<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
                            AND EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

                         COMMISSION FILE NUMBER: 0-23159

                          Vari-Lite International, Inc.
                          -----------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                  75-2239444
                --------                                  ----------
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                  Identification No.)

                     201 Regal Row, Dallas, Texas            75247
                     ----------------------------            -----
               (Address of principal executive offices)    (Zip Code)

        Registrant's telephone number including area code: (214) 630-1963
                                                           ---------------

         Indicate by check mark 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 the number of shares outstanding of each of the Issuer's classes 
of common stock, as of the latest practicable date: As of May 12, 1999, there 
were 7,800,003 shares of Common Stock outstanding.

<PAGE>

                          VARI-LITE INTERNATIONAL, INC.
                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 1999

<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION                                           Page
<S>                                                                       <C>
Item 1.  Financial Statements:

         Condensed Consolidated Balance Sheets as of
         September 30, 1998 and March 31, 1999............................ 3

         Condensed Consolidated Statements of Income for
         the three months ended March 31, 1998 and 1999................... 4

         Condensed Consolidated Statements of Income for
         the six months ended March 31, 1998 and 1999..................... 5

         Condensed Consolidated Statements of Cash Flows for
         the six months ended March 31, 1998 and 1999..................... 6

         Notes to Condensed Consolidated Financial Statements............. 7

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations........................................12

PART II. - OTHER INFORMATION

Item 1.  Legal Proceedings................................................18

Item 4.  Submission of Matters to a Vote of Security Holders..............18

Item 6.  Exhibits and Reports on Form 8-K.................................18

SIGNATURES................................................................19
</TABLE>


                                       2
<PAGE>


                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30,        MARCH 31,
                                                                                          1998               1999
                                                                                      ------------      -------------
<S>                                                                                   <C>               <C>
CURRENT ASSETS:
   Cash............................................................................   $     3,838        $     3,175
   Receivables, less allowance for doubtful accounts of $900 and $890..............        13,471             14,597
   Inventory.......................................................................         6,075              5,791
   Prepaid expense and other current assets........................................         1,749              2,442
                                                                                      -----------       ------------
      TOTAL CURRENT ASSETS.........................................................        25,133             26,005
EQUIPMENT AND OTHER PROPERTY:
   Lighting and sound equipment....................................................       127,763            130,073
   Machinery and tools.............................................................         5,097              6,132
   Furniture and fixtures..........................................................         4,439              4,666
   Office and computer equipment...................................................        10,399             10,261
   Work in progress and raw materials inventory....................................         5,320              3,431
                                                                                      -----------       ------------
                                                                                          153,018            154,563
      Less accumulated depreciation and amortization...............................        71,745             76,956
                                                                                      -----------       ------------
                                                                                           81,273             77,607
OTHER ASSETS.......................................................................         8,221              8,413
                                                                                      -----------       ------------
      TOTAL ASSETS.................................................................   $   114,627        $   112,025
                                                                                      -----------       ------------
                                                                                      -----------       ------------
                                          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued expenses...........................................   $    13,189        $    11,848
   Unearned revenue................................................................         1,694              1,353
   Income taxes payable............................................................           999                457
   Current portion of long-term obligations........................................         3,049              2,925
                                                                                      -----------       ------------
      TOTAL CURRENT LIABILITIES....................................................        18,931             16,583
LONG-TERM OBLIGATIONS..............................................................        47,284             47,677
DEFERRED INCOME TAXES..............................................................         3,708              3,431
                                                                                      -----------       ------------
      TOTAL LIABILITIES............................................................        69,923             67,691
COMMITMENTS AND CONTINGENCIES  (Note 11)
STOCKHOLDERS' EQUITY:
   Preferred Stock, $0.10 par value (10,000,000 shares authorized; no shares
      outstanding).................................................................             -                 -
   Common Stock, $0.10 par value (40,000,000 shares authorized; 7,800,003 and
      7,800,003 shares outstanding)................................................           785                785
   Treasury Stock..................................................................          (186)              (186)
   Additional paid-in capital......................................................        24,426             24,426
   Stockholder notes receivable....................................................           (82)               (56)
   Stock purchase warrants.........................................................           600                600
   Accumulated other comprehensive loss -  foreign currency translation
        adjustment.................................................................          (230)              (459)
   Retained earnings...............................................................        19,391             19,224
                                                                                      -----------       ------------
      TOTAL STOCKHOLDERS' EQUITY...................................................        44,704             44,334
                                                                                      -----------       ------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................   $   114,627        $   112,025
                                                                                      -----------       ------------
                                                                                      -----------       ------------

</TABLE>

            See notes to condensed consolidated financial statements.

