substantially all of the individuals and entities who were the Beneficial Owners of the Company’s outstanding voting securities immediately prior to such sale or other disposition beneficially own, directly or indirectly, substantially all of the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors of the acquiror of such assets (either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such sale or other disposition).

Notwithstanding anything herein to the contrary, and only to the extent that an Award is subject to Code Section 409A and payment of the Award pursuant to the application of the definition of “Change in Control” above would cause such Award not to otherwise comply with Code Section 409A, payment of an Award may occur upon a Change in Control only to the extent that the event constitutes a “change in the ownership or effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company under Code Section 409A.

(h)     “Code” means the Internal Revenue Code of 1986, as amended, and any rules, regulations or guidance promulgated thereunder. Any reference to the Code or a section thereof shall also refer to any successor Code or section.

A-2

(i)     “Committee” means a committee appointed by the Board consisting of at least three members of the Board, all meeting the definitions of “outside director” set forth in Code Section 162(m), “independent director” set forth in The Nasdaq Stock Market rules, and “non-employee director” set forth in Rule 16b-3 of the Exchange Act, or any successor definitions adopted for a similar purpose by the Internal Revenue Service, any national securities exchange on which the Common Shares are listed or the Securities and Exchange Commission.

(j)     “Common Share” or “Common Shares” means one or more of the common shares, without par value, of the Company.

(k)     “Company” means LSI Industries Inc., a corporation organized under the laws of the State of Ohio, its subsidiaries, divisions and affiliated businesses.

(l)     “Date of Grant” means the date on which the Committee authorizes the grant of an Award or such later date as may be specified by the Committee in such authorization.

(m)     “Disability” means a Participant’s physical or mental incapacity resulting from personal injury, disease, illness or other condition which (i) prevents him or her from performing his or her duties for the Company, as determined by the Committee or its designee, and (ii) results in his or her termination of employment or service with the Company. The Committee may substitute a different definition for the term “Disability” in its discretion as it deems appropriate.

(n)     “Effective Date” has the meaning set forth in Section 13(a).

(o)     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any rules, regulations, schedules or guidance promulgated thereunder. Any reference to the Exchange Act or a section thereof shall also refer to any successor Exchange Act or section.

(p)      “Exercise Price” means the purchase price of a Common Share covered by a Stock Option or SAR, as applicable.

(q)     “Fair Market Value” on any date means the closing price of the Common Shares as reported on The Nasdaq Stock Market or, if applicable, any other national securities exchange on which the Common Shares are principally traded, or, if there were no sales of Common Shares on such date, then on the immediately preceding date on which there were any sales of Common Shares. If the Common Shares cease to be traded on a national securities exchange, the Fair Market Value shall be determined pursuant to a reasonable valuation method prescribed by the Committee. In the case of an ISO (or Tandem SAR), Fair Market Value shall be determined by the Committee in accordance with Code Section 422. For Awards intended to be exempt from Code Section 409A, Fair Market Value shall be determined by the Committee in accordance with Code Section 409A.

(r)     “Full-Value Award” means Restricted Shares, Restricted Share Units or unrestricted Common Shares.

(s)     “ISO” means an Incentive Stock Option satisfying the requirements of Code Section 422 and designated as an ISO by the Committee.

A-3

(t)     “Non-Employee Director” means a member of the Board who is not an employee of the Company.

(u)     “NQSO” means a non-qualified Stock Option that does not satisfy the requirements of Code Section 422 or that is not designated as an ISO by the Committee.

(v)     “Participant” means a person eligible to receive an Award under the Plan, as set forth in Section 4, and designated by the Committee to receive an Award subject to the conditions set forth in the Plan and any Award Agreement.

(w)     “Performance-Based Exception” means the performance-based exception to the deductibility limitations of Code Section 162(m), as set forth in Code Section 162(m)(4)(C) and applicable Treasury Department regulations thereunder.

(x)     “Performance Goals” means the goals established by the Committee, as described in Section 6(d)(ii).

(y)     “Performance Measures” means the criteria set out in Section 6(d)(iii) that may be used by the Committee as the basis for a Performance Goal.

(z)     “Performance Period” means the period established by the Committee during which the achievement of Performance Goals is assessed in order to determine whether and to what extent an Award that is conditioned on attaining Performance Goals has been earned.

(aa)     “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, except that such term shall not include (i) the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Company securities.

(bb)     “Plan” means the LSI Industries Inc. Amended and Restated 2012 Stock Incentive Plan as of November 19, 2015, as amended and restated from time to time.

(cc)     “Prior Plan” means the LSI Industries Inc. 2003 Equity Compensation Plan, as amended and restated.

(dd)     “Restricted Shares” means Common Shares that are subject to restrictions, as described in Section 6(c).

(ee)     “Restricted Share Units” means a right, as described in Section 6(c), denominated in Common Shares to receive an amount, payable in either cash, Common Shares, Restricted Shares, or a combination thereof, equal to the value of a specified number of Common Shares.

(ff)     “Restriction Period” means, with respect to any Full-Value Award, the period during which any risk of forfeiture or other restrictions set by the Committee, including performance restrictions, remain in effect until such time as they have lapsed under the terms and conditions of the Full-Value Award or as otherwise determined by the Committee, including the Performance Period for Full-Value Awards intended to qualify for the Performance-Based Exception.

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(gg)     “Retirement” means retirement with the Company at or after age 65 or at or after the later of age 55 and ten years of service.

(hh)     “Securities Act” means the Securities Act of 1933, as amended, and any rules, regulations, schedules or guidance promulgated thereunder. Any reference to the Securities Act or a section thereof shall also refer to any successor Securities Act or section.

(ii)     “Stock Appreciation Right” or “SAR” means the right, as described in Section 6(b), to receive a payment equal to the excess of the Fair Market Value of a Common Share on the date the SAR is exercised over the Exercise Price established for that SAR at the time of grant, multiplied by the number of Common Shares with respect to which the SAR is exercised.

(jj)     “Stock Option” means the right, as described in Section 6(a), to purchase Common Shares at a specified price for a specified period of time. Stock Options include ISOs and NQSOs.

(kk)     “Tandem SAR” means a SAR granted in tandem with a Stock Option.

3.            Administration of the Plan

(a)     Authority of Committee. The Plan shall be administered by the Committee. Unless otherwise determined by the Board, the Compensation Committee of the Board shall serve as the Committee. The Committee shall have all the powers vested in it by the terms of the Plan, such powers to include the sole and exclusive authority to (within the limitations described in the Plan):

(i)     select Participants to be granted Awards under the Plan and grant Awards pursuant to the terms of the Plan;

(ii)     determine the type, size and terms of the Awards to be granted to each Participant;

(iii)     determine the time when Awards are to be granted and any conditions that must be satisfied before an Award is granted;

(iv)     establish objectives and conditions for earning an Award;

(v)     determine all other terms and conditions, not inconsistent with the terms of the Plan and any operative employment or other agreement, of any Award granted under the Plan, and determine the appropriate Award Agreement evidencing the Award;

(vi)     determine whether the terms, conditions, and objectives for earning an Award have been met, including, without limitation, any such determination or certification, as the case may be, required for compliance with Code Section 162(m);

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(vii)     modify or waive the terms and conditions of Awards granted under the Plan, not inconsistent with the terms of the Plan and any operative employment or other agreement, accelerate the vesting, exercise or payment of an Award or cancel or suspend an Award;

(viii)     determine whether the amount or payment of an Award should be reduced or eliminated, and determine if, when and under what conditions payment of all or any part of any Award may be deferred;

(ix)     determine the guidelines and/or procedures for the payment or exercise of Awards;

(x)     determine whether any Awards granted to an employee should qualify for the Performance-Based Exception;

(xi)     adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan;

(xii)     construe, interpret, administer and implement the Plan, any Award Agreements or related documents and correct any defect, supply an omission or reconcile any inconsistency in or between the Plan, any Award Agreement or related documents; and

(xiii)     make factual determinations with respect to the Plan and any Awards and otherwise supervise the administration of the Plan.

(b)     Binding Authority. The Committee’s interpretations of the Plan, and all actions taken and determinations made by the Committee pursuant to the powers vested in it under the Plan, shall be conclusive and binding on all parties, including the Company, its shareholders and all Participants.

(c)     Delegation of Authority. To the extent not prohibited by law or the rules of the national securities exchange on which the Company’s Common Shares are listed, the Committee may allocate its authority hereunder to one or more of its members or delegate its authority hereunder to one or more Non-Employee Directors, except that no such allocation or delegation shall be permitted with respect to Awards intended to qualify for the Performance-Based Exception, and may grant authority to employees of the Company to execute documents on behalf of the Committee or to otherwise assist in the administration and operation of the Plan. When the Committee delegates its authority hereunder to one or more officers of the Company, it shall specify the total number of Awards that the officer or officers may award and the terms on which any Awards may be issued, offered or sold. In no event shall the Committee authorize any officer to designate such officer as a recipient of any Awards.

4.            Eligibility

Subject to the terms and conditions of the Plan, the Committee may select, from all eligible persons, Participants to whom Awards shall be granted under the Plan and shall determine the nature and amount of each Award. Eligible persons include any of the following individuals: (i) any officer or key employee of the Company, (ii) any consultant (as defined in the General Instructions to the Form S-8 registration statement under the Securities Act) to the Company, and (iii) any Non-Employee Director. All Awards shall be evidenced by an Award Agreement, and Awards may be conditioned upon the Participant’s execution of an Award Agreement.

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5.            Common Shares Subject to the Plan

(a)     Authorized Number of Common Shares. Unless otherwise authorized by the Company’s shareholders and subject to this Section 5 and Section 8, the maximum aggregate number of Common Shares available for issuance under the Plan is 2,800,000, plus (i) the number of Common Shares that, on the Effective Date, are available to be granted under the Prior Plan but which are not then subject to outstanding awards under the Prior Plan, and (ii) the number of Common Shares subject to outstanding awards under the Prior Plan as of the Effective Date which thereafter are forfeited, settled in cash or cancelled or expire. Upon the Effective Date, the Prior Plan will terminate; provided that all outstanding awards under the Prior Plan as of the Effective Date shall remain outstanding and shall be administered and settled in accordance with the provisions of the Prior Plan, as applicable. The maximum number of Common Shares available for issuance with respect to ISOs is 2,800,000.

(b)     Share Counting. The following rules shall apply in determining the number of Common Shares available for grant under the Plan:

(i)     Common Shares subject to any Award shall be counted against the maximum share limitation as one Common Share for every Common Share subject thereto.

(ii)     To the extent that any Award is forfeited, cancelled, settled in cash, returned to the Company for failure to satisfy vesting requirements or other conditions of the Award or otherwise terminates without an issuance of Common Shares being made, the maximum share limitation shall be credited with one Common Share for each Common Share subject to such Award, and such number of credited Common Shares may again be made subject to Awards under the Plan.

(iii)     Any Common Shares tendered by a Participant or withheld as full or partial payment of withholding or other taxes or as payment for the exercise or conversion price of an Award or repurchased by the Company with Stock Option proceeds shall not be added back to the number of Common Shares available for issuance under the Plan. Upon exercise of a SAR, the number of Common Shares subject to the Award that are being exercised shall be counted against the maximum aggregate number of Common Shares that may be issued under the Plan on the basis of one Common Share for every Common Share subject thereto, regardless of the actual number of Common Shares used to settle the SAR upon exercise.

(iv)     Any Common Shares underlying Awards granted through the assumption of, or in substitution for, outstanding awards previously granted to individuals who become employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction shall not, unless required by law or regulation, count against the reserve of available Common Shares under the Plan.

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(c)     Award Limitations. Subject to the adjustment provisions of Section 8:

(i)     The maximum aggregate number of Common Shares that may be subject to Stock Options or SARs granted in any calendar year to any one Participant shall be 250,000 Common Shares.

(ii)     The maximum aggregate number of Common Shares that may be subject to Full-Value Awards granted in any calendar year to any one Participant shall be 50,000 Common Shares.

(d)     Shares to be Delivered. Common Shares to be delivered by the Company under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

6.            Awards to Participants

(a)     Stock Options.

(i)     Grants. Subject to the terms and conditions of the Plan, Stock Options may be granted to Participants, in such number and upon such terms and conditions as the Committee determines, and may consist of ISOs or NQSOs. Stock options may be granted alone or with Tandem SARs. With respect to Stock Options granted with Tandem SARs, the exercise of either such Stock Options or Tandem SARs will result in the simultaneous cancellation of the same number of Stock Options or Tandem SARs, as the case may be.

(ii)     Exercise Price. The Exercise Price shall be equal to or, at the Committee’s discretion, greater than the Fair Market Value on the date the Stock Option is granted, unless the Stock Option was granted through the assumption of, or in substitution for, outstanding awards previously granted to individuals who became employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction, in which case the assumption or substitution shall be accomplished in a manner that permits the Stock Option to be exempt from Code Section 409A.

(iii)     Term. The term of Stock Options shall be determined by the Committee in its sole discretion, but in no event shall the term exceed ten years from the Date of Grant.

(iv)     ISO Limits. ISOs may be granted only to Participants who are employees of the Company (or of any parent or subsidiary corporation within the meaning of Code Section 424) on the Date of Grant, and may only be granted to an employee who, at the time the Stock Option is granted, does not own more than ten percent of the total combined voting power of all classes of stock of the Company (or of any parent or subsidiary corporation within the meaning of Code Section 424), unless (A) the Exercise Price is at least 110% percent of the Fair Market Value on the Date of Grant, and (B) the ISO is not exercisable after five years from the Date of Grant. The aggregate Fair Market Value of all Common Shares, determined at the time the ISOs are granted, with respect to which ISOs are exercisable by a Participant for the first time during any calendar year (under all plans of the Company) shall not exceed $100,000 or such other amount as may subsequently be specified by the Code. If such Fair Market Value exceeds the $100,000 limit, the ISOs exceeding the limit shall be treated as NQSOs, taking the Stock Options in the order each was granted. The terms of all ISOs shall be consistent with and contain or be deemed to contain all provisions required to qualify as an “incentive stock option” under Code Section 422.

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(v)     No Repricing. Subject to the adjustment provisions of Section 8, without the approval of the Company’s shareholders, (A) the Exercise Price for any outstanding Stock Option may not be decreased after the Date of Grant, (B) no outstanding Stock Option may be surrendered to the Company as consideration for the grant of a new Stock Option with a lower Exercise Price, and (C) no other modifications to any outstanding Stock Option may be made that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the national securities exchange on which the Common Shares are listed.

(vi)     Form of Payment. Vested Stock Options may be exercised in whole or in part, and the Exercise Price shall be paid to the Company at the time of exercise, subject to any applicable rules or regulations adopted by the Committee:

(A) to the extent permitted by applicable law, pursuant to cashless exercise procedures that are approved by the Committee;

(B) through the tender of unrestricted Common Shares owned by the Participant (or by delivering a certification or attestation of ownership of such Common Shares) valued at their Fair Market Value on the date of exercise;

(C) in cash or its equivalent; or

(D) by any combination of (A), (B), and (C) above.

