Reportable Business Segments

The Company made two changes to its reportable business segments in fiscal 2011. The Technology Segment was reclassified into the All Other Category because there were no quantitative measures or qualitative factors that required the operating results of LSI Saco Technology to be reported as a separate business segment. The Company also reclassified its Corporate Administration expense out of the All Other Category and into a separate line item in the business segment disclosures. These changes were made for all reported periods in the financial information presented, and they had no impact on the Company's consolidated results.

Company Comments

Robert J. Ready, President and Chief Executive Officer, commented, "In LSI Industries' year-end press release and letter to shareholders in the Annual Report for fiscal 2010, I reported to you in some detail on the various actions taken in connection with our theme of 'preparation and change.' I also remarked that our overall strategic growth vision had not wavered as LSI continues its commitment to developing new product technologies for its markets while maintaining and growing its world class lighting and graphics capabilities. I stated 'The potential of LSI Industries resides in how we think about our long-term growth strategies while we employ short-term oriented tactics and actions to cut costs, improve efficiencies, and remain financially sound.' Finally, I commented that LSI was well positioned to capitalize on an improving economy and the markets served.

"I am pleased to report that we are now beginning to reap the benefits of our 'preparation and change' work as evidenced by the operating results achieved for the fiscal 2011 first quarter ended September 30, 2010. On an increase in net sales of 18%, net income increased 88% over the same period of the prior year (after disregarding acquisition related costs incurred in the first quarter of fiscal 2010). While we are proud of the increase in sales, we also believe these operating results demonstrate that LSI is being operated on a very efficient basis and will enjoy favorable operating leverage to its earnings as net sales increase.