                                       3

<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                     1998               1999
                                                                                                   --------           --------
<S>                                                                                            <C>                  <C>
Rental revenues........................................................................        $    15,965          $   20,881 
Product sales and services revenues ...................................................              3,262               2,289 
                                                                                               -----------          ---------- 
   TOTAL REVENUES .....................................................................             19,227              23,170 
Rental costs ..........................................................................              7,468              11,003 
Product sales and services costs ......................................................              2,356               1,769 
                                                                                               -----------          ---------- 
   TOTAL COST OF SALES ................................................................              9,824              12,772 
                                                                                               -----------          ---------- 
   GROSS PROFIT .......................................................................              9,403              10,398 
Selling, general and administrative expense ...........................................              7,641               8,860 
Research and development expense ......................................................              1,890               1,236 
                                                                                               -----------          ---------- 
   TOTAL OPERATING EXPENSES ...........................................................              9,531              10,096 
                                                                                               -----------          ---------- 
OPERATING INCOME (LOSS) ...............................................................               (128)                302 
Interest expense (net) ................................................................                568                 991 
                                                                                               -----------          ---------- 
LOSS  BEFORE INCOME TAX ...............................................................               (696)               (689)
Income tax benefit ....................................................................               (275)               (280)
                                                                                               -----------          ---------- 
NET LOSS ..............................................................................               (421)               (409)
Other comprehensive income (loss) - foreign currency translation adjustments ..........                 29                 (52)
                                                                                               -----------          ---------- 
COMPREHENSIVE LOSS.....................................................................        $      (392)         $     (461)
                                                                                               -----------          ---------- 
                                                                                               -----------          ---------- 
WEIGHTED AVERAGE SHARES OUTSTANDING ...................................................          7,800,003           7,800,003 
                                                                                               -----------          ---------- 
                                                                                               -----------          ---------- 
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING ...........................................          7,800,003           7,800,003 
                                                                                               -----------          ---------- 
                                                                                               -----------          ---------- 
PER SHARE INFORMATION
BASIC:
    Net loss ..........................................................................         $    (0 05)         $   (0 05)
DILUTED:
    Net loss...........................................................................         $    (0.05)         $   (0.05)
Dividends declared ....................................................................         $       --          $      --
</TABLE>

            See notes to condensed consolidated financial statements.

                                       4
<PAGE>

                                       
             VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF INCOME

            FOR THE SIX  MONTHS ENDED MARCH 31, 1998 AND 1999

                                (UNAUDITED)

                    (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                       1998              1999
                                                                                                       ----              ----
<S>                                                                                               <C>                 <C>
Rental revenues ..........................................................................        $    35,135         $    43,515 
Product sales and services revenues ......................................................              6,611               4,903 
                                                                                                  -----------         ----------- 
   TOTAL REVENUES ........................................................................             41,746              48,418 
Rental costs .............................................................................             15,035              21,966 
Product sales and services costs .........................................................              4,670               3,651 
                                                                                                  -----------         ----------- 
   TOTAL COST OF SALES ...................................................................             19,705              25,617 
                                                                                                  -----------         ----------- 
   GROSS PROFIT ..........................................................................             22,041              22,801 
Selling, general and administrative expense ..............................................             15,898              18,563 
Research and development expense .........................................................              3,463               2,482 
                                                                                                  -----------         ----------- 
   TOTAL OPERATING EXPENSES ..............................................................             19,361              21,045 
                                                                                                  -----------         ----------- 
OPERATING INCOME .........................................................................              2,680               1,756 
Interest expense (net) ...................................................................              1,297               2,032 
                                                                                                  -----------         ----------- 
INCOME  (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF CHANGE IN                                         
   ACCOUNTING PRINCIPLE ..................................................................              1,383                (276)
Income taxes expense (benefit) ...........................................................                546                (109)
                                                                                                  -----------         ----------- 
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
   PRINCIPLE .............................................................................                837                (167)
Extraordinary loss .......................................................................                737                  -- 
Cumulative effect of change in accounting principle ......................................                195                  -- 
                                                                                                  -----------         ----------- 
NET LOSS .................................................................................                (95)               (167)
Other comprehensive income (loss) - foreign currency translation adjustments .............                142                (229)
                                                                                                  -----------         ----------- 
COMPREHENSIVE INCOME (LOSS) ..............................................................        $        47         $      (396)
                                                                                                  -----------         ----------- 
                                                                                                  -----------         ----------- 
WEIGHTED AVERAGE SHARES OUTSTANDING ......................................................          7,624,179           7,800,003 
                                                                                                  -----------         ----------- 
                                                                                                  -----------         ----------- 
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING ..............................................          7,638,372           7,800,003 
                                                                                                  -----------         ----------- 
                                                                                                  -----------         ----------- 
PER SHARE INFORMATION
BASIC:
    Income (loss) before extraordinary loss and cumulative effect of change in accounting
       principle .........................................................................         $     0.11          $    (0.02)
    Extraordinary loss ...................................................................               (.10)                 --
    Cumulative effect of change in accounting principle ..................................               (0.2)                 --
    Net loss .............................................................................         $    (0.01)         $    (0.02)
DILUTED:
     Income (loss) before extraordinary loss and cumulative effect of change in accounting
       Principle .........................................................................         $     0.11          $    (0.02)
    Extraordinary loss ...................................................................               (.10)                 --
    Cumulative effect of change in accounting principle ..................................               (0.2)                 --
    Net loss .............................................................................         $    (0.01)         $    (0.02)