(vii)     No Dividends or Shareholder Rights. No dividends or dividend equivalents may be paid on Stock Options. Except as otherwise provided herein, a Participant shall have no rights as a holder of Common Shares covered by a Stock Option unless and until such Common Shares have been registered to the Participant as the owner.

(viii)     Other Restrictions. Stock Options may be granted subject to such terms and conditions as the Committee determines, including, without limitation: forfeiture conditions, transfer restrictions, restrictions based upon the achievement of specific Performance Goals (Company-wide, divisional and/or individual) which may be based on one or more Performance Measures, time-based restrictions on vesting and/or restrictions under applicable federal or state securities laws.

(b)     Stock Appreciation Rights.

(i)     Grants. Subject to the terms and provisions of the Plan, SARs may be granted to Participants, in such number and upon such terms and conditions as the Committee determines, and may be granted alone or as Tandem SARs. With respect to Tandem SARs, the exercise of either such Stock Options or SARs will result in the simultaneous cancellation of the same number of Tandem SARs or Stock Options, as the case may be.

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(ii)     Exercise Price. The Exercise Price shall be equal to or, at the Committee’s discretion, greater than Fair Market Value on the date the SAR is granted, unless the SAR was granted through the assumption of, or in substitution for, outstanding awards previously granted to individuals who became employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction involving the Company, in which case the assumption or substitution shall be accomplished in a manner that permits the SAR to be exempt from Code Section 409A.

(iii)     Term. The term of a SAR shall be determined by the Committee in its sole discretion, but in no event shall the term exceed ten years from the Date of Grant; provided that, each SAR granted in tandem with a Stock Option shall terminate upon the termination or exercise of the related Stock Option.

(iv)     No Repricing. Subject to the adjustment provisions of Section 8, without the approval of the Company’s shareholders, (A) the Exercise Price for any outstanding SAR may not be decreased after the Date of Grant, (B) no outstanding SAR may be surrendered to the Company as consideration for the grant of a new SAR with a lower Exercise Price, and (C) no other modifications to any outstanding SAR may be made that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the national securities exchange on which the Common Shares are listed.

(v)     Form of Payment. Vested SARs may be exercised in whole or in part, and the Committee may authorize payment of a SAR in the form of cash, Common Shares valued at its Fair Market Value on the date of the exercise or a combination thereof, or by any other method as the Committee may determine.

(vi)     Tandem SARs. Tandem SARs may be exercised for all or part of the Common Shares subject to the related Stock Option upon the surrender of the right to exercise the equivalent portion of the related Stock Option. A Tandem SAR may be exercised only with respect to the Common Shares for which its related Stock Option is then exercisable. Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (A) the Tandem SAR will expire no later than the expiration of the underlying ISO; (B) the value of the payout with respect to the Tandem SAR may be for no more than 100% of the excess of the Fair Market Value of the Common Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Exercise Price of the underlying ISO; and (C) the Tandem SAR may be exercised only when the Fair Market Value of the Common Shares subject to the ISO exceeds the Exercise Price of the ISO.

(vii)     No Dividends or Shareholder Rights. No dividends or dividend equivalents may be paid on SARs. Except as otherwise provided herein, a Participant shall have no rights as a holder of Common Shares covered by a SAR unless and until such Common Shares have been registered to the Participant as the owner.

(viii)     Other Restrictions. SARs may be granted subject to such terms and conditions as the Committee determines, including, without limitation: forfeiture conditions, transfer restrictions, restrictions based upon the achievement of specific Performance Goals (Company-wide, divisional and/or individual) which may be based on one or more Performance Measures, time-based restrictions on vesting and/or restrictions under applicable federal or state securities laws.

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(c)     Restricted Shares and Restricted Share Units.

(i)     Grants. Subject to the terms and provisions of the Plan, Restricted Shares and Restricted Share Units may be granted to Participants in such number and upon such terms and conditions as the Committee determines. Restricted Shares will be registered in the name of the Participant and deposited with the Company or its agent in certificated or book-entry form.

(ii)     Restrictions. Restricted Shares or Restricted Share Units may be granted at no cost or at a purchase price determined by the Committee, which may be less than the Fair Market Value, but subject to such terms and conditions as the Committee determines, including, without limitation: forfeiture conditions, transfer restrictions, restrictions based upon the achievement of specific Performance Goals (Company-wide, divisional and/or individual) which may be based on one or more Performance Measures, time-based restrictions on vesting and/or restrictions under applicable federal or state securities laws. Subject to Sections 9 and 10, for Awards to employees, no Restricted Shares or Restricted Share Units conditioned upon the achievement of performance shall be based on a Restriction Period of less than one year, and, except as may be determined by the Committee, any Restriction Period based solely on continued employment or service (time-based) shall be for a minimum of three years, subject to (A) pro rata or graded vesting prior to the expiration of such time-based Restriction Period, and (B) acceleration due to the Participant’s death, Disability or Retirement, in each case as specified in the applicable Award Agreement; provided that the Restriction Period applicable to the first vesting date of an Award subject to pro rata or graded vesting (as referenced in (A) above) may be for less than one year, provided the first vesting date is no earlier than the fiscal year-end date of the fiscal year during which the Award was granted. To the extent the Restricted Shares or Restricted Share Units are intended to qualify for the Performance-Based Exception, except as may be determined by the Committee, the applicable restrictions shall be based on the achievement of Performance Goals over a Performance Period, as described in Section 6(d).

(iii)     Transfer Restrictions. During the Restriction Period, Restricted Shares and Restricted Share Units may not be sold, assigned, transferred or otherwise disposed of, or mortgaged, pledged or otherwise encumbered. In order to enforce the limitations imposed upon the Restricted Shares, the Committee may (A) cause a legend or legends to be placed on any certificates evidencing such Restricted Shares, and/or (B) cause “stop transfer” instructions to be issued, as it deems necessary or appropriate.

(iv)     Dividends and Voting Rights. Unless otherwise determined by the Committee, during the Restriction Period, Participants who hold Restricted Shares shall have the right to receive dividends in cash or other property or other distribution or rights in respect of the Restricted Shares and shall have the right to vote the Restricted Shares as the record owners; provided that, unless otherwise determined by the Committee, any dividends or other property payable to a Participant during the Restriction Period shall be distributed to the Participant only if and when the restrictions imposed on the applicable Restricted Shares lapse. Unless otherwise determined by the Committee, during the Restriction Period, Participants who hold Restricted Share Units shall be credited with dividend equivalents in respect of such Restricted Share Units; provided that, unless otherwise determined by the Committee, such dividend equivalents shall be distributed (without interest) to the Participant only if and when the restrictions imposed on the applicable Restricted Share Units lapse. Participants shall have no other rights as a shareholder with respect to Restricted Share Units unless otherwise determined by the Committee. Notwithstanding the forgoing, no Restricted Shares or Restricted Share Units intended to qualify for the Performance-Based Exception shall provide the Participant with dividend or shareholder rights unless otherwise determined by the Committee; provided, however, that if dividend rights are provided, any dividends or other property otherwise payable to the Participant during the Restriction Period with respect to such Restricted Shares or Restricted Share Units shall accumulate and be payable only if and when the specific Performance Goals are attained.

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(v)     Payment of Restricted Share Units. Restricted Share Units that become payable in accordance with their terms and conditions shall be settled in cash, Common Shares, Restricted Shares, or a combination thereof, as determined by the Committee.

(vi)     Ownership. Restricted Shares shall be registered in the name of the Participant on the books and records of the Company or its designee (or by one or more physical certificates if physical certificates are issued) subject to the applicable restrictions imposed by the Plan. At the end of the Restriction Period that applies to Restricted Shares, the number of shares to which the Participant is entitled shall be delivered to the Participant free and clear of the restrictions, either in certificated or book-entry form. No Common Shares shall be registered in the name of the Participant with respect to Restricted Share Units, and Participants shall have no ownership interest in the Common Shares to which the Restricted Share Units relate, unless and until payment is made in Common Shares.

(vii)     Forfeiture. If a Participant who holds Restricted Shares or Restricted Share Units fails to satisfy the restrictions, terms or conditions applicable to the Award, except as otherwise determined by the Committee, the Participant shall forfeit the Restricted Shares or Restricted Share Units. The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse; however, to the extent the Restricted Shares or Restricted Share Units are intended to qualify for the Performance-Based Exception, the provisions of Section 6(d)(iv) will apply.

(d)     Performance-Based Exception.

(i)     Grants. Subject to the provisions of the Plan, Full-Value Awards granted in a manner that is intended to qualify for the Performance-Based Exception shall be conditioned upon the achievement of Performance Goals as the Committee shall determine, in its sole discretion.

(ii)     Performance Goals. Performance Goals shall be based on one or more Performance Measures, over a Performance Period, as to be determined by the Committee. Performance Goals shall be objective (as that term is described in Treasury Regulations under Code Section 162(m)) and shall be established in writing by the Committee not later than 90 days after the beginning of the Performance Period (but in no event after 25% of the Performance Period has elapsed), and while the outcome as to the Performance Goal is substantially uncertain.

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(iii)     Performance Measures. The Performance Measure(s) may be described in terms of objectives that are related to the individual Participant or objectives that are Company-wide or related to a subsidiary, division, department, region, function or business unit of the Company, and shall consist of one or more or any combination of the following criteria: cash flow, profit, revenue, stock price, market share, sales, net income, operating income, return ratios, earnings per share, earnings (which may include an add back for taxes, interest, and/or depreciation and amortization), operating earnings, profit margins, earnings per Common Share, favorable comparison to established budgets, return on shareholders’ equity, return on assets, attainment of strategic and operational initiatives, comparisons with various stock market indices, reduction in costs or a combination of such factors, personal performance measures, working capital, total assets, net assets, return on sales, return on invested capital, gross margin, costs, shareholders’ equity, shareholder return and/or productivity or productivity improvement. The Performance Goals based on these Performance Measures may be expressed in absolute terms or relative to the performance of other entities.

(iv)     Treatment of Awards. With respect to any Full-Value Award that is intended to qualify for the Performance-Based Exception: (A) the Committee shall interpret the Plan and this Section 6(d) in light of Code Section 162(m), (B) the Committee shall not amend the Full-Value Award in any way that would adversely affect the treatment of the Full-Value Award under Code Section 162(m), and (C) such Full-Value Award and any dividends or other property otherwise payable with respect to such Full-Value Award shall not vest or be paid until the Committee shall first have certified in writing that the Performance Goals have been achieved.

(e)     Unrestricted Share Awards.

Subject to the terms and provisions of the Plan, the Committee may grant awards of unrestricted Common Shares to Participants in such number and upon such terms and conditions as the Committee determines in recognition of outstanding achievements or contributions by such Participants or otherwise. Unrestricted Common Shares issued on a bonus basis may be issued for no cash consideration.

7.            Deferred Payment

Subject to the terms of the Plan, the Committee may determine that all or a portion of any Award to a Participant, whether it is to be paid in cash, Common Shares or a combination thereof, shall be deferred or may, in its sole discretion, approve deferral elections made by Participants. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, which terms shall comply with Code Section 409A.

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8.            Dilution and Other Adjustments

In the event of any merger, reorganization, consolidation, liquidation, recapitalization, reclassification, redesignation, stock dividend, other distribution (whether in the form of cash, shares or otherwise), stock split, reverse stock split, spin off, combination, repurchase or exchange of shares or issuance of warrants or rights to purchase shares or other securities, or other change in corporate structure affecting the Common Shares, the Committee shall make such adjustments in the aggregate number and type of Common Shares which may be delivered and the individual award maximums as set forth in Section 5, the number and type of Common Shares subject to outstanding Awards and the Exercise Price or other price of Common Shares subject to outstanding Awards (provided the number of Common Shares subject to any Award shall always be a whole number), as may be and to the extent determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. Such adjustment shall be conclusive and binding for all purposes of the Plan. Any such adjustment of an ISO or SAR shall be made in compliance with Code Sections 422 and 424, and no such adjustment shall be made that would cause any Award which is exempt from Code Section 409A or which is or becomes subject to Code Section 409A to fail to comply with the requirements of Code Section 409A.

9.            Change in Control

Notwithstanding any other provision of the Plan to the contrary, immediately upon the occurrence of a Change in Control, the following provisions of this Section 9 shall apply except to the extent an Award Agreement provides for a different treatment (in which case the Award Agreement shall govern):

(a)     all outstanding Stock Options and SARs vest and become fully exercisable; and

(b)     all Full-Value Awards become fully vested.

10.          Termination

(a)     Termination by Death, Disability, or Retirement. If a Participant’s employment by the Company terminates by reason of death, Disability or Retirement, or in the case of an advisory relationship if such business relationship terminates by reason of death or Disability, any Award held by such Participant, unless otherwise determined by the Committee at grant or otherwise interpreted pursuant to Section 12(l) hereof, shall be fully vested and may thereafter be exercised by the Participant or by the Participant’s beneficiary or legal representative, for a period of one year following termination of employment, in the case of death or Disability, and 90 days in the case of Retirement, or such longer period as the Committee may specify at or after grant in all cases other than ISOs, or until the expiration of the stated term of such Award, whichever period is shorter; provided that, for Full-Value Awards intended to qualify for the Performance-Based Exception, no vesting may occur or no distribution may be made in the case of Retirement prior to the attainment of the Performance Goals.

(b)     Termination for Cause. If a Participant’s employment or service terminates for Cause, (i) all Stock Options and SARs (or portions thereof) which have not been exercised, whether vested or not, and (ii) all unvested Full-Value Awards, shall immediately be forfeited upon termination, including such Awards that are subject to performance conditions (or unearned portions thereof).

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(c)     Other Terminations. If a Participant’s employment or service terminates, voluntarily or involuntarily, for any reason other than death, Disability, Retirement or Cause, (i) any vested portion of Stock Options or SARs held by the Participant at the time of termination may be exercised for a period of three months (or such other period as the Committee may specify at or after the time of grant) from the termination date, or until the expiration of the original term of the Stock Option or SAR, whichever period is shorter, (ii) no unvested portion of any Stock Option or SAR shall become vested, including such Awards that are subject to performance conditions (or unearned portions thereof), and (iii) all unvested Full-Value Awards, including such Awards that are subject to performance conditions (or unearned portions thereof), shall immediately be forfeited upon termination.

(d)     Limitation for ISOs. No ISO may be exercised more than three months following termination of employment for any reason (including Retirement) other than death or Disability, nor more than one year following termination of employment for the reason of death or Disability (as defined in Code Section 422), or such Award will no longer qualify as an ISO and shall thereafter be, and receive the tax treatment applicable to, a NQSO. For this purpose, a termination of employment is cessation of employment, under the rules applicable to ISOs, such that no employment relationship exists between the Participant and the Company.

