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SEC Letter

LSI INDUSTRIES INC.

10000 Alliance Road

Cincinnati, Ohio 45242

(513) 793-3200

Via EDGAR

April 24, 2009

Mr. Larry Spirgel

Ms. Melissa Hauber

Mr. Robert S. Littlepage, Jr.

Mr. John Harrington

Ms. Celeste Murphy

Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 3720

100 F Street, N.E.

Washington, D.C. 20549

    Re:

     LSI Industries Inc. Form 10-K for Fiscal Year Ended June 30, 2008

Filed on September 15, 2008 and Form 10-Q for Fiscal Quarter Ended
December 31, 2008

File No. 0-13375

Ladies and Gentlemen:

We have received and reviewed your letter dated March 12, 2009 related to the above-referenced
filings of LSI Industries Inc. (“LSI” or the “Company”). In accordance with your request, we have
responded to each of the comments included in your letter. Our responses to each of the items
noted in your letter are detailed below and are keyed to the numerical order of your comments. This
letter has been filed with the Commission as correspondence through EDGAR.

Form 10-K for Fiscal Year Ended June 30, 2008

Definitive Proxy Statement Incorporated by Reference Into Part III

Summary Compensation Table, page 17

    1.

    We note that the value included in the Option Awards column is based on grant date fair value
according to footnote (3). Regulation S-K Item 402(c)(2)(vi) and the Instruction thereto
require you to include in this column the dollar amount recognized for financial reporting
purposes with respect to the fiscal year in accordance with FAS 123R. Please confirm that you
will comply with this requirement in future filings.

Response:

We confirm that in future filings we will comply with the Regulation S-K Item 402(c)(2)(vi)
requirements you identify.

April 24, 2009

Page 2

Potential Payments Upon Termination or Change In Control, page 23

    2.

    In future filings, please provide quantitative disclosure of the potential payments to each
named executive officer assuming a triggering event took place on the last day of your fiscal
year. Refer to Regulation S-K Item 402(j) and Instruction 1 thereto. Please note that this
quantitative disclosure should include, among other things, the value of accelerated option
vesting. Refer to Regulation S-K Compliance and Disclosure Interpretations, Question and
Answer 126.02, available at www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm.

Response:

In future filings we will provide the requested quantitative disclosure of any potential
payments to named executive officers upon the triggering events identified in Regulation
S-K Item 402(j). You may note that we have no stand alone contracts or arrangements
requiring payments to named executive officers if any such triggering event were to occur,
other than the accelerated vesting of stock options. Potential payments to named executive
officers upon any such triggering event are limited to base salary through date of
termination, payment of earned vacation not yet taken, and disbursement of accumulated
account balances in the Company’s defined contribution qualified Retirement Plan and
Nonqualified Deferred Compensation Plan.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page
F-1

    3.

    We note that your net sales began decreasing from prior period levels in the second half of
fiscal 2008 and that this trend has continued through the first half of fiscal 2009. In future
filings, please provide additional disclosure identifying and assessing material known trends
that are impacting your results of operations and/or financial condition. Although you discuss
changes in your results of operations and liquidity from period-to-period in your recent
filings, additional disclosure providing management’s insight into the underlying causes and
potential effects of material trends would be helpful to investors. This disclosure should
also discuss actions being taken in response to such trends. Refer to the Commission’s
Interpretive Release No. 33-8350, “Commission Guidance Regarding Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”

Response:

In future filings we will provide additional disclosure identifying and assessing material
trends known to management and will provide additional disclosure of management’s
insight into the underlying causes and potential effects of material trends on results of
operations and/or financial condition.

April 24, 2009

Page 3

Results of operations, page F-1

    4.

    It appears that your segments contribute in a disproportionate way to your operating results.
In future filings, discuss your results of operations on a segment basis, as required by
Section 501.06 of the Codification of Financial Reporting Policies. In this regard, we note
that you discuss information regarding revenues for each segment within MD&A. Expand this
disclosure to discuss your segment measure of profit or loss, which appears to be “operating
income (loss),” for each reportable segment.

Response:

We confirm that in future filings, as required by Section 501.06 of the Codification of
Financial Reporting Policies, that we will expand our disclosure by discussing the
components of operating income (loss) for each reportable business segment.