Dividends declared .......................................................................         $       --          $      --
</TABLE>

               See notes to consolidated financial statements.

                                       5
<PAGE>

                                       
               VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

             FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999

                                 (UNAUDITED)

                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                             1998             1999
                                                                                             ----             ----
<S>                                                                                      <C>             <C>
Cash flows from operating activities:
   Net loss .....................................................................        $    (95)        $   (167)
   Adjustments to reconcile net loss to net cash provided by (used in) operating
      activities:
      Depreciation and amortization .............................................           6,449            7,882
      Amortization of note discount and deferred loan fees ......................              59               57
      Provision for doubtful accounts ...........................................              90               32
      Extraordinary loss from early extinguishment of debt ......................             737               --
      Cumulative effect of change in accounting principle .......................             195               --
      Deferred income taxes .....................................................             580             (277)
      (Gain) on sale of Brilliant Stages assets and cancellation of land lease ..              --             (599)
      (Gain) on sale of equipment ...............................................             (34)            (138)
      Provisions for ESOP and ESEP contributions ................................             125              125
      Net change in assets and liabilities:
        Accounts receivable .....................................................           1,477           (1,157)
        Prepaid expenses ........................................................             958             (693)
        Inventory ...............................................................          (2,648)          (1,657)
        Other assets ............................................................          (1,156)             808
        Accounts payable, accrued liabilities and income taxes payable ..........          (5,011)          (2,008)
        Unearned revenue ........................................................          (1,379)            (341)
                                                                                         --------         --------
        Net cash provided by operating activities ...............................             347            1,867

Cash flows from investing activities:
   Capital expenditures, including rental equipment .............................          (9,227)          (5,660)
   Acquisition of European companies ............................................          (1,697)          (1,191)
   Proceeds from sale of Irideon and Brilliant Stages assets and
     cancellation of land lease .................................................              --            2,892
   Proceeds from sale of equipment ..............................................              67              268
                                                                                         --------         --------
        Net cash used in investing activities ...................................         (10,857)          (3,691)

Cash flows from financing activities:
   Proceeds from issuance of debt ...............................................          54,283           16,835
   Principal payments on debt ...................................................         (62,637)         (15,908)
   Proceeds from issuance of distributor advances ...............................             514             --
   Principal payments on distributor advances ...................................          (1,242)            (172)
   Proceeds from payments on stockholder notes receivable .......................              89               26
   Proceeds from public offering of common stock ................................          21,307             --
                                                                                         --------         --------
        Net cash provided by financing activities ...............................          12,314              781
Effect from foreign currency translation adjustment .............................             (74)             380
                                                                                         --------         --------
Net increase during the period ..................................................           1,730             (663)
Cash, beginning of period .......................................................           1,862            3,838
                                                                                         --------         --------
Cash, end of period .............................................................        $  3,592         $  3,175
                                                                                         --------         --------
                                                                                         --------         --------
SUPPLEMENTAL CASH FLOW INFORMATION
   Cash paid for interest expense ...............................................        $  1,321         $  1,730
   Cash paid for income taxes ...................................................        $    539         $  1,213

</TABLE>

                 See notes to consolidated financial statements

                                       6
<PAGE>


                VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 (UNAUDITED)

                       (IN THOUSANDS EXCEPT SHARE DATA)

1.  Interim Financial Information

         The accompanying unaudited condensed consolidated financial 
statements of Vari-Lite International, Inc. (the "Company") have been 
prepared by the Company in accordance with generally accepted accounting 
principles for interim financial information and the instructions to Form 
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all 
of the information and footnotes required by generally accepted accounting 
principles for complete financial statements.