(e)     Transfers and Leaves of Absence. The transfer of a Participant within the Company shall not be deemed a termination of employment except as required by Code Sections 422 and 409A, and other applicable laws. The following leaves of absences are not deemed to be a termination of employment:

(i)     if approved in writing by the Company, for military service, sickness or any other purpose approved by the Company, and the period of absence does not exceed 90 days;

(ii)     if in excess of 90 days, if approved in writing by the Company, but only if the Participant’s right to reemployment is guaranteed by statute or contract and provided that the Participant returns to work within 30 days after the end of such absence; and

(iii)     subject to the restrictions of Code Section 409A and to the extent that such discretion is permitted by law, if the Committee determines in its discretion that the absence is not a termination of employment.

11.          Recoupment or Recovery Policy

Any Award shall be subject to forfeiture or repayment pursuant to the terms of any applicable compensation recoupment or recovery policy adopted by the Company, Committee or Board, as thereafter amended, including any policy adopted to comply with the rules of any stock exchange on which the Common Shares are traded or the Securities and Exchange Commission.

12.          Miscellaneous Provisions

(a)     Rights as a Shareholder. Except as otherwise provided herein, a Participant shall have no rights as a shareholder with respect to Awards hereunder, unless and until the Common Shares have been registered to the Participant as the owner.

(b)     No Loans. No loans from the Company to Participants shall be permitted in connection with the Plan.

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(c)     Assignment or Transfer. Except as otherwise provided under the Plan, no Award or any rights or interests therein shall be transferable other than by will or the laws of descent and distribution. The Committee may, in its discretion, provide that an Award (other than an ISO) is transferable without the payment of any consideration to a Participant’s family member, subject to such terms and conditions as the Committee may impose. For this purpose, “family member” has the meaning given to such term in the General Instructions to the Form S-8 registration statement under the Securities Act. All Awards shall be exercisable, during the Participant’s lifetime, only by the Participant or a person who is a permitted transferee pursuant to this Section 12(c). Once awarded, the Common Shares (other than Restricted Shares) received by Participants may be freely transferred, assigned, pledged or otherwise subjected to lien, subject to the restrictions imposed by the Securities Act, Section 16 of the Exchange Act and the Company’s Insider Trading Policy, each as amended.

(d)     Withholding Taxes. The Company shall have the right to deduct from all Awards paid in cash to a Participant any taxes required by law to be withheld with respect to such Awards. All statutory minimum applicable withholding taxes arising with respect to Awards paid in Common Shares to a Participant shall be satisfied by the Company retaining Common Shares having a Fair Market Value on the date the tax is to be determined that is equal to the amount of such statutory minimum applicable withholding tax (rounded, if necessary, to the next lowest whole number of Common Shares); provided, however, that, subject to any restrictions or limitations that the Company deems appropriate, a Participant may elect to satisfy such statutory minimum applicable withholding tax through cash or cash proceeds.

(e)     No Rights to Awards. Neither the Plan nor any action taken hereunder shall be construed as giving any person any right to be retained in the employ or service of the Company, and the Plan shall not interfere with or limit in any way the right of the Company to terminate any person’s employment or service at any time. Except as set forth herein, no employee or other person shall have any claim or right to be granted an Award under the Plan. By accepting an Award, the Participant acknowledges and agrees that (i) the Award will be exclusively governed by the Plan, including the right of the Company to amend or cancel the Plan at any time without the Company incurring liability to the Participant (except, to the extent the terms of the Award so provide, for Awards already granted under the Plan), (ii) the Participant is not entitled to future award grants under the Plan or any other plan, and (iii) the value of any Awards received shall be excluded from the calculation of termination or other severance payments or benefits.

(f)     Beneficiary Designation. To the extent allowed by the Committee, each Participant under the Plan may name any beneficiary or beneficiaries to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives all of such benefit. Unless the Committee determines otherwise, each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee and shall be effective only when received in writing by the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

A-16

(g)     Fractional Shares. Fractional Common Shares shall not be issued or transferred under an Award, but the Committee may direct that cash be paid in lieu of fractional shares or may round off fractional shares, in its discretion.

(h)     Unfunded Plan. The Plan shall be unfunded and any benefits under the Plan shall represent an unsecured promise to pay by the Company. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general unsecured creditor of the Company.

(i)     Severability. If any provision of the Plan is deemed illegal or invalid, the illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

(j)     Limitation of Liability. Members of the Board and the Committee and officers and employees of the Company who are their designees acting under the Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross or willful misconduct in the performance of their duties hereunder.

(k)     Successors. All obligations of the Company with respect to Awards granted under the Plan shall be binding on any successor to the Company, whether as a result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

(l)     Code Section 409A Compliance. Each Award granted under the Plan is intended to be either exempt from or in compliance with the requirements of Code Section 409A and any regulations or guidance that may be adopted thereunder, including any transition relief available under applicable guidance. The Plan may be amended or interpreted by the Committee as it determines appropriate in accordance with Code Section 409A in order for the Plan and Awards to comply with Code Section 409A. If a Participant is a “specified employee” as defined in Code Section 409A at the time of the Participant’s separation from service with the Company, then solely to the extent necessary to avoid the imposition of any additional tax under Code Section 409A, the commencement of any payments or benefits under an Award shall be deferred until the date that is six months following the Participant’s separation from service (or such other period as required to comply with Code Section 409A). Notwithstanding the foregoing, the Company does not guarantee that Awards under the Plan will comply with Code Section 409A and the Committee is under no obligation to make any changes to Awards to cause such compliance.

13.          Effective Date, Amendments, Governing Law and Plan Termination

(a)     Effective Date. The Effective Date of the Plan is the date on which the Company’s shareholders approve the Plan at a duly held shareholder meeting.

A-17

(b)     Amendments.

(i)     Amendment of the Plan. The Committee or the Board may at any time terminate or amend the Plan in whole or in part, but no such action shall materially and adversely affect any rights or obligations with respect to any Awards granted prior to the date of such termination or amendment without the consent of the affected Participant, except to the extent that the Committee reasonably determines that such termination or amendment is necessary or appropriate to comply with applicable law or the rules and regulations of any stock exchange on which the Common Shares are traded or to preserve any intended favorable, or avoid any unintended unfavorable, tax effects for the Company, Plan or Participants. Notwithstanding the foregoing, unless the Company’s shareholders shall have first approved the amendment, no amendment of the Plan shall be effective if the amendment would: (A) increase the maximum number of Common Shares that may be delivered under the Plan or to any one individual (except to the extent made pursuant to Section 8 hereof), (B) extend the maximum period during which Awards may be granted under the Plan, (C) add to the types of awards that can be made under the Plan, (D) modify the requirements as to eligibility for participation in the Plan, (E) permit a repricing or decrease the Exercise Price to less than the Fair Market Value on the Date of Grant of any Stock Option or SAR, except for adjustments made pursuant to Section 8, (F) materially increase benefits to Participants, or (G) otherwise require shareholder approval pursuant to the Plan or applicable law or the rules of the principal securities exchange on which Common Shares are traded.

(ii)     Amendment of Awards. The Committee may amend, prospectively or retroactively, the terms of an Award, provided that no such amendment is inconsistent with the terms of the Plan or would materially and adversely affect the rights of any Participant without his or her written consent.

(c)     Governing Law. To the extent not preempted by Federal law, the Plan and all Award Agreements are construed in accordance with and governed by the laws of the State of Ohio. The Plan is not intended to be governed by the Employment Retirement Income Security Act of 1974, and shall be so construed and administered.

(d)     Plan Termination. No Awards shall be made under the Plan after the tenth anniversary of the Effective Date.

Approved by Board on August 19, 2015

Submitted to Shareholders for Approval on November 19, 2015

A-18

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer

Pursuant to Rule 13a-14(a)

I, Dennis W. Wells, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of LSI Industries Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 4, 2016	/s/ Dennis W. Wells
	Principal Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer

Pursuant to Rule 13a-14(a)

I, Ronald S. Stowell, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of LSI Industries Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 4, 2016	/s/ Ronald S. Stowell
	Principal Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF DENNIS W. WELLS

Pursuant to Section 1350 of Chapter 63 of the

United States Code and Rule 13a-14b

In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of LSI Industries Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2015 (the “Report”), I, Dennis W. Wells, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Dennis W. Wells

Dennis W. Wells

Chairman of the Board, Chief Executive Officer and President

Date: February 4, 2016

A signed original of this written statement required by Section 906 has been provided to LSI Industries Inc. and will be retained by LSI Industries Inc. and furnished to the Securities and Exchange Commission or its staff upon request

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF RONALD S. STOWELL

Pursuant to Section 1350 of Chapter 63 of the

United States Code and Rule 13a-14b

In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of LSI Industries Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2015 (the “Report”), I, Ronald S. Stowell, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ronald S. Stowell

Ronald S. Stowell

Vice President, Chief Financial Officer, and Treasurer

Date:  February 4, 2016

A signed original of this written statement required by Section 906 has been provided to LSI Industries Inc. and will be retained by LSI Industries Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	6 Months Ended
	Dec. 31, 2015	Feb. 02, 2016
Entity Registrant Name	LSI INDUSTRIES INC
Entity Central Index Key	0000763532
Trading Symbol	lyts
Current Fiscal Year End Date	--06-30
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		24,689,131
Document Type	10-Q
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Building [Member]
(Gain) on sale of building					$ (343)
Net sales	[1]	$ 84,687	$ 84,715	$ 170,612	163,181
Cost of products and services sold		60,761	64,160	123,337	124,018
Gross profit		$ 23,926	20,555	$ 47,275	39,163
Loss on sale of subsidiary (see Note 13)					565
Selling and administrative expenses		$ 18,546	18,331	$ 36,132	34,183
Operating Income (Loss)		5,380	2,224	11,143	4,758
Interest (income)		(17)	(6)	(25)	(9)
Interest expense		9	12	17	23
Income before income taxes		5,388	2,218	11,151	4,744
Income tax expense		1,606	630	3,619	1,629
Net income		$ 3,782	$ 1,588	$ 7,532	$ 3,115
Earnings per common share (see Note 4)
Basic earnings per share (in dollars per share)		$ 0.15	$ 0.06	$ 0.30	$ 0.13
Diluted earnings per share (in dollars per share)	[2]	$ 0.15	$ 0.06	$ 0.30	$ 0.13
Weighted average common shares outstanding
Weighted average shares outstanding during the period, net of treasury shares (a) (in shares)		24,911	24,449	24,838	24,442
Diluted (in shares)	[2],[3]	25,624	24,507	25,405	24,506

[1] Net sales are attributed to geographic areas based upon the location of the operation making the sale.

[2] Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

[3] Options to purchase 1,115,250 common shares and 2,377,900 common shares at December 31, 2015 and 2014, respectively, and options to purchase 1,506,800 common shares and 2,371,900 common shares at December 31, 2015 and 2014, respectively, were not included in the computation of the three month and six month periods for diluted earnings per share, respectively, because the exercise price was greater than the average fair market value of the common shares.

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Current Assets
Cash and cash equivalents	$ 28,763	$ 26,409
Accounts receivable, less allowance for doubtful accounts of $372 and $317, respectively	43,122	43,661
Inventories	45,885	43,083
Refundable income taxes	574	99
Other current assets	7,448	7,562
Total current assets	125,792	120,814
Land	6,980	6,952
Buildings	38,162	37,706
Machinery and equipment	77,570	76,383
Construction in progress	1,514	588
	124,226	121,629
Less accumulated depreciation	(80,510)	(78,441)
Net property, plant and equipment	43,716	43,188
Goodwill	10,508	10,508
Other Intangible Assets, net	5,839	6,092
Other Long-Term Assets, net	1,679	1,777
Total assets	187,534	182,379
Current Liabilities
Accounts payable	8,829	14,721
Accrued expenses	23,307	22,126
Total current liabilities	32,136	36,847
Other Long-Term Liabilities	$ 2,099	$ 2,580
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 24,685,777 and 24,392,938 shares, respectively	$ 110,891	$ 106,353
Retained earnings	42,408	36,599
Total shareholders’ equity	153,299	142,952
Total liabilities & shareholders’ equity	$ 187,534	$ 182,379

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Allowance for doubtful accounts	$ 372	$ 317
Preferred Shares, No Par Value (in dollars per share)	$ 0	$ 0
Preferred Shares, Authorized (in shares)	1,000,000	1,000,000
Preferred Shares, Issued (in shares)	0	0
Common shares, no par value (in dollars per share)	$ 0	$ 0
Common shares, authorized (in shares)	40,000,000	40,000,000
Common shares, outstanding (in shares)	24,685,777	24,392,938

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Building [Member]
Non-cash items included in net income
(Gain) on disposition of building		$ (343,000)
Net income	$ 7,532,000	3,115,000
Depreciation and amortization	3,174,000	3,138,000
Deferred income taxes	(448,000)	(101,000)
Deferred compensation plan	310,000	94,000
Stock or Unit Option Plan Expense	2,150,000	882,000
Issuance of common shares as compensation	113,000	96,000
(Gain) Loss on disposition of fixed assets	$ 1,000	(1,000)
Loss on sale of subsidiary		565,000
Allowance for doubtful accounts	$ 131,000	176,000
Inventory obsolescence reserve	699,000	753,000
Changes in certain assets and liabilities:
Accounts receivable	387,000	(2,021,000)
Inventories	(3,480,000)	1,757,000
Refundable income taxes	(475,000)	1,801,000
Accounts payable	(5,962,000)	(784,000)
Accrued expenses and other	920,000	1,792,000
Customer prepayments	438,000	(201,000)
Net cash flows provided by operating activities	5,490,000	10,718,000
Cash Flows from Investing Activities
Purchases of property, plant and equipment	(3,384,000)	(2,404,000)
Proceeds from sale of subsidiary, net of cash sold		1,494,000
Proceeds from sale of fixed assets	4,000	952,000
Net cash flows provided by (used in) investing activities	(3,380,000)	42,000
Cash Flows from Financing Activities
Cash dividends paid	(1,721,000)	(1,688,000)
Exercise of stock options	2,195,000	108,000
Purchase of treasury shares	(277,000)	$ (139,000)
Issuance of treasury shares	47,000
Net cash flows provided by (used in) financing activities	244,000	$ (1,719,000)
Increase in cash and cash equivalents	2,354,000	9,041,000
Cash and cash equivalents at beginning of period	26,409,000	9,013,000
Cash and cash equivalents at end of period	$ 28,763,000	$ 18,054,000

XML

Note 1 - Interim Condensed Consolidated Financial Statements

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Condensed Financial Statements [Text Block]

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of December 31, 2015, the results of its operations for the three and six month periods ended December 31, 2015 and 2014, and its cash flows for the six month periods ended December 31, 2015 and 2014. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2015 Annual Report on Form 10-K.  Financial information as of June 30, 2015 has been derived from the Company’s audited consolidated financial statements.

XML

Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

The condensed consolidated financial statements include the accounts of LSI Industries Inc. (an Ohio corporation) and its subsidiaries (collectively, the “Company”), all of which are wholly owned.  All intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition:

Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectability is reasonably assured.  Revenue is typically recognized at time of shipment.  In certain arrangements with customers, as is the case with the sale of some of our solid-state LED video screens, revenue is recognized upon customer acceptance of the video screen at the job site.  Sales are recorded net of estimated returns, rebates and discounts.  Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has five sources of revenue:  revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting; revenue from the management of media content and digital hardware related to active digital signage; and revenue from shipping and handling.