This will involve creating one section in MD&A for the Lighting Segment and a separate
section for the Graphics Segment, each leading with a small table reporting both net sales
and operating income for the current period and prior period in the analysis. Subsequent
narrative discussion will provide the reasons for the change in both net sales and operating
income of each business segment. By way of an abbreviated example, we anticipate this would take the
following form (amounts in thousands):

    2nd Quarter FY09

    2nd Quarter FY08

    Lighting Segment

    Net Sales

    $
    45,290

    $
    48,811

    Operating Income (Loss)

    $
    (11,761
    )

    $
    3,731

The $3.5 million or 7.2% decrease in Lighting Segment net sales is primarily the result of                     . The $15.5 million decrease in operating income of the Lighting Segment is
primarily the net result of a $11.3 million goodwill impairment in one reporting unit, a
$x.x million reduction in gross profit                     .

    2nd Quarter FY09

    2nd Quarter FY08

    Graphics Segment

    Net Sales

    $
    15,497

    $
    35,251

    Operating Income (Loss)

    $
    (1,665
    )

    $
    3,978

The $19.8 million or 56.0% decrease in Graphics Segment net sales is primarily the result of
                    . The $5.6 million decrease in operating income of the Lighting Segment is
primarily the net result of a $1.3 million partial goodwill impairment in one reporting
unit, a $x.x million reduction in gross profit                     .

April 24, 2009

Page 4

Consolidated Statements of Operations, page F-16

    5.

    In future filings, separately state revenues from net sales of tangible products and sales of
services, if greater than 10% of total revenues. Also, separately state the costs and expenses
applicable to each category of sales and revenues. Refer to Rule 5-03 of Regulation S-X.

Response:

We confirm that we have disclosed net sales of services when they have been equal to or
greater than 10% of total net sales. We also confirm that in future filings we will also
separately state the cost of sales applicable to each category of net sales reported.

Net sales of services in the periods the SEC has recently reviewed have been under 10% of
total net sales as follows (amounts in thousands):

    Net Sales

    % of Total

    Total Net Sales

    – Services

    Net Sales

    FY 2008

    $
    305,286

    $
    18,750

    6.1
    %

    FY 2007

    $
    337,453

    $
    20,225

    6.0
    %

    FY 2006

    $
    280,470

    $
    7,706

    2.7
    %

    FY09 1st Half

    $
    136,625

    $
    3,452

    2.5
    %

    FY08 1st Half

    $
    174,063

    $
    15,841

    9.1
    %

    FY09 2nd Qtr

    $
    60,787

    $
    1,341

    2.2
    %

    FY08 2nd Qtr

    $
    84,062

    $
    6,737

    8.0
    %

    FY09 1st Qtr

    $
    75,838

    $
    2,111

    2.8
    %

    FY08 1st Qtr

    $
    90,001

    $
    9,404
    (a)

    10.4
    %

    (a)

    This was reported on the face of the income statement in the Form 10-Q for the
period ended September 30, 2007, but it was inadvertently omitted in the Form 10-Q
for the period ended September 30, 2008.

April 24, 2009

Page 5

Note 1 — Summary of Significant Accounting Policies, page F-21

Revenue Recognition, page F-21

    6.

    We note your disclosure that sales are recorded net of estimated returns, rebates and
discounts. However, you state at page F-2 that selling and administrative expenses fluctuated
as a result of reduced customer rebates and accommodations. Clarify your policy regarding
these items and your application of the guidance in EITF 01-9.

Response:

LSI’s policy on Revenue Recognition states, in accordance with U.S. GAAP, that “Sales are
recorded net of estimated returns, rebates and discounts.” Customer rebates issued by LSI
are in the form of cash paid to the customers, which as indicated in paragraph 9 of EITF
01-9 requires that the rebate be recorded as a reduction of net sales. LSI customers do not
receive their rebates in the form of identifiable assets. As a result of review of how
customer rebates have been treated by each of the LSI companies, we found that primarily
only the largest lighting company did not comply with the LSI policy and did report customer
rebates as an operating expense. The amount recorded as an expense, rather than as a
reduction of net sales, in the periods reported in the 10-K and 10-Q which you reviewed were
as follows (amounts in thousands):

    FY 2006

    FY 2007

    FY 2008

    FY 2008 1st Half

    FY 2009 1st Half

$                   80

    $
    80

    $
    132

    $
    42

    $
    76

    Net sales for
these same
periods
were as
follows
(amounts in
thousands):

$          280,470

    $
    337,453

    $
    305,286

    $
    84,062

    $
    60,787

These amounts of improperly classified customer rebates are insignificant to net sales,
gross profit, operating expense and gross margin percentage, and have zero impact on
operating income, segment operating income, net income or earnings per share if they had
been properly recorded in the income statement. LSI will properly record customer rebates
in the Lighting Segment as a reduction of net sales beginning with the third quarter of
fiscal 2009, and in future filings we will no longer reference customer rebates when
discussing trends in our expenses.