         In the opinion of management, the condensed consolidated financial 
statements contain all adjustments, consisting of normal recurring 
adjustments, considered necessary to present fairly the consolidated 
financial position, results of operations and cash flows of the Company. The 
results of operations for the three-month and six-month periods ended March 
31, 1999 are not necessarily indicative of the results of operations that may 
be expected for any other interim periods or for the fiscal year ending 
September 30, 1999.

         For further information, refer to the consolidated financial 
statements and accompanying notes included in the Company's Annual Report on 
Form 10-K for the year ended September 30, 1998.

2.  Inventory

         Inventory consists of the following:

<TABLE>
<CAPTION>
                                                                       September 30,           March 31,
                                                                           1998                  1999
                                                                           ----                  ----
<S>                                                                    <C>                     <C>
Raw materials..............................................               $5,283                $5,348
Work in progress...........................................                  616                   443
Finished goods.............................................                  176                     -
                                                                          ------                ------
                                                                          $6,075                $5,791
                                                                          ------                ------
                                                                          ------                ------
</TABLE>

3.  Initial Public Offering

         On October 15, 1997, in conjunction with the Company's 
reincorporation in Delaware and an initial public offering, the Board of 
Directors of the Company created a new class of common stock and authorized 
40,000,000 shares. As a result of the reincorporation, stockholders received 
3.76368 shares of common stock for each share of the Company's Class A common 
stock and Class B common stock held by the stockholders.

         The Company filed a Registration Statement (Commission file no. 
333-33559) for the public offering of 2,300,000 shares of common stock which 
became effective October 16, 1997. The Company sold 2,000,000 shares of 
common stock for $12.00 per share for an aggregate amount of $24,000 and 
certain stockholders of the Company sold 300,000 shares of common stock for 
$12.00 per share for an aggregate amount of $3,600.

                                       7
<PAGE>

4.  Long-Term Debt and Extraordinary Loss

         On December 19, 1997, the Company entered into a five-year $50,000 
multicurrency revolving credit facility (the "New Credit Facility") and 
canceled its existing credit facility. The initial $50,000 committment on the 
New Credit Facility, as amended in April 1999, decreases by $1,000 during 
each of the third and fourth quarters of fiscal 1999 and $1,500 per quarter 
thereafter through maturity. Borrowings under the New Credit Facility were 
$45,400 at March 31, 1999 and bear interest at the lender's base rate plus a 
rate margin ranging from 0.00% to 1.00% or LIBOR plus a rate margin ranging 
from 1.00% to 3.50% based upon the Company's ratio of Adjusted Funded Debt to 
EBITDA (as defined in the New Credit Facility) and are secured by 
substantially all of the assets owned by the Company's domestic subsidiaries 
and a pledge of 65% of the outstanding capital stock of the Company's foreign 
subsidiaries. A commitment fee is charged on the average daily unused portion 
of the New Credit Facility at a rate ranging from 0.20% to 0.50% per annum 
based upon the ratio of Adjusted Funded Debt to EBITDA. The New Credit 
Facility contains compliance covenants, including requirements that the 
Company achieve certain financial ratios. In addition, the New Credit 
Facility places limitations on annual capital expenditures and on the ability 
to incur additional indebtedness, make certain loans or investments, sell 
assets, pay dividends or reacquire the Company's stock. In December 1997, the 
Company expensed deferred financing costs related to the prior debt facility 
of $737 (net of tax benefit of $481) relating to the early extinguishment of 
debt, which have been reflected in the consolidated statements of income as 
an extraordinary loss for the six months ended March 31, 1998.

5.  Net Income Per Share

         Basic earnings per share are computed based upon the weighted 
average number of common shares outstanding. Diluted earnings per share 
reflects the dilutive effect, if any, of stock options and warrants.