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment.  However, product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed.  The company provides product warranties and certain post-shipment service, support and maintenance of certain solid state LED video screens and billboards.

Installation revenue is recognized when the products have been fully installed.  The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products at each customer site have been installed.

Revenue from the management of media content and digital hardware related to active digital signage is recognized evenly over the service period with the customer. Media content service periods with most customers range from 1 month to 1 year.

Shipping and handling revenue coincides with the recognition of revenue from the sale of the product.

In situations where the Company is responsible for re-imaging programs with multiple sites, each site is viewed as a separate unit of accounting and has stand-alone value to the customer. Revenue is recognized upon the Company’s complete performance at the location, which may include a site survey, graphics products, lighting products, and installation of products. The selling price assigned to each site is based upon an agreed upon price between the Company and its customer and reflects the estimated selling price for that site relative to the selling price for sites with similar image requirements.

The Company also evaluates the appropriateness of revenue recognition in accordance with the accounting standard on software revenue recognition. Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental.

Credit and Collections:

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments.  If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income.  The Company determines its allowance for doubtful accounts by first considering all known collectability problems of customers’ accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables.  The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, and historical trends.  The Company also establishes allowances, at the time revenue is recognized, for returns, discounts, pricing and other possible customer deductions.  These allowances are based upon historical trends.

The following table presents the Company’s net accounts receivable at the dates indicated.

(In thousands)	December 31, 2015			June 30, 2015
Accounts receivable	$	43,494		$	43,978
Less: Allowance for doubtful accounts		(372	)		(317	)
Accounts receivable, net	$	43,122		$	43,661

Cash and Cash Equivalents:

The cash balance includes cash and cash equivalents which have original maturities of less than three months.  The Company maintains balances at financial institutions in the United States. The FDIC limit for insurance coverage on non-interest bearing accounts is $250,000.

As of December 31, 2015 and June 30, 2015, the Company had bank balances of $31,602,000 and $28,494,000, respectively, without insurance coverage.

Inventories:

Inventories are stated at the lower of cost or market.  Cost of inventories includes the cost of purchased raw materials and components, direct labor, as well as manufacturing overhead which is generally applied to inventory based on direct labor and material content. Cost is determined on the first-in, first-out basis.

Property, Plant and Equipment and Related Depreciation:

Property, plant and equipment are stated at cost.  Major additions and betterments are capitalized while maintenance and repairs are expensed.  For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful lives of the assets as follows:

Buildings (in years)	28	-	40
Machinery and equipment (in years)	3	-	10
Computer software (in years)	3	-	8

Costs related to the purchase, internal development, and implementation of the Company’s fully integrated enterprise resource planning/business operating software system are either capitalized or expensed in accordance with accounting guidance on internal use software.  Leasehold improvements are amortized over the shorter of fifteen years or the remaining term of the lease.

The Company recorded $1,471,000 and $1,425,000 of depreciation expense in the second quarter of fiscal 2016 and 2015, respectively, and

$2,921,000 and $2,863,000 of depreciation expense in the first half of fiscal 2016 and 2015, respectively.

Intangible Assets:

Intangible assets consisting of customer relationships, trade names and trademarks, patents, technology and software, and non-compete agreements are recorded on the Company's balance sheet.  The definite-lived intangible assets are being amortized to expense over periods ranging between five and twenty years.  The Company evaluates definite-lived intangible assets for permanent impairment when triggering events are identified. Neither indefinite-lived intangible assets nor the excess of cost over fair value of assets acquired ("goodwill") are amortized, however they are subject to review for impairment.  See additional information about goodwill and intangibles in Note 7.

Fair Value:

The Company has financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and on occasion, long-term debt.  The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.  The Company has no financial instruments with off-balance sheet risk.

Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in goodwill and other intangible asset impairment analyses, in the purchase price of acquired companies (if any), and in the valuation of the contingent earn-out. The accounting guidance was used to measure the fair value of these nonfinancial assets and nonfinancial liabilities.

Product Warranties:

The Company offers a limited warranty that its products are free from defects in workmanship and materials.  The specific terms and conditions vary somewhat by product line, but generally cover defective products returned within one to five years, with some exceptions where the terms extend to 10 years, from the date of shipment.  The Company records warranty liabilities to cover the estimated future costs for repair or replacement of defective returned products as well as products that need to be repaired or replaced in the field after installation.  The Company calculates its liability for warranty claims by applying estimates to cover unknown claims, as well as estimating the total amount to be incurred for known warranty issues.  The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, during the periods indicated below were as follows:

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	3,408		$	2,662		$	2,662
Additions charged to expense		2,259			1,557			3,185
Deductions for repairs and replacements		(1,357	)		(971	)		(2,439	)
Balance at end of the period	$	4,310		$	3,248		$	3,408

Research and Development Costs:

Research and development expenses are costs directly attributable to new product development, including the development of new technology for both existing and new products, and consist of salaries, payroll taxes, employee benefits, materials, outside legal costs and filing fees related to obtaining patents, supplies, depreciation and other administrative costs. The Company expenses as research and development all costs associated with development of software used in solid-state LED products.  All costs are expensed as incurred and are included in selling and administrative expenses.  Research and development costs related to both product and software development totaled $1,320,000 and $1,450,000 for the three months ended December 31, 2015 and 2014, respectively, and $2,631,000 and $3,301,000 for the six months ended December 31, 2015 and 2014, respectively.

Cost of Products and Services Sold:

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacture of products, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity. Cost of services sold is primarily comprised of the internal and external labor costs required to support the Company’s service revenue along with the management of media content.

Earnings Per Common Share:

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period net of treasury shares held in the Company’s non-qualified deferred compensation plan.  The computation of diluted earnings per share is based on the weighted average of common shares outstanding for the period and includes common share equivalents.  Common share equivalents include the dilutive effect of stock options, restricted stock units, contingently issuable shares and common shares to be issued under a deferred compensation plan, all of which totaled 987,000 shares and 383,000 shares for the three months ended December 31, 2015 and 2014, respectively, and 836,000 shares and 383,000 shares for the six months ended December 31, 2015 and 2014, respectively

See further discussion of earnings per common share in Note 4.

New Accounting Pronouncements:

In June 2014, the Financial Accounting Standards Board issued ASU 2014-09, “Revenue from Contracts with Customers.” This amended guidance supersedes and replaces all existing U.S. GAAP revenue recognition guidance. The guidance established a new revenue recognition model, changes the basis for deciding when revenue is recognized over a point in time, provides new and more detailed guidance on specific revenue topics, and expands and improves disclosures about revenue. The amended guidance is effective for fiscal years and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal year 2019. The Company has not yet determined the impact the amended guidance will have on its financial statements.

In July 2015, the Financial Accounting Standards Board issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amended guidance requires an entity to measure in scope inventory at lower of cost and net realizable value. The amended guidance is effective for fiscal years beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

In December 2015, the Financial Accounting Standards Board issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes.” The amended guidance eliminates the requirements for organizations to present deferred tax liabilities and assets as current and noncurrent. Instead, all deferred tax assets and liabilities will be classified as noncurrent. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

Comprehensive Income:

The Company does not have any comprehensive income items other than net income. The functional currency of the Company’s former Canadian operation was the U.S. dollar.

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the condensed consolidated financial statements were filed.  No items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements.

Use of Estimates:

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

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Note 3 - Segment Reporting Information

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 3 - SEGMENT

REPORTING

INFORMATION

The accounting guidance on segment reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. In the third quarter of fiscal 2015, the Company realigned its operating segments to be in alignment with the financial information received by the then new Chief Executive Officer. The Company’s three operating segments are Lighting, Graphics, and Technology, each of which has a president who is responsible for that business and reports to the CODM. An All Other Category as well as Corporate and Eliminations will also be reported in the segment information. As a result of the realignment of the Company’s operating segments in the third quarter of fiscal 2015, all prior period segment information has been revised so as to be comparable with the new segment reporting structure.

The changes made and realignment of the Company’s operating segments involved the following:

1) The segment formerly known as the Electronic Components Segment was renamed as the Technology Segment.

2) The LED Video Screen product line was moved out of the Lighting Segment and into the Technology Segment.

3) The Company’s installation management business (LSI Adapt) and the menu board business (LSI Images) were moved out of the All Other Category and into the Graphics Segment.

The Lighting Segment includes outdoor, indoor, and landscape lighting utilizing both traditional and LED light sources, that have been fabricated and assembled for the commercial, industrial and multi-site retail lighting markets, the Company’s primary niche markets (petroleum / convenience store market, automotive dealership market, and quick service restaurant market).

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements related to traditional graphics, active digital signage along with the management of media content related to digital signage, and menu board systems that are either digital or traditional by design. These products are used in visual image programs in several markets, including the petroleum / convenience store market, multi-site retail operations, banking, and restaurants. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.

The Technology Segment designs and manufactures electronic circuit boards, assemblies and sub-assemblies, various control system products used in other applications (including the control of solid-state LED lighting and metal halide lighting), and solid state LED video screens, scoreboards and advertising ribbon boards. This operating segment sells its products directly to customers (primarily in the transportation, original equipment manufacturers and medical markets) and also has significant inter-segment sales to the Lighting Segment.

The All Other Category includes only the Company’s former subsidiary that designed and produced high-performance light engines, large format video screens using solid-state LED technology, and certain specialty LED lighting. This subsidiary was sold on September 30, 2014 (See Note 13).

The Company’s corporate administration activities are reported in a line item titled Corporate and Eliminations.  This primarily includes intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, stock option expense for options granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes, and deferred income tax assets.

The Company’s Lighting Segment and Graphics Segment net sales to a petroleum / convenience store customer represented approximately $17,045,000 or 10% of consolidated net sales in the six months ended December 31, 2015. There was no concentration of consolidated net sales in the three months ended December 31, 2015 or in the three and six months ended December 31, 2014.  The Company’s Graphics Segment accounts receivable balance related to this customer at December 31, 2015 was $4,690,000 or 11% of consolidated net accounts receivable. There was no concentration of accounts receivable at June 30, 2015.

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of December 31, 2015 and December 31, 2014:

( In thousands)	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Net Sales:
Lighting Segment	$	59,601		$	59,796		$	118,676		$	115,517
Graphics Segment		21,034			20,269			42,787			36,293
Technology Segment		4,052			4,650			9,149			11,330
All Other Category		--			--			--			41
	$	84,687		$	84,715		$	170,612		$	163,181
Operating Income (Loss):
Lighting Segment	$	5,182		$	4,090		$	10,864		$	8,317
Graphics Segment		2,035			1,065			4,196			1,118
Technology Segment		993			499			2,333			1,131
All Other Category		--			--			--			(183	)
Corporate and Eliminations		(2,830	)		(3,430	)		(6,250	)		(5,625	)
	$	5,380		$	2,224		$	11,143		$	4,758
Capital Expenditures:
Lighting Segment	$	1,160		$	599		$	1,849		$	1,181
Graphics Segment		604			533			1,109			867
Technology Segment		108			241			224			285
All Other Category		--			--			--			4
Corporate and Eliminations		150			61			202			67
	$	2,022		$	1,434		$	3,384		$	2,404
Depreciation and Amortization:
Lighting Segment	$	717		$	729		$	1,422		$	1,451
Graphics Segment		213			256			428			506
Technology Segment		364			325			719			663
All Other Category		--			--			--			31
Corporate and Eliminations		304			242			605			487
	$	1,598		$	1,552		$	3,174		$	3,138

	December 31, 2015		June 30, 2015
Identifiable Assets:
Lighting Segment	$	87,209	$	90,713
Graphics Segment		36,306		29,477
Technology Segment		29,956		28,423
All Other Category		--		--
Corporate and Eliminations		34,063		33,766
	$	187,534	$	182,379

The segment net sales reported above represent sales to external customers.  Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses including impairment of goodwill, but excluding interest expense and interest income. Identifiable assets are those assets used by each segment in its operations. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes, and deferred income tax assets.

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In thousands)	2015		2014		2015		2014
Lighting Segment inter-segment net sales	$	814	$	445	$	1,428	$	1,497
Graphics Segment inter-segment net sales	$	562	$	125	$	1,006	$	256
Technology inter-segment net sales	$	8,932	$	7,675	$	18,316	$	14,947
All Other Category inter-segment net sales	$	--	$	--	$	--	$	308

The Company considers its geographic areas to be:  1) the United States, and 2) Canada.  The Company’s operations are in the United States, with one operation previously in Canada.  As a result of the sale of a subsidiary on September 30, 2014, the Company no longer has a presence in Canada (See Note 13). The geographic distribution of the Company’s net sales and long-lived assets are as follows:

( In thousands)	Three Months Ended December 31				Six Months Ended December 31
	2015		2014		2015		2014
Net Sales (a):
United States	$	84,687	$	84,715	$	170,612	$	163,140
Canada		--		--		--		41
	$	84,687	$	84,715	$	170,612	$	163,181

	December 31, 2015		June 30, 2015
Long-lived Assets (b):
United States	$	45,395	$	44,965
Canada		--		--
	$	45,395	$	44,965

a. Net sales are attributed to geographic areas based upon the location of the operation making the sale.

b. Long-lived assets include property, plant and equipment, and other long-term assets.  Goodwill and intangible assets are not included in long-lived assets.

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Note 4 - Earnings Per Common Share

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE 4 - EARNINGS PER COMMON SHARE

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data) :

	Three Months Ended December 31				Six Months Ended December 31
	2015		2014		2015		2014
BASIC EARNINGS PER SHARE
Net income	$	3,782	$	1,588	$	7,532	$	3,115
Weighted average shares outstanding during the period, net of treasury shares (a)		24,637		24,124		24,569		24,123
Weighted average vested restricted stock units outstanding		25		--		26		--
Weighted average shares outstanding in the Deferred Compensation Plan during the period		249		325		243		319
Weighted average shares outstanding		24,911		24,449		24,838		24,442
Basic earnings per share	$	0.15	$	0.06	$	0.30	$	0.13
DILUTED EARNINGS PER SHARE
Net income	$	3,782	$	1,588	$	7,532	$	3,115
Weighted average shares outstanding
Basic		24,911		24,449		24,838		24,442
Effect of dilutive securities (b): Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		713		58		567		64
Weighted average shares outstanding (c)		25,624		24,507		25,405		24,506
Diluted earnings per share	$	0.15	$	0.06	$	0.30	$	0.13

(a) Includes shares accounted for as treasury stock according to accounting standards.

(b) Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

(c) Options to purchase 1,115,250 common shares and 2,377,900 common shares at December 31, 2015 and 2014, respectively, and options to purchase 1,506,800 common shares and 2,371,900 common shares at December 31, 2015 and 2014, respectively, were not included in the computation of the three month and six month periods for diluted earnings per share, respectively, because the exercise price was greater than the average fair market value of the common shares.