Clearly the most significant cost element referenced on page F-2 in the discussion of
selling expenses is what LSI calls customer accommodations. Total customer accommodations
were $2.0 million, $2.4 million and $1.6 million in 2008, 2007 and 2006, respectively, and
inclusive of the customer rebate amounts discussed above. Cost accumulates in this category
at the discretion of the sales management team and primarily consists of product we provide
to our sales representatives in the marketing of our products as well as costs we incur to
maintain customer relationships (ie., freight charges when we have shipped the wrong
quantity or product to the customer). These costs are defined internally as “customer
concessions” and were $1.2 million, $1.5 million and $0.8 million in 2008,
2007 and 2006,
respectively. In accordance with our revenue recognition policy, the Company establishes
allowances, at the time revenue is recognized, for returns and allowances based upon
historical trends. When products are returned, the sale is reversed, cost of sales is
reversed, the receivable is reversed, or credited, and the reserve for returns and
allowances is adjusted as necessary. Historically, returns have been insignificant as a
percentage of total sales: $2.3 million,
$3.2 million and $2.8 million in credit memos for returns were issued in 2008,

April 24, 2009

Page 6

 2007 and
2006, respectively. The element of customer accommodations that is reported in selling
expense is related to product returned to inventory. LSI’s general practice is to “tear
down” the light fixtures and return all good individual components back to raw materials
inventory. Many times components are damaged, defective or are otherwise not useable by LSI
in future light fixtures. When not charged back to the customer, the cost of these unusable
components as well as the original final assembly labor and overhead are classified as
“customer accommodations” expense. In each of the three years presented in the 2008 Annual
Report on Form 10-K these costs represented less than $0.1 million per year. Additionally,
in the spirit of maintaining good customer relations with a customer who has a long history
with LSI or who has great potential for future business, LSI may choose to expense as
customer accommodations expense certain receivables or inventory costs that may be disputed
by a customer. This is viewed as a sales/marketing investment in the relationship with this
customer. In limited circumstances LSI may offer a sample lighting fixture to the customer
for evaluation. This has occurred most recently in the development of new technology
white-light LED light fixtures. The cost of the sample product is generally recorded as
“customer accommodations” expense within selling and administration expense because the
decision is the responsibility of sales management, who makes these decisions in order to
maintain good customer relations by allowing them to evaluate the new product in its
environment before proceeding with a purchase order. In the three years presented in the
2008 Annual Report on Form 10-K these costs represented approximately $0.4 million, $0.2
million and $0.2 million during 2008, 2007 and 2006, respectively, of our selling and
administration expenses. We do not believe these types of cost fall within the scope of
EITF 01-9 for classification as a reduction of net sales.

    7.

    Tell us the nature of the products or services for which you recognize revenue under SOP 97-2
and how you determined that this guidance is applicable to these transactions.

Response:

Since the acquisition of LSI Saco Technologies at the end of fiscal 2006, LSI has expanded
its product offerings and such products require the use of software. The Company sells
products that include integrated software for two types of product lines: 1) solid state
LED video screens used as advertising billboards or marquees; and 2) active digital signage
utilizing LCD screens. In both cases, software is an integral element and is required to
make the product function properly. For both LED and LCD screens, the software is included
in the unit price of the product as a whole and not separately licensed to a customer.
There are no multiple deliverables within these product lines; the product is delivered to
the customer along with the corresponding software and title is transferred and revenue
recognized at the time of delivery to the customer.

April 24, 2009

Page 7

We considered the indicators of whether software is incidental to a product, as a whole,
based on the following questions derived from our understanding of Footnote 2 of SOP 97-2:

    Q:

     Is the software a significant focus of the marketing effort or
is sold separately?

    A:

    No. The Company markets products based on the quality of
image, which is an aspect of the hardware, rather than an aspect of the
software, and does not sell or market the software on a stand-alone basis.
However, the software is an integral component of the LED and LCD screens.
Without the software the screens will not operate. For both products, the
software allows any user of the screen to display their image. Thus, the
softw