                                       8
<PAGE>

         The following is a reconciliation of shares used in calculating 
diluted income per share for the three-month and six-month periods ended 
March 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                                        Three Months ended                Six Months ended
                                                             March 31,                        March 31,
                                                   --------------------------        -------------------------
                                                      1998           1999               1998          1999
                                                      ----           ----               ----          ----
<S>                                                <C>            <C>                <C>           <C>
Weighted average shares outstanding....            7,800,003      7,800,003          7,624,179     7,800,003

Dilutive effect of stock options and  
    warrants after application of 
    treasury stock method..............               -              -                  14,193        -
                                                   ---------      ---------          ---------     ---------

Shares used in calculating diluted 
   income per share....................            7,800,003      7,800,003          7,638,372     7,800,003
                                                   ---------      ---------          ---------     ---------
</TABLE>

         For the three and six month period ended March 31, 1999, earnings 
per share excludes 600,300 stock options and 242,233 warrants which are 
anti-dilutive. For the three and six month periods ended March 31, 1998, 
earnings per share excludes 544,000 and 41,665 stock options, respectively. 
In addition for the three month period ended March 31, 1998, 242,233 warrants 
were excluded as they are anti-dilutive.

6.  Accounting Standards Changes

         In 1998, the Accounting Standards Executive Committee ("AcSEC") 
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of 
Start-Up Activities", which requires that such costs be expensed as incurred. 
The Company's practice has been to record the costs of bringing significant 
new operations into operation as deferred charges and to amortize them over 
periods of not more than five years. The Company early adopted the SOP 
retroactively as of October 1, 1997, and restated 1998 first quarter results 
to record a pre-tax charge of $282 ($195 after taxes, or $0.02 per basic and 
diluted share) as a cumulative effect of this accounting change.

         SFAS No. 131, "Disclosures about Segments of an Enterprise and 
Related Information", will be effective in 1999 and requires the disclosure 
of certain information about the Company's operating segments on a basis 
consistent with the way the Company is organized and operated. This standard 
expands or modifies disclosures and, accordingly, will have no effect on the 
Company's consolidated financial position, results of operations or cash 
flows.

         In 1998, SFAS No. 133, "Accounting for Derivative Instruments and 
Hedging Activities" was issued. This standard, which establishes new 
accounting and reporting standards for derivative financial instruments, must 
be adopted no later than 2000. The Company is currently analyzing the effect 
of this standard and does not expect it to have a material effect on the 
Company's consolidated financial position, results of operations or cash 
flows.

                                       9
<PAGE>

7.  Acquisitions

         In October 1998, the Company acquired the VARI*LITE-R- distribution 
rights and related assets of its French distributor for approximately $1,200 
in cash, virtually all of which has been recorded as goodwill.

8.  Dispositions

         During fiscal 1998, the Company made a strategic decision to dispose 
of its Irideon-R- architectural automated lighting product line. As a result 
of this decision, during 1998 the Irideon-R- assets were written down to 
their net realizable value in accordance with SFAS No. 121. On October 30, 
1998, the Company sold substantially all of the Irideon-R- assets for its net 
book value, after writedown, of approximately $2,000.

         On December 31, 1998, the Company sold substantially all of the 
assets of Brilliant Stages, Ltd., one of the Company's European subsidiaries, 
for approximately $500, resulting in a gain of approximately $99.

9.  Lease Cancellation

         In December 1995, the Company entered into an operating lease with 
an unaffiliated land developer ("Lessor"). In December 1998, the lease was 
canceled as a result of the sale of the land by the Lessor, resulting in a 
gain to the Company of approximately $500.

10. Legal Proceedings

         In August 1995, the Company brought suit asserting a number of 
claims of infringement of several of its patents by High End Systems, Inc. 
("High End") in the United States District Court for the Northern District of 
Texas seeking monetary damages and injunctive relief to prevent future patent 
infringement. In December 1998, the court approved a negotiated settlement 
between the Company and High End, the specific terms of which are 
confidential but included cash paid to the Company, a cross license of 
certain patents and authorization for High End to continue to sell all of the 
products that were the subject of the suit. The settlement, recorded in 
December 1998, does not affect the sale or use of any of the Company's or 
High End's products or services that existed at the time of settlement.

         In November 1998, the Company brought suit asserting several claims 
of patent infringement by Martin Gruppen A/S and Martin Professional A/S in 
the United States Federal District Court of Sherman, Texas seeking monetary 
damages and injunctive relief to prevent future infringement. Discovery in 
this matter is proceeding and a preliminary injunction hearing is currently 
scheduled for July 1999.