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Note 5 - Inventories

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Inventory Disclosure [Text Block]

NOTE 5 – INVENTORIES

The following information is provided as of the dates indicated:

(In thousands)	December 31, 2015		June 30, 2015
Inventories:
Raw materials	$	27,414	$	27,920
Work-in-process		4,498		4,658
Finished goods		13,973		10,505
Total Inventories	$	45,885	$	43,083

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Note 6 - Accrued Expenses

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

NOTE

6

- A

CCRUED EXPENSES

The following information is provided as of the dates indicated:

(In thousands)	December 31, 2015		June 30, 2015
Accrued Expenses:
Compensation and benefits	$	11,097	$	11,614
Customer prepayments		1,762		1,324
Accrued sales commissions		2,021		1,982
Accrued warranty		4,310		3,408
Other accrued expenses		4,117		3,798
Total Accrued Expenses	$	23,307	$	22,126

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Note 7 - Goodwill and Other Intangible Assets

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with the accounting standard on goodwill and intangible assets. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level, that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.  Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing.  The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing.  These include operating results, forecasts, anticipated future cash flows and marketplace data, to name a few.  There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

Goodwill
(In thousands)	Lighting Segment			Graphics Segment			Technology Segment			All Other Category			Total
Balance as of June 30, 2015
Goodwill	$	34,913		$	28,690		$	11,621		$	--	$	75,224
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		--		(64,716	)
Goodwill, net as of June 30, 2015	$	135		$	1,165		$	9,208		$	--	$	10,508
Balance as of December 31, 2015
Goodwill	$	34,913			28,690			11,621			--		75,224
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		--		(64,716	)
Goodwill, net as of December 31, 2015	$	135			1,165			9,208		$	--	$	10,508

In the first quarter of fiscal 2015, the Company sold LSI Saco Technologies Inc. A customer relationship intangible asset with a gross carrying amount of $1,036,000 and accumulated amortization of $428,000 was sold as a result of the sale of LSI Saco Technologies (See Note 13).

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

	December 31, 2015
	Gross
Other Intangible Assets	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	9,316		7,436		1,880
Patents		338		136		202
LED technology firmware, software		11,228		10,950		278
Trade name		460		460		--
Non-compete agreements		710		653		57
Total Amortized Intangible Assets		22,052		19,635		2,417
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	25,474		19,635		5,839

	June 30, 2015
Other Intangible Assets (In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	9,316	$	7,290	$	2,026
Patents		338		120		218
LED technology firmware, software		11,228		10,910		318
Trade name		460		460		--
Non-compete agreements		710		602		108
Total Amortized Intangible Assets		22,052		19,382		2,670
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	25,474	$	19,382	$	6,092

(In thousands)	Amortization Expense of Other Intangible Assets
	December 31, 2015		December 31, 2014
Three Months Ended	$	127	$	127
Six Months Ended	$	253	$	275

The Company expects to record annual amortization expense as follows:

(In thousands)
2016	$	505
2017	$	409
2018	$	400
2019	$	400
2020	$	327
After 2020	$	629

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Note 8 - Revolving Line of Credit

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 8 - REVOLVING LINE OF CREDIT

In March 2015, the Company renewed its $30 million unsecured revolving credit line. The line of credit expires in the third quarter of fiscal 2018. Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, or at the bank’s base lending rate, at the Company’s option.  The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between 150 and 190 basis points depending upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the credit facility.  The fee on the unused balance of the $30 million committed line of credit is 12.5 basis points.  Under the terms of this credit facility, the Company has agreed to a negative pledge of assets and is required to comply with financial covenants that limit the amount of debt obligations, require a minimum amount of tangible net worth, and limit the ratio of indebtedness to EBITDA. There are no borrowings against the line of credit as of December 31, 2015.

The Company is in compliance with all of its loan covenants as of December 31, 2015

.

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Note 9 - Cash Dividends

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of $1,721,000 and $1,688,000 in the six months ended December 31, 2015 and 2014, respectively. Dividends on restricted stock units in the amount of $4,690 were accrued in the six months ended December 31, 2015. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In January 2016, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 16, 2016 to shareholders of record as of February 8, 2016.

The new indicated annual cash dividend rate is $0.20 per share.

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Note 10 - Equity Compensation

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 10

-

EQUITY COMPENSATION

Stock Based Compensation

 

The Company has an equity compensation plan that was approved by shareholders in November 2012 and that covers all of its full-time employees, outside directors and certain advisors.  This 2012 Stock Incentive Plan replaced all previous equity compensation plans of the Company. The options granted and stock awards made pursuant to this Plan are granted at fair market value at the date of grant or award.  Service-based options granted to non-employee directors become exercisable 25% each ninety days (cumulative) from the date of grant and options granted to employees generally become exercisable 25% per year (cumulative) beginning one year after the date of grant. Performance-based options granted to employees become exercisable 33.3% per year (cumulative) beginning one year after the date of grant. The maximum contractual term of the Company’s stock options is ten years.  If a stock option holder’s employment with the Company terminates by reason of death, disability or retirement, as defined in the Plan, the Plan generally provides for acceleration of vesting.  The number of shares reserved for issuance is 1,522,593 shares, all of which were available for future grant or award as of December 31, 2015.  This Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, performance stock awards, and other stock awards. Service based and performance based stock options were granted and restricted stock units (“RSUs”) were awarded during the six months ended December 31, 2015. As of December 31, 2015, a total of 3,340,462 options for common shares were outstanding from this Plan as well as one previous stock option plan (which has also been approved by shareholders), and of these, a total of 1,628,976 options for common shares were vested and exercisable.  As of December 31, 2015, the approximate unvested stock option expense that will be recorded as expense in future periods is $3,110,463.  The weighted average time over which this expense will be recorded is approximately 32 months. Additionally, as of December 31, 2015 a total of 67,000 RSUs were outstanding. The approximate unvested stock compensation expense that will be recorded as expense in future periods for the RSUs is $332,454. The weighted average time over which this expense will be recorded is approximately 36 months.

Stock Options

The fair value of each option on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for grants in the periods indicated.

	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Dividend yield		1.33	%		1.17	%		1.28	%		1.17	%
Expected volatility		43	%		56	%		44	%		56	%
Risk-free interest rate		1.38	%		1.64	%		1.67	%		1.64	%
Expected life (in years)		6.0			6.0			6.0			6.0

At December 31, 2015, the 1,016,800 options granted during the first six months of fiscal 2016 to employees had exercise prices ranging from $8.84 to $11.82 per share, fair values ranging from $3.28 to $4.48 per share, and remaining contractual lives of between nine years, six months and nine years, eleven months.

At December 31, 2014, the 593,400 options granted during the first six months of fiscal 2015 to employees had exercise prices ranging from $5.96 to $6.94 per share, fair values ranging from $2.19 to $3.48 per share, and remaining contractual lives of between nine years, nine months and nine years, eleven months.

The Company calculates stock option expense using the Black-Scholes model.  Stock option expense is recorded on a straight line basis, or sooner if the grantee is retirement eligible as defined in the 2012 Stock Incentive Plan, with an estimated 3.1% forfeiture rate effective October 1, 2015. Previous estimated forfeiture rates were between 2.0% and 3.3% for the period January 1, 2013 through September 30, 2015. The expected volatility of the Company’s stock was calculated based upon the historic monthly fluctuation in stock price for a period approximating the expected life of option grants.  The risk-free interest rate is the rate of a five year Treasury security at constant, fixed maturity on the approximate date of the stock option grant.  The expected life of outstanding options is determined to be less than the contractual term for a period equal to the aggregate group of option holders’ estimated weighted average time within which options will be exercised.  It is the Company’s policy that when stock options are exercised, new common shares shall be issued.  The Company recorded $342,134 and $796,192 of expense related to stock options in the three months ended December 31, 2015 and 2014, respectively, and $1,830,707 and $881,825 of expense related to stock options in the six months ended December 31, 2015 and 2014, respectively.  As of December 31, 2015, the Company had 3,287,071 stock options that were vested and that were expected to vest, with a weighted average exercise price of $9.12 per share, an aggregate intrinsic value of $12,468,545 and weighted average remaining contractual terms of 6.8 years.

Information related to all stock options for the three months ended December 31, 2015 and 2014 is shown in the following tables:

	Six Months Ended December 31, 2015
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at 6/30/15		2,677,436		$	8.85		6.1	$	4,914,601
Granted		1,016,800		$	9.38
Forfeitures		(55,050	)	$	11.65
Exercised		(298,724	)	$	7.20
Outstanding at 12/31/15		3,340,462		$	9.11		6.8	$	12,661,470
Exercisable at 12/31/15		1,628,976		$	9.95		4.5	$	6,032,985

	Six Months Ended December 31, 2014
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at 6/30/14		2,677,464		$	9.57		5.4	$	1,674,010
Granted		593,400		$	6.66
Forfeitures		(378,525	)	$	9.99
Exercised		(24,725	)	$	5.84
Outstanding at 12/31/14		2,867,614		$	8.95		6.3	$	558,591
Exercisable at 12/31/14		1,778,589		$	10.24		4.6	$	438,785

The following table presents information related to unvested stock options:

	Shares			Weighted-Average Grant Date Fair Value
Non-vested at June 30, 2015		1,080,198		$	2.99
Granted		1,016,800		$	3.63
Vested		(355,462	)	$	2.91
Forfeited		(30,050	)	$	3.30
Non-vested at December 31, 2015		1,711,486		$	3.38

The weighted average grant date fair value of options granted during the six month periods ended December 31, 2015 and 2014 was $3.63 and $3.23, respectively. The aggregate intrinsic value of options exercised during the six month periods ended December 31, 2015 and 2014 was $852,596 and $22,383, respectively. The aggregate grant date fair value of options that vested during the six month periods ended December 31, 2015 and 2014 was $1,035,041 and $598,316, respectively. The Company received $2,149,606 and $144,352 of cash from employees who exercised options in the six month periods ended December 31, 2015 and 2014, respectively. In the first six months of fiscal 2016 the Company recorded $300,868 as a reduction of federal income taxes payable, $46,066 as an increase in common stock, $84,781 as a reduction of income tax expense, and $170,021 as a reduction of the deferred tax asset related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise. In the first six months of fiscal 2015 the Company recorded $7,834 as a reduction of federal income taxes payable, $36,575 as a reduction in common stock, $7,690 as a reduction of income tax expense, and $36,718 as a reduction of the deferred tax asset related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise.

Restricted Stock Units

A total of 72,000 RSUs with a weighted average fair value of $9.39 per share were awarded to employees during the six months ended December 31, 2015. The Company determined the fair value of the awards based on the closing price of the Company’s common stock on the date the restricted stock units were awarded. The RSUs have a four year ratable vesting period. The RSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. Dividends on RSUs in the amount of $5,040 were accrued or paid in the six months ended December 31, 2015. Accrued dividends are paid to the holder upon vesting of the RSUs and issuance of shares. As of December 31, 2015, the 67,000 restricted stock units outstanding had a remaining contractual life of 9 years, 6 months. Of the 67,000 RSUs outstanding, 64,434 are expected to vest as of December 31, 2015. An estimated forfeiture rate of 3.3% was used in the calculation of expense related to the restricted stock units. The Company recorded $33,276 and $319,533 of expense related to RSUs in the three and six month periods ended December 31, 2015. There were no RSUs awarded prior to July 1, 2015.

Director and Employee

Stock Compensation Awards

The Company awarded a total of 12,590 and 13,800 common shares in the six months ended December 31, 2015 and 2014, respectively, as stock compensation awards. These common shares were valued at their approximate $113,400 and $96,000 fair market values based on their stock price at dates of issuance multiplied by the number of common shares awarded, respectively, pursuant to the compensation programs for non-employee directors who receive a portion of their compensation as an award of Company stock and for employees who received a nominal recognition award in the form of company stock. Stock compensation awards are made in the form of newly issued common shares of the Company.

Deferred Compensation Plan

 

The Company has a Non-qualified Deferred Compensation Plan providing for both Company contributions and participant deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in common shares of the Company. As of December 31, 2015 there were 28 participants, all with fully vested account balances. A total of 250,075 common shares with a cost of $2,375,242, and 226,600 common shares with a cost of $2,145,100 were held in the plan as of December 31, 2015 and June 30, 2015, respectively, and, accordingly, have been recorded as treasury shares. The change in the number of shares held by this plan is the net result of share purchases and sales on the open stock market for compensation deferred into the plan and for distributions to terminated employees. The Company does not issue new common shares for purposes of the non-qualified deferred compensation plan. The company accounts for assets held in the non-qualified deferred compensation plan according to accounting guidance. The Company used approximately $276,800 and $139,100 to purchase 29,021 and 20,034 common shares of the Company in the open stock market during the six months ended December 31, 2015 and 2014, respectively, for either employee salary deferrals or Company contributions into the non-qualified deferred compensation plan. For fiscal year 2016, the Company estimates the Rabbi Trust for the Nonqualified Deferred Compensation Plan will make net repurchases in the range of 35,000 to 39,000 common shares of the Company. The Company does not currently repurchase its own common shares for any other purpose.

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Note 11 - Supplemental Cash Flow Information

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

(In thousands)	Six Months Ended December 31
	2015		2014
Cash payments:
Interest	$	23	$	36
Income taxes	$	4,650	$	21
Issuance of common shares as compensation	$	113	$	96

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Note 12 - Commitments and Contingencies

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 1

2

-

COMMITMENTS AND CONTINGENCIES

As part of the acquisition of Virticus Corporation on March 19, 2012, a contingent Earn-Out liability was established. This discounted liability was to be paid over a five year period, contingent upon reaching certain sales in each year over the five year period (fiscal year 2013 through fiscal year 2017). In fiscal 2013, as a result of modified sales forecasts for LSI Controls (fka, LSI Virticus), the fair value of the Earn-Out liability was adjusted to zero. As of December 31, 2015, the maximum potential undiscounted liability related to the Earn-Out is $2 million. This would be based upon the achievement of a defined level of sales of lighting control systems in fiscal years 2016 through 2017. The likelihood of this occurring is not considered probable.

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

The Company may occasionally issue a standby letter of credit in favor of third parties. As of December 31, 2015, there were no standby letter of credit agreements.

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Note 13 - Sale of Subsidiary

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

NOTE

13

–

SALE OF SUBSIDIARY

On September 30, 2014, the Company sold the stock of its wholly owned subsidiary LSI Saco Technologies Inc., located in Montreal, Canada, for $1.9 million cash. The sale resulted in a pre-tax loss of $565,000. As a result of the sale, the Company terminated the $5 million unsecured revolving line of credit for this Canadian operation. LSI Saco reported $41,000 of net customer sales and a $(183,000) operating loss in the first quarter of fiscal 2015 prior to the sale. LSI Saco was reported in the All Other Category. The sale of LSI Saco was not considered the sale of a discontinued operation because the Company migrated most of its manufacturing, research and development, and selling activities from LSI Saco to the Company’s Cincinnati, Ohio location.

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Note 14 - Severance Costs

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

NOTE 14 – SEVERANCE COSTS

Pursuant to a management succession agreement entered into in fiscal 2004 as subsequently amended, the Company’s former Chief Executive Officer, Robert J. Ready, relinquished this title and related management responsibilities when the Company hired and appointed a new Chief Executive Officer in October 2014. Mr. Ready remained on the Company’s Board of Directors until his death in March 2015, but was no longer Chairman of the Board following the November 2014 Annual Meeting of Shareholders. The management succession agreement provided for 18 months of compensation to be paid to Mr. Ready, which resulted in a severance charge in the second quarter of fiscal 2015 of $800,000. Severance payments totaling $224,000 were made in the second and third quarters of fiscal 2015. The remaining $576,000 severance liability was recognized as income when Mr. Ready died in March 2015. Pursuant to the management succession agreement a $1 million self-insured death benefit was paid to Mr. Ready’s beneficiary in the fourth quarter of fiscal 2015.

In January 2015, the Company initiated a reduction in force and recorded severance charges of $340,000 and facility exit charges of $21,200 in the third quarter of fiscal 2015. This reduction in force and employee retirements that occurred early in the third quarter of fiscal 2015 represented approximately 8.3% of the Company’s total salaried workforce and approximately $3.7 million of annual total compensation and benefit reductions. The Company recorded severance charges of $223,000 during the first half of fiscal year 2016 in the Graphics Segment.

The activity in the Company’s Accrued Severance Liability is as follows for the periods indicated:

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	379		$	--		$	--
Accrual of expense		223			944			1,718
Payments		(314	)		(213	)		(704	)
Adjustments		(58	)		--			(635	)
Balance at end of the period	$	230		$	731		$	379

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Note 15 - Income Taxes

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 15 – INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate		33.3	%		36.1	%		34.5	%		41.0	%
Impact of foreign operations		--			--			--			(0.2	)
Enactment of tax law changes		(2.0	)		(6.1	)		(1.0	)		(2.9	)
Uncertain tax positions		(0.3	)		(1.3	)		(0.3	)		(1.2	)
Other		(1.2	)		(0.3	)		(0.7	)		(2.4	)
Effective tax rate		29.8	%		28.4	%		32.5	%		34.3	%

The Protecting Americans from Tax Hike Act of 2015 that made permanent the tax credit for research and development (“R&D”), retroactive back to January 1, 2015, was signed into law in December 2015. Therefore, the Company recorded an estimated R&D tax credit benefit of $111,000 in December 2015 for the second half of fiscal year 2015, and estimated an R&D tax credit in its calculation of the estimated income tax rate for fiscal 2016. Other items in this December 2015 tax bill will have little impact on the Company’s income tax expense.

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Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Consolidation:

The condensed consolidated financial statements include the accounts of LSI Industries Inc. (an Ohio corporation) and its subsidiaries (collectively, the “Company”), all of which are wholly owned.  All intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition:

Revenue is recognized when title to goods and risk of loss have passed to the customer, there is persuasive evidence of a purchase arrangement, delivery has occurred or services have been rendered, and collectability is reasonably assured.  Revenue is typically recognized at time of shipment.  In certain arrangements with customers, as is the case with the sale of some of our solid-state LED video screens, revenue is recognized upon customer acceptance of the video screen at the job site.  Sales are recorded net of estimated returns, rebates and discounts.  Amounts received from customers prior to the recognition of revenue are accounted for as customer pre-payments and are included in accrued expenses.

The Company has five sources of revenue:  revenue from product sales; revenue from installation of products; service revenue generated from providing integrated design, project and construction management, site engineering and site permitting; revenue from the management of media content and digital hardware related to active digital signage; and revenue from shipping and handling.

Product revenue is recognized on product-only orders upon passing of title and risk of loss, generally at time of shipment.  However, product revenue related to orders where the customer requires the Company to install the product is recognized when the product is installed.  The company provides product warranties and certain post-shipment service, support and maintenance of certain solid state LED video screens and billboards.

Installation revenue is recognized when the products have been fully installed.  The Company is not always responsible for installation of products it sells and has no post-installation responsibilities, other than normal warranties.

Service revenue from integrated design, project and construction management, and site permitting is recognized when all products at each customer site have been installed.

Revenue from the management of media content and digital hardware related to active digital signage is recognized evenly over the service period with the customer. Media content service periods with most customers range from 1 month to 1 year.

Shipping and handling revenue coincides with the recognition of revenue from the sale of the product.

In situations where the Company is responsible for re-imaging programs with multiple sites, each site is viewed as a separate unit of accounting and has stand-alone value to the customer. Revenue is recognized upon the Company’s complete performance at the location, which may include a site survey, graphics products, lighting products, and installation of products. The selling price assigned to each site is based upon an agreed upon price between the Company and its customer and reflects the estimated selling price for that site relative to the selling price for sites with similar image requirements.

The Company also evaluates the appropriateness of revenue recognition in accordance with the accounting standard on software revenue recognition. Our solid-state LED video screens, billboards and active digital signage contain software elements which the Company has determined are incidental.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Credit and Collections:

The Company maintains allowances for doubtful accounts receivable for probable estimated losses resulting from either customer disputes or the inability of its customers to make required payments.  If the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against income.  The Company determines its allowance for doubtful accounts by first considering all known collectability problems of customers’ accounts, and then applying certain percentages against the various aging categories based on the due date of the remaining receivables.  The resulting allowance for doubtful accounts receivable is an estimate based upon the Company’s knowledge of its business and customer base, and historical trends.  The Company also establishes allowances, at the time revenue is recognized, for returns, discounts, pricing and other possible customer deductions.  These allowances are based upon historical trends.

The following table presents the Company’s net accounts receivable at the dates indicated.

(In thousands)	December 31, 2015			June 30, 2015
Accounts receivable	$	43,494		$	43,978
Less: Allowance for doubtful accounts		(372	)		(317	)
Accounts receivable, net	$	43,122		$	43,661

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents:

The cash balance includes cash and cash equivalents which have original maturities of less than three months.  The Company maintains balances at financial institutions in the United States. The FDIC limit for insurance coverage on non-interest bearing accounts is $250,000.

As of December 31, 2015 and June 30, 2015, the Company had bank balances of $31,602,000 and $28,494,000, respectively, without insurance coverage.

Inventory, Policy [Policy Text Block]

Inventories:

Inventories are stated at the lower of cost or market.  Cost of inventories includes the cost of purchased raw materials and components, direct labor, as well as manufacturing overhead which is generally applied to inventory based on direct labor and material content. Cost is determined on the first-in, first-out basis.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment and Related Depreciation:

Property, plant and equipment are stated at cost.  Major additions and betterments are capitalized while maintenance and repairs are expensed.  For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful lives of the assets as follows:

Buildings (in years)	28	-	40
Machinery and equipment (in years)	3	-	10
Computer software (in years)	3	-	8

Costs related to the purchase, internal development, and implementation of the Company’s fully integrated enterprise resource planning/business operating software system are either capitalized or expensed in accordance with accounting guidance on internal use software.  Leasehold improvements are amortized over the shorter of fifteen years or the remaining term of the lease.

The Company recorded $1,471,000 and $1,425,000 of depreciation expense in the second quarter of fiscal 2016 and 2015, respectively, and

$2,921,000 and $2,863,000 of depreciation expense in the first half of fiscal 2016 and 2015, respectively.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets:

Intangible assets consisting of customer relationships, trade names and trademarks, patents, technology and software, and non-compete agreements are recorded on the Company's balance sheet.  The definite-lived intangible assets are being amortized to expense over periods ranging between five and twenty years.  The Company evaluates definite-lived intangible assets for permanent impairment when triggering events are identified. Neither indefinite-lived intangible assets nor the excess of cost over fair value of assets acquired ("goodwill") are amortized, however they are subject to review for impairment.  See additional information about goodwill and intangibles in Note 7.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value:

The Company has financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and on occasion, long-term debt.  The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.  The Company has no financial instruments with off-balance sheet risk.

Fair value measurements of nonfinancial assets and nonfinancial liabilities are primarily used in goodwill and other intangible asset impairment analyses, in the purchase price of acquired companies (if any), and in the valuation of the contingent earn-out. The accounting guidance was used to measure the fair value of these nonfinancial assets and nonfinancial liabilities.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranties:

The Company offers a limited warranty that its products are free from defects in workmanship and materials.  The specific terms and conditions vary somewhat by product line, but generally cover defective products returned within one to five years, with some exceptions where the terms extend to 10 years, from the date of shipment.  The Company records warranty liabilities to cover the estimated future costs for repair or replacement of defective returned products as well as products that need to be repaired or replaced in the field after installation.  The Company calculates its liability for warranty claims by applying estimates to cover unknown claims, as well as estimating the total amount to be incurred for known warranty issues.  The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, during the periods indicated below were as follows:

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	3,408		$	2,662		$	2,662
Additions charged to expense		2,259			1,557			3,185
Deductions for repairs and replacements		(1,357	)		(971	)		(2,439	)
Balance at end of the period	$	4,310		$	3,248		$	3,408

Research, Development, and Computer Software, Policy [Policy Text Block]

Research and Development Costs:

Research and development expenses are costs directly attributable to new product development, including the development of new technology for both existing and new products, and consist of salaries, payroll taxes, employee benefits, materials, outside legal costs and filing fees related to obtaining patents, supplies, depreciation and other administrative costs. The Company expenses as research and development all costs associated with development of software used in solid-state LED products.  All costs are expensed as incurred and are included in selling and administrative expenses.  Research and development costs related to both product and software development totaled $1,320,000 and $1,450,000 for the three months ended December 31, 2015 and 2014, respectively, and $2,631,000 and $3,301,000 for the six months ended December 31, 2015 and 2014, respectively.

Cost of Sales, Policy [Policy Text Block]

Cost of Products and Services Sold:

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacture of products, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity. Cost of services sold is primarily comprised of the internal and external labor costs required to support the Company’s service revenue along with the management of media content.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share:

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period net of treasury shares held in the Company’s non-qualified deferred compensation plan.  The computation of diluted earnings per share is based on the weighted average of common shares outstanding for the period and includes common share equivalents.  Common share equivalents include the dilutive effect of stock options, restricted stock units, contingently issuable shares and common shares to be issued under a deferred compensation plan, all of which totaled 987,000 shares and 383,000 shares for the three months ended December 31, 2015 and 2014, respectively, and 836,000 shares and 383,000 shares for the six months ended December 31, 2015 and 2014, respectively

See further discussion of earnings per common share in Note 4.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements:

In June 2014, the Financial Accounting Standards Board issued ASU 2014-09, “Revenue from Contracts with Customers.” This amended guidance supersedes and replaces all existing U.S. GAAP revenue recognition guidance. The guidance established a new revenue recognition model, changes the basis for deciding when revenue is recognized over a point in time, provides new and more detailed guidance on specific revenue topics, and expands and improves disclosures about revenue. The amended guidance is effective for fiscal years and interim periods within those years, beginning after December 15, 2017, or the Company’s fiscal year 2019. The Company has not yet determined the impact the amended guidance will have on its financial statements.

In July 2015, the Financial Accounting Standards Board issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amended guidance requires an entity to measure in scope inventory at lower of cost and net realizable value. The amended guidance is effective for fiscal years beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

In December 2015, the Financial Accounting Standards Board issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes.” The amended guidance eliminates the requirements for organizations to present deferred tax liabilities and assets as current and noncurrent. Instead, all deferred tax assets and liabilities will be classified as noncurrent. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after December 15, 2016, or the Company’s fiscal year 2018, with early adoption permitted.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income:

The Company does not have any comprehensive income items other than net income. The functional currency of the Company’s former Canadian operation was the U.S. dollar.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the condensed consolidated financial statements were filed.  No items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates:

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

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Note 2 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(In thousands)	December 31, 2015			June 30, 2015
Accounts receivable	$	43,494		$	43,978
Less: Allowance for doubtful accounts		(372	)		(317	)
Accounts receivable, net	$	43,122		$	43,661

Property, Plant and Equipment [Table Text Block]

Buildings (in years)	28	-	40
Machinery and equipment (in years)	3	-	10
Computer software (in years)	3	-	8

Schedule of Product Warranty Liability [Table Text Block]

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	3,408		$	2,662		$	2,662
Additions charged to expense		2,259			1,557			3,185
Deductions for repairs and replacements		(1,357	)		(971	)		(2,439	)
Balance at end of the period	$	4,310		$	3,248		$	3,408

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Note 3 - Segment Reporting Information (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

( In thousands)	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Net Sales:
Lighting Segment	$	59,601		$	59,796		$	118,676		$	115,517
Graphics Segment		21,034			20,269			42,787			36,293
Technology Segment		4,052			4,650			9,149			11,330
All Other Category		--			--			--			41
	$	84,687		$	84,715		$	170,612		$	163,181
Operating Income (Loss):
Lighting Segment	$	5,182		$	4,090		$	10,864		$	8,317
Graphics Segment		2,035			1,065			4,196			1,118
Technology Segment		993			499			2,333			1,131
All Other Category		--			--			--			(183	)
Corporate and Eliminations		(2,830	)		(3,430	)		(6,250	)		(5,625	)
	$	5,380		$	2,224		$	11,143		$	4,758
Capital Expenditures:
Lighting Segment	$	1,160		$	599		$	1,849		$	1,181
Graphics Segment		604			533			1,109			867
Technology Segment		108			241			224			285
All Other Category		--			--			--			4
Corporate and Eliminations		150			61			202			67
	$	2,022		$	1,434		$	3,384		$	2,404
Depreciation and Amortization:
Lighting Segment	$	717		$	729		$	1,422		$	1,451
Graphics Segment		213			256			428			506
Technology Segment		364			325			719			663
All Other Category		--			--			--			31
Corporate and Eliminations		304			242			605			487
	$	1,598		$	1,552		$	3,174		$	3,138

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	December 31, 2015		June 30, 2015
Identifiable Assets:
Lighting Segment	$	87,209	$	90,713
Graphics Segment		36,306		29,477
Technology Segment		29,956		28,423
All Other Category		--		--
Corporate and Eliminations		34,063		33,766
	$	187,534	$	182,379

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Three Months Ended December 31				Six Months Ended December 31
(In thousands)	2015		2014		2015		2014
Lighting Segment inter-segment net sales	$	814	$	445	$	1,428	$	1,497
Graphics Segment inter-segment net sales	$	562	$	125	$	1,006	$	256
Technology inter-segment net sales	$	8,932	$	7,675	$	18,316	$	14,947
All Other Category inter-segment net sales	$	--	$	--	$	--	$	308

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

( In thousands)	Three Months Ended December 31				Six Months Ended December 31
	2015		2014		2015		2014
Net Sales (a):
United States	$	84,687	$	84,715	$	170,612	$	163,140
Canada		--		--		--		41
	$	84,687	$	84,715	$	170,612	$	163,181

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

	December 31, 2015		June 30, 2015
Long-lived Assets (b):
United States	$	45,395	$	44,965
Canada		--		--
	$	45,395	$	44,965

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Note 4 - Earnings Per Common Share (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended December 31				Six Months Ended December 31
	2015		2014		2015		2014
BASIC EARNINGS PER SHARE
Net income	$	3,782	$	1,588	$	7,532	$	3,115
Weighted average shares outstanding during the period, net of treasury shares (a)		24,637		24,124		24,569		24,123
Weighted average vested restricted stock units outstanding		25		--		26		--
Weighted average shares outstanding in the Deferred Compensation Plan during the period		249		325		243		319
Weighted average shares outstanding		24,911		24,449		24,838		24,442
Basic earnings per share	$	0.15	$	0.06	$	0.30	$	0.13
DILUTED EARNINGS PER SHARE
Net income	$	3,782	$	1,588	$	7,532	$	3,115
Weighted average shares outstanding
Basic		24,911		24,449		24,838		24,442
Effect of dilutive securities (b): Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		713		58		567		64
Weighted average shares outstanding (c)		25,624		24,507		25,405		24,506
Diluted earnings per share	$	0.15	$	0.06	$	0.30	$	0.13

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Note 5 - Inventories (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Inventory, Current [Table Text Block]

(In thousands)	December 31, 2015		June 30, 2015
Inventories:
Raw materials	$	27,414	$	27,920
Work-in-process		4,498		4,658
Finished goods		13,973		10,505
Total Inventories	$	45,885	$	43,083

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Note 6 - Accrued Expenses (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

(In thousands)	December 31, 2015		June 30, 2015
Accrued Expenses:
Compensation and benefits	$	11,097	$	11,614
Customer prepayments		1,762		1,324
Accrued sales commissions		2,021		1,982
Accrued warranty		4,310		3,408
Other accrued expenses		4,117		3,798
Total Accrued Expenses	$	23,307	$	22,126

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Note 7 - Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Goodwill [Table Text Block]

Goodwill
(In thousands)	Lighting Segment			Graphics Segment			Technology Segment			All Other Category			Total
Balance as of June 30, 2015
Goodwill	$	34,913		$	28,690		$	11,621		$	--	$	75,224
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		--		(64,716	)
Goodwill, net as of June 30, 2015	$	135		$	1,165		$	9,208		$	--	$	10,508
Balance as of December 31, 2015
Goodwill	$	34,913			28,690			11,621			--		75,224
Accumulated impairment losses		(34,778	)		(27,525	)		(2,413	)		--		(64,716	)
Goodwill, net as of December 31, 2015	$	135			1,165			9,208		$	--	$	10,508

Schedule of Intangible Assets and Goodwill [Table Text Block]

	December 31, 2015
	Gross
Other Intangible Assets	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	9,316		7,436		1,880
Patents		338		136		202
LED technology firmware, software		11,228		10,950		278
Trade name		460		460		--
Non-compete agreements		710		653		57
Total Amortized Intangible Assets		22,052		19,635		2,417
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	25,474		19,635		5,839

	June 30, 2015
Other Intangible Assets (In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	9,316	$	7,290	$	2,026
Patents		338		120		218
LED technology firmware, software		11,228		10,910		318
Trade name		460		460		--
Non-compete agreements		710		602		108
Total Amortized Intangible Assets		22,052		19,382		2,670
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	25,474	$	19,382	$	6,092

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

(In thousands)	Amortization Expense of Other Intangible Assets
	December 31, 2015		December 31, 2014
Three Months Ended	$	127	$	127
Six Months Ended	$	253	$	275

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

(In thousands)
2016	$	505
2017	$	409
2018	$	400
2019	$	400
2020	$	327
After 2020	$	629

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Note 10 - Equity Compensation (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Dividend yield		1.33	%		1.17	%		1.28	%		1.17	%
Expected volatility		43	%		56	%		44	%		56	%
Risk-free interest rate		1.38	%		1.64	%		1.67	%		1.64	%
Expected life (in years)		6.0			6.0			6.0			6.0

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Six Months Ended December 31, 2015
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at 6/30/15		2,677,436		$	8.85		6.1	$	4,914,601
Granted		1,016,800		$	9.38
Forfeitures		(55,050	)	$	11.65
Exercised		(298,724	)	$	7.20
Outstanding at 12/31/15		3,340,462		$	9.11		6.8	$	12,661,470
Exercisable at 12/31/15		1,628,976		$	9.95		4.5	$	6,032,985

	Six Months Ended December 31, 2014
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at 6/30/14		2,677,464		$	9.57		5.4	$	1,674,010
Granted		593,400		$	6.66
Forfeitures		(378,525	)	$	9.99
Exercised		(24,725	)	$	5.84
Outstanding at 12/31/14		2,867,614		$	8.95		6.3	$	558,591
Exercisable at 12/31/14		1,778,589		$	10.24		4.6	$	438,785

Schedule of Nonvested Share Activity [Table Text Block]

	Shares			Weighted-Average Grant Date Fair Value
Non-vested at June 30, 2015		1,080,198		$	2.99
Granted		1,016,800		$	3.63
Vested		(355,462	)	$	2.91
Forfeited		(30,050	)	$	3.30
Non-vested at December 31, 2015		1,711,486		$	3.38

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Note 11 - Supplemental Cash Flow Information (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

(In thousands)	Six Months Ended December 31
	2015		2014
Cash payments:
Interest	$	23	$	36
Income taxes	$	4,650	$	21
Issuance of common shares as compensation	$	113	$	96

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Note 14 - Severance Costs (Tables)

6 Months Ended

Dec. 31, 2015

Employee Severance [Member]

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

(In thousands)	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014			Fiscal Year Ended June 30, 2015
Balance at beginning of the period	$	379		$	--		$	--
Accrual of expense		223			944			1,718
Payments		(314	)		(213	)		(704	)
Adjustments		(58	)		--			(635	)
Balance at end of the period	$	230		$	731		$	379

Schedule of Accrued Liabilities [Table Text Block]

(In thousands)	December 31, 2015		June 30, 2015
Accrued Expenses:
Compensation and benefits	$	11,097	$	11,614
Customer prepayments		1,762		1,324
Accrued sales commissions		2,021		1,982
Accrued warranty		4,310		3,408
Other accrued expenses		4,117		3,798
Total Accrued Expenses	$	23,307	$	22,126

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Note 15 - Income Taxes (Tables)

6 Months Ended

Dec. 31, 2015

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three Months Ended December 31						Six Months Ended December 31
	2015			2014			2015			2014
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate		33.3	%		36.1	%		34.5	%		41.0	%
Impact of foreign operations		--			--			--			(0.2	)
Enactment of tax law changes		(2.0	)		(6.1	)		(1.0	)		(2.9	)
Uncertain tax positions		(0.3	)		(1.3	)		(0.3	)		(1.2	)
Other		(1.2	)		(0.3	)		(0.7	)		(2.4	)
Effective tax rate		29.8	%		28.4	%		32.5	%		34.3	%

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Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015
Minimum [Member]
Media Content Service Period			30 days
Finite-Lived Intangible Asset, Useful Life			5 years
Standard Warranty Term			1 year
Maximum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment, Useful Life			15 years
Maximum [Member] | Product Warranty Exceptions [Member]
Standard Warranty Term			10 years
Maximum [Member]
Media Content Service Period			1 year
Finite-Lived Intangible Asset, Useful Life			20 years
Standard Warranty Term			5 years
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Asset	$ 0		$ 0
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	0		0
Cash, FDIC Insured Amount	250,000		250,000
Cash, Uninsured Amount	31,602,000		31,602,000		$ 28,494,000
Depreciation	1,471,000	$ 1,425,000	2,921,000	$ 2,863,000
Research and Development Expense	$ 1,320,000	$ 1,450,000	$ 2,631,000	$ 3,301,000
Incremental Common Shares Attributable to Dilutive Effect of Contingently Issuable Shares	987,000	383,000	836,000	383,000

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Note 2 - Net Accounts Receivable (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Accounts receivable	$ 43,494	$ 43,978
Less: Allowance for doubtful accounts	(372)	(317)
Accounts receivable, net	$ 43,122	$ 43,661

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Note 2 - Estimated Useful Lives of Long-lived Assets (Details)	6 Months Ended
	Dec. 31, 2015
Building [Member] | Minimum [Member]
Property, Plant, and Equipment	28 years
Building [Member] | Maximum [Member]
Property, Plant, and Equipment	40 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant, and Equipment	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant, and Equipment	10 years
Software and Software Development Costs [Member] | Minimum [Member]
Property, Plant, and Equipment	3 years
Software and Software Development Costs [Member] | Maximum [Member]
Property, Plant, and Equipment	8 years

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Note 2 - Warranty Liabilities (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015
Balance at	$ 3,408	$ 2,662	$ 2,662
Additions charged to expense	2,259	1,557	3,185
Deductions for repairs and replacements	(1,357)	(971)	(2,439)
Balance at	$ 4,310	$ 3,248	$ 3,408

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Note 3 - Segment Reporting Information (Details Textual) - USD ($)		3 Months Ended		6 Months Ended		12 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Phillips 66 [Member]
Concentration Risk, Percentage				10.00%
Revenue, Net				$ 17,045,000
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage		0.00%	0.00%		0.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Phillips 66 [Member]
Concentration Risk, Percentage				11.00%
Accounts, Notes, Loans and Financing Receivable, Net, Current		$ 4,690,000		$ 4,690,000
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage						0.00%
CANADA
Number of Operating Segments				1
Revenue, Net	[1]				$ 41,000
Number of Operating Segments				3
Revenue, Net	[1]	84,687,000	$ 84,715,000	$ 170,612,000	$ 163,181,000
Accounts, Notes, Loans and Financing Receivable, Net, Current		$ 43,122,000		$ 43,122,000		$ 43,661,000
Intersegment Revenue Markup Percentage				10.00%

[1] Net sales are attributed to geographic areas based upon the location of the operation making the sale.

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Note 3 - Summarized Financial Information by Reportable Business Segments (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Lighting Segment [Member]
Net Sales (a):
Net Sales		$ 59,601	$ 59,796	$ 118,676	$ 115,517
Operating Income (Loss):
Operating Income (Loss)		5,182	4,090	10,864	8,317
Capital Expenditures:
Capital Expenditures		1,160	599	1,849	1,181
Depreciation and Amortization:
Depreciation and Amortization		717	729	1,422	1,451
Graphics Segment [Member]
Net Sales (a):
Net Sales		21,034	20,269	42,787	36,293
Operating Income (Loss):
Operating Income (Loss)		2,035	1,065	4,196	1,118
Capital Expenditures:
Capital Expenditures		604	533	1,109	867
Depreciation and Amortization:
Depreciation and Amortization		213	256	428	506
Technology Segment [Member]
Net Sales (a):
Net Sales		4,052	4,650	9,149	11,330
Operating Income (Loss):
Operating Income (Loss)		993	499	2,333	1,131
Capital Expenditures:
Capital Expenditures		108	241	224	285
Depreciation and Amortization:
Depreciation and Amortization		364	325	719	663
All Other Category [Member]
Net Sales (a):
Net Sales					41
Operating Income (Loss):
Operating Income (Loss)					(183)
Capital Expenditures:
Capital Expenditures					4
Depreciation and Amortization:
Depreciation and Amortization					31
Corporate and Eliminations [Member]
Operating Income (Loss):
Operating Income (Loss)		(2,830)	(3,430)	(6,250)	(5,625)
Capital Expenditures:
Capital Expenditures		150	61	202	67
Depreciation and Amortization:
Depreciation and Amortization		304	242	605	487
Net Sales	[1]	84,687	84,715	170,612	163,181
Operating Income (Loss)		5,380	2,224	11,143	4,758
Capital Expenditures		2,022	1,434	3,384	2,404
Depreciation and Amortization		$ 1,598	$ 1,552	$ 3,174	$ 3,138

[1] Net sales are attributed to geographic areas based upon the location of the operation making the sale.

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Note 3 - Identifiable Assets by Segment (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Lighting Segment [Member]
Identifiable Assets:
Identifiable Assets	$ 87,209	$ 90,713
Graphics Segment [Member]
Identifiable Assets:
Identifiable Assets	36,306	29,477
Technology Segment [Member]
Identifiable Assets:
Identifiable Assets	29,956	28,423
Corporate and Eliminations [Member]
Identifiable Assets:
Identifiable Assets	34,063	33,766
Identifiable Assets	$ 187,534	$ 182,379

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Note 3 - Inter-segment Revenues (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Intersegment Eliminations [Member] | Lighting Segment [Member]
Net Sales		$ 814	$ 445	$ 1,428	$ 1,497
Intersegment Eliminations [Member] | Graphics Segment [Member]
Net Sales		562	125	1,006	256
Intersegment Eliminations [Member] | Technology Segment [Member]
Net Sales		8,932	7,675	18,316	14,947
Intersegment Eliminations [Member] | All Other Category [Member]
Net Sales					308
Lighting Segment [Member]
Net Sales		59,601	59,796	118,676	115,517
Graphics Segment [Member]
Net Sales		21,034	20,269	42,787	36,293
Technology Segment [Member]
Net Sales		4,052	4,650	9,149	11,330
All Other Category [Member]
Net Sales					41
Net Sales	[1]	$ 84,687	$ 84,715	$ 170,612	$ 163,181

[1] Net sales are attributed to geographic areas based upon the location of the operation making the sale.

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Note 3 - Revenue by Geographic Region (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
UNITED STATES
Net Sales (a):
Revenue, Net	[1]	$ 84,687	$ 84,715	$ 170,612	$ 163,140
CANADA
Net Sales (a):
Revenue, Net	[1]				41
Revenue, Net	[1]	$ 84,687	$ 84,715	$ 170,612	$ 163,181

[1] Net sales are attributed to geographic areas based upon the location of the operation making the sale.

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Note 3 - Long-lived Assets by Geographical Region (Details) - USD ($) $ in Thousands		Dec. 31, 2015	Jun. 30, 2015
UNITED STATES
Long-lived Assets (b):
Long-Lived Assets	[1]	$ 45,395	$ 44,965
Long-Lived Assets	[1]	$ 45,395	$ 44,965

[1] Long-lived assets include property, plant and equipment, and other long-term assets. Goodwill and intangible assets are not included in long-lived assets.

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Note 4 - Earnings Per Common Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,115,250	2,377,900	1,506,800	2,371,900

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Note 4 - Basic and Diluted Earnings Per Share (Details) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Net of Treasury Shares [Member]
BASIC EARNINGS PER SHARE
Weighted average shares outstanding during the period, net of treasury shares (a) (in shares)	[1]	24,637	24,124	24,569	24,123
Weighted average shares outstanding (in shares)	[1]	24,637	24,124	24,569	24,123
DILUTED EARNINGS PER SHARE
Weighted average shares outstanding (in shares)	[1]	24,637	24,124	24,569	24,123
Net income		$ 3,782	$ 1,588	$ 7,532	$ 3,115
Weighted average shares outstanding during the period, net of treasury shares (a) (in shares)		24,911	24,449	24,838	24,442
Weighted average vested restricted stock units outstanding (in shares)		25		26
Weighted average shares outstanding in the Deferred Compensation Plan during the period (in shares)		249	325	243	319
Weighted average shares outstanding (in shares)		24,911	24,449	24,838	24,442
Basic earnings per share (in dollars per share)		$ 0.15	$ 0.06	$ 0.30	$ 0.13
Net income		$ 3,782	$ 1,588	$ 7,532	$ 3,115
Weighted average shares outstanding (in shares)		24,911	24,449	24,838	24,442
Effect of dilutive securities (b): Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any (in shares)	[2]	713	58	567	64
Weighted average shares outstanding (c) (in shares)	[2],[3]	25,624	24,507	25,405	24,506
Diluted earnings per share (in dollars per share)	[2]	$ 0.15	$ 0.06	$ 0.30	$ 0.13

[1] Includes shares accounted for as treasury stock according to accounting standards.

[2] Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

[3] Options to purchase 1,115,250 common shares and 2,377,900 common shares at December 31, 2015 and 2014, respectively, and options to purchase 1,506,800 common shares and 2,371,900 common shares at December 31, 2015 and 2014, respectively, were not included in the computation of the three month and six month periods for diluted earnings per share, respectively, because the exercise price was greater than the average fair market value of the common shares.

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Note 5 - Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Inventories:
Raw materials	$ 27,414	$ 27,920
Work-in-process	4,498	4,658
Finished goods	13,973	10,505
Total Inventories	$ 45,885	$ 43,083

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Note 6 - Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Accrued Expenses:
Compensation and benefits	$ 11,097	$ 11,614
Customer prepayments	1,762	1,324
Accrued sales commissions	2,021	1,982
Accrued warranty	4,310	3,408
Other accrued expenses	4,117	3,798
Total Accrued Expenses	$ 23,307	$ 22,126

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Note 7 - Goodwill and Other Intangible Assets (Details Textual) - USD ($)	Dec. 31, 2015	Jun. 30, 2015	Sep. 30, 2014
Customer Relationships [Member] | LSI Saco [Member]
Finite-Lived Intangible Assets, Gross			$ 1,036,000
Finite-Lived Intangible Assets, Accumulated Amortization			$ 428,000
Customer Relationships [Member]
Finite-Lived Intangible Assets, Gross	$ 9,316,000	$ 9,316,000
Finite-Lived Intangible Assets, Accumulated Amortization	7,436,000	7,290,000
Finite-Lived Intangible Assets, Gross	22,052,000	22,052,000
Finite-Lived Intangible Assets, Accumulated Amortization	$ 19,635,000	$ 19,382,000

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Note 7 - Goodwill (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Lighting Segment [Member]
Balance as of June 30, 2015
Goodwill	$ 34,913	$ 34,913
Accumulated impairment losses	(34,778)	(34,778)
Goodwill, net as of June 30, 2015	135	135
Graphics Segment [Member]
Balance as of June 30, 2015
Goodwill	28,690	28,690
Accumulated impairment losses	(27,525)	(27,525)
Goodwill, net as of June 30, 2015	1,165	1,165
Technology Segment [Member]
Balance as of June 30, 2015
Goodwill	11,621	11,621
Accumulated impairment losses	(2,413)	(2,413)
Goodwill, net as of June 30, 2015	9,208	9,208
Goodwill	75,224	75,224
Accumulated impairment losses	(64,716)	(64,716)
Goodwill, net as of June 30, 2015	$ 10,508	$ 10,508

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Note 7 - Other Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Customer Relationships [Member]
Finite-Lived Intangible Assets, Gross	$ 9,316	$ 9,316
Finite-Lived Intangible Assets, Accumulated Amortization	7,436	7,290
Net Amount	1,880	2,026
Patents [Member]
Finite-Lived Intangible Assets, Gross	338	338
Finite-Lived Intangible Assets, Accumulated Amortization	136	120
Net Amount	202	218
Technology-Based Intangible Assets [Member]
Finite-Lived Intangible Assets, Gross	11,228	11,228
Finite-Lived Intangible Assets, Accumulated Amortization	10,950	10,910
Net Amount	278	318
Trade Names [Member]
Finite-Lived Intangible Assets, Gross	460	460
Finite-Lived Intangible Assets, Accumulated Amortization	460	460
Noncompete Agreements [Member]
Finite-Lived Intangible Assets, Gross	710	710
Finite-Lived Intangible Assets, Accumulated Amortization	653	602
Net Amount	57	108
Trademarks and Trade Names [Member]
Indefinite Lived Intangible Assets	3,422	3,422
Total Indefinite-lived Intangible Assets	3,422	3,422
Finite-Lived Intangible Assets, Gross	22,052	22,052
Finite-Lived Intangible Assets, Accumulated Amortization	19,635	19,382
Net Amount	2,417	2,670
Indefinite Lived Intangible Assets	3,422	3,422
Total Indefinite-lived Intangible Assets	3,422	3,422
Total Other Intangible Assets	25,474	25,474
Total Other Intangible Assets	$ 5,839	$ 6,092

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Note 7 - Amortization Expense of Other Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Amortization Expense	$ 127	$ 127	$ 253	$ 275

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Note 7 - Future Amortization Expense (Details) $ in Thousands	Dec. 31, 2015 USD ($)
2016	$ 505
2017	409
2018	400
2019	400
2020	327
After 2020	$ 629

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Note 8 - Revolving Line of Credit (Details Textual) - USD ($)	1 Months Ended
	Mar. 31, 2015	Dec. 31, 2015
UNITED STATES
Long-term Line of Credit		$ 0
Line of Credit Facility, Maximum Borrowing Capacity	$ 30,000,000
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.125%
Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.90%

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Note 9 - Cash Dividends (Details Textual) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jan. 31, 2015
Restricted Stock Units (RSUs) [Member]
Dividends Accrued	$ 4,690
Payments of Ordinary Dividends, Common Stock	$ 1,721,000	$ 1,688,000
Quarterly Indicated Per Share Dividend Rate			$ 0.05
Annual Indicated per Share Dividend Rate	$ 0.20

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Note 10 - Equity Compensation (Details Textual)	3 Months Ended		6 Months Ended			12 Months Ended		33 Months Ended
	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 USD ($) shares	Dec. 31, 2015 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) shares	Dec. 31, 2014 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) shares	Jun. 30, 2014 shares	Sep. 30, 2015
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term			9 years 182 days		9 years 273 days
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares			$ 8.84		$ 5.96
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares			$ 3.28		$ 2.19
Share Based Compensation Valuation Assumptions Expected Forfeiture Rate								2.00%
Treasury Stock Acquired, Repurchase Authorization, Shares Expected | shares	35,000		35,000
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term			9 years 334 days		9 years 334 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term			10 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares			$ 11.82		$ 6.94
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares			$ 4.48		$ 3.48
Share Based Compensation Valuation Assumptions Expected Forfeiture Rate								3.30%
Treasury Stock Acquired, Repurchase Authorization, Shares Expected | shares	39,000		39,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares			72,000	0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 332,454		$ 332,454
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | shares	67,000		67,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares			$ 9.39
Share Based Compensation Valuation Assumptions Expected Forfeiture Rate			3.30%
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			4 years
Dividends			$ 5,040
Sharebased Compensation Arrangement By Sharebased Payment Award Equity Other Than Options Expected To Vest Outstanding Number | shares	64,434		64,434
Allocated Share-based Compensation Expense	$ 33,276		$ 319,533
Performance Shares [Member] | Annually [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			33.30%
Employee Stock Option [Member]
Stock or Unit Option Plan Expense	$ 342,134	$ 796,192	$ 1,830,707		$ 881,825
Non-Employee Directors [Member] | Each Ninety Days [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			25.00%
Employees [Member] | Annually [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			25.00%
Excluding Tax Effect of Disqualified Dispositions [Member]
Proceeds from Stock Options Exercised			$ 2,149,606		144,352
Employee Salary Deferrals or Company Contributions [Member]
Treasury Stock, Value, Acquired, Cost Method			$ 276,800		$ 139,100
Treasury Stock, Shares, Acquired | shares			29,021		20,034
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term			4 years 182 days		4 years 219 days
Deferred Compensation Plan, Number of Participants	28		28
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term			6 years 292 days		6 years 109 days	6 years 36 days	5 years 146 days
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | shares	1,522,593		1,522,593
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | shares	3,340,462	2,867,614	3,340,462	2,677,436	2,867,614	2,677,436	2,677,464
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | shares	1,628,976	1,778,589	1,628,976		1,778,589
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 3,110,463		$ 3,110,463
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			2 years 240 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares			1,016,800		593,400
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares			$ 9.38		$ 6.66
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares			$ 3.63		$ 3.23
Share Based Compensation Valuation Assumptions Expected Forfeiture Rate	3.10%
Stock or Unit Option Plan Expense			$ 2,150,000		$ 882,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | shares	3,287,071		3,287,071
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price | $ / shares	$ 9.12		$ 9.12
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value	$ 12,468,545		$ 12,468,545
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Remaining Contractual Term			6 years 292 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value			$ 852,596		22,383
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Aggregate Grant Date Fair Value			1,035,041		598,316
Proceeds from Stock Options Exercised			2,195,000		108,000
Increase (Decrease) in Income Taxes Payable			(300,868)		(7,834)
Increase (Decrease) In Common Stock Related To Stock Option Exercise			46,066		(36,575)
Reduction of Income Tax Expense Related to Stock Option Exercises			84,781		7,690
Reduction of Deferred Tax Asset Related to Stock Option Exercises			$ 170,021		$ 36,718
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period | shares			12,590		13,800
Stock Issued During Period, Value, Share-based Compensation, Gross			$ 113,400		$ 96,000
Treasury Stock, Shares | shares	250,075		250,075	226,600		226,600
Treasury Stock, Value	$ 2,375,242		$ 2,375,242	$ 2,145,100		$ 2,145,100

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Note 10 - Weighted Average Assumptions Used to Develop the Fair Value of Stock Options (Details)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Dividend yield	1.33%	1.17%	1.28%	1.17%
Expected volatility	43.00%	56.00%	44.00%	56.00%
Risk-free interest rate	1.38%	1.64%	1.67%	1.64%
Expected life (in years)	6 years	6 years	6 years	6 years

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Note 10 - Stock Options (Details) - USD ($)	6 Months Ended		12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015	Jun. 30, 2014
Outstanding at (in shares)	2,677,436	2,677,464	2,677,464
Outstanding at (in dollars per share)	$ 8.85	$ 9.57	$ 9.57
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	6 years 292 days	6 years 109 days	6 years 36 days	5 years 146 days
Outstanding at	$ 12,661,470	$ 558,591	$ 4,914,601	$ 1,674,010
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	1,016,800	593,400
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 9.38	$ 6.66
Forfeitures (in shares)	(55,050)	(378,525)
Forfeitures (in dollars per share)	$ 11.65	$ 9.99
Exercised (in shares)	(298,724)	(24,725)
Exercised (in dollars per share)	$ 7.20	$ 5.84
Outstanding at (in shares)	3,340,462	2,867,614	2,677,436	2,677,464
Outstanding at (in dollars per share)	$ 9.11	$ 8.95	$ 8.85	$ 9.57
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	1,628,976	1,778,589
Exercisable at (in dollars per share)	$ 9.95	$ 10.24
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term	4 years 182 days	4 years 219 days
Exercisable at	$ 6,032,985	$ 438,785

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Note 10 - Summary of Unvested Stock Options (Details)	6 Months Ended
	Dec. 31, 2015 $ / shares shares
Non-vested at (in shares) | shares	1,080,198
Non-vested at (in dollars per share) | $ / shares	$ 2.99
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares	1,016,800
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 3.63
Vested (in shares) | shares	(355,462)
Vested (in dollars per share) | $ / shares	$ 2.91
Forfeited (in shares) | shares	(30,050)
Forfeited (in dollars per share) | $ / shares	$ 3.30
Non-vested at (in shares) | shares	1,711,486
Non-vested at (in dollars per share) | $ / shares	$ 3.38

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Note 11 - Supplemental Cash Flow Information (Details) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Interest	$ 23,000	$ 36,000
Income taxes	4,650,000	21,000
Stock Issued During Period, Value, Share-based Compensation, Gross	$ 113,400	$ 96,000

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Note 12 - Commitments and Contingencies (Details Textual) - USD ($)	Mar. 19, 2012	Dec. 31, 2015	Jun. 30, 2013
Standby Letters of Credit [Member]
Letters of Credit Outstanding, Amount		$ 0
LSI Virticus [Member]
Liability Payment Period	5 years
Business Combination, Contingent Consideration, Liability			$ 0
Loss Contingency, Range of Possible Loss, Maximum		$ 2,000,000

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Note 13 - Sale of Subsidiary (Details Textual) - USD ($)			3 Months Ended			6 Months Ended
		Sep. 30, 2014	Dec. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2015	Dec. 31, 2014
LSI Saco Technologies Inc [Member]
Sale of Stock, Consideration Received on Transaction		$ 1,900,000
Gain (Loss) on Disposition of Business		(565,000)
Line Of Credit Terminated		$ 5,000,000			$ 5,000,000
Revenue, Net					41,000
Operating Income (Loss)					$ (183,000)
Gain (Loss) on Disposition of Business							$ (565,000)
Revenue, Net	[1]		$ 84,687,000	$ 84,715,000		$ 170,612,000	163,181,000
Operating Income (Loss)			$ 5,380,000	$ 2,224,000		$ 11,143,000	$ 4,758,000

[1] Net sales are attributed to geographic areas based upon the location of the operation making the sale.

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Note 14 - Severance Costs (Details Textual) - USD ($)	1 Months Ended	3 Months Ended				6 Months Ended
	Mar. 31, 2015	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2015
Chief Executive Officer [Member] | Reclassification From Liability [Member]
Other Noncash Income	$ 576,000
Chief Executive Officer [Member]
Severance Costs					$ 800,000
Payments for Postemployment Benefits						$ 224,000
Increase (Decrease) in Self Insurance Reserve			$ 1,000,000
Facility Closing [Member]
Business Exit Costs				$ 21,200
Severance Costs		$ 223,000		$ 340,000
Percent Of Reduction Of Workforce	8.30%			8.30%		8.30%
Employee Related Reduction In Annual Compensation And Benefits				$ 3,700,000

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Note 14 - Accrued Severance Liability Activity (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015
Balance at	$ 379
Accrual of expense	223	$ 944	$ 1,718
Payments	(314)	(213)	(704)
Adjustments	(58)		(635)
Balance at	$ 230	$ 731	$ 379

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Note 15 - Income Taxes (Details Textual)	Dec. 31, 2015 USD ($)
Research Tax Credit Carryforward [Member]
Tax Credit Carryforward, Amount	$ 111,000

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Note 15 - Reconciliation of Income Tax Rate (Details)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate	33.30%	36.10%	34.50%	41.00%
Impact of foreign operations				(0.20%)
Enactment of tax law changes	(2.00%)	(6.10%)	(1.00%)	(2.90%)
Uncertain tax positions	(0.30%)	(1.30%)	(0.30%)	(1.20%)
Other	(1.20%)	(0.30%)	(0.70%)	(2.40%)
Effective tax rate	29.80%	28.40%	32.50%	34.30%