                                       10
<PAGE>

11. Commitments and Contingencies

         In the ordinary course of its business, the Company is from time to 
time threatened with or named as a defendant in various lawsuits, including 
patent infringement claims. Additionally, the Company has filed lawsuits 
claiming patent infringement by third parties in connection with which the 
Company has been subject to counterclaims. Management does not believe that 
these lawsuits will have a significant impact on the Company's financial 
position or results of operations.

                                       11
<PAGE>


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

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998

      REVENUES. Total revenues increased 20.5%, or $4.0 million, to $23.2 
million in the three-month period ended March 31, 1999, compared to $19.2 
million in the three-month period ended March 31, 1998. The revenue increase 
was attributable primarily to the factors set forth below.

      Rental revenues increased 30.8%, or $4.9 million, to $20.9 million in 
the three-month period ended March 31, 1999, compared to $16.0 million in the 
three-month period ended March 31, 1998. This increase was primarily due to 
the acquisition of several of the Company's European distributors in fiscal 
1998. Prior to acquiring each distributor, the Company received and 
recognized approximately one-half of the rental revenue earned by the 
distributor in accordance with the terms of the distributor agreement. After 
acquiring each distributor, the Company's results reflect all of the revenues 
the distributor would have earned. In addition, the Company's sales-type 
lease revenues increased as a result of the conversion of several of our 
North American dealers from a monthly rental arrangement to a fully paid long 
term lease program. Sales-type lease revenues increased by $1.9 million to 
$2.5 million in the three-month period ended March 31, 1999, compared to $0.6 
million in the three-month period ended March 31, 1998. Finally, additional 
revenue increases resulted from the opening of two new offices in fiscal 1998.

      Product sales and services revenues decreased 29.8%, or $0.9 million, 
to $2.3 million in the three-month period ended March 31, 1999, compared to 
$3.2 million in the three-month period ended March 31, 1998. This decrease 
was primarily due to the sale of the Company's Irideon-R- automated lighting 
product line in October 1998 and substantially all of the assets of the 
Company's Brilliant Stages, Ltd. subsidiary ("Brilliant Stages") in December 
1998.

      RENTAL COSTS. Rental costs increased 47.3%, or $3.5 million, to $11.0 
million in the three-month period ended March 31, 1999, compared to $7.5 
million in the three-month period ended March 31, 1998. Rental costs as a 
percentage of rental revenues increased to 52.7% in the three-month period 
ended March 31, 1999, from 46.8% in the three-month period ended March 31, 
1998. The increase in rental costs as a percentage of total rental revenues 
was primarily due to increased costs associated with the higher level of 
conventional equipment rentals, pricing pressures from competitors which 
resulted in increased costs associated with renting more equipment without a 
corresponding increase in revenue and the inclusion of all of the costs of 
the operations of the European distributors that were acquired in fiscal 
1998. Prior to acquiring each distributor, the Company's rental costs 
associated with distributor rental revenues were almost exclusively the 
depreciation on the equipment assigned to the distributor. After acquiring 
the distributor, the Company's results reflect all of the additional rental 
costs incurred from operating the business previously operated by the 
distributor.

                                       12
<PAGE>

      PRODUCT SALES AND SERVICES COSTS. Product sales and services costs 
decreased 24.9%, or $0.6 million, to $1.8 million in the three-month period 
ended March 31, 1999, compared to $2.4 million in the three-month period 
ended March 31, 1998. Product sales and services costs as a percentage of 
product sales and services revenue increased to 77.3% in the three-month 
period ended March 31, 1999, from 72.2% in the three-month period ended March 
31, 1998. The increase in product sales and services costs as a percentage of 
the related revenues was primarily due to costs incurred in connection with a 
Brilliant Stages construction contract that was in progress when the 
Brilliant Stages business was sold at December 31, 1998.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and 
administrative expense increased 16.0%, or $1.3 million, to $8.9 million in 
the three-month period ended March 31, 1999, compared to $7.6 million in the 
three-month period ended March 31, 1998. This increase resulted primarily 
from the acquisition of certain of the Company's European distributors in 
fiscal 1998. This expense as a percentage of total revenues decreased to 
38.2% in the three-month period ended March 31, 1999, from 39.7% in the 
three-month period ended March 31, 1998.

      RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense 
decreased 34.6%, or $0.7 million, to $1.2 million in the three-month period 
ended March 31, 1999, compared to $1.9 million in the three-month period 
ended March 31, 1998. This expense as a percentage of total revenues 
decreased to 5.3% in the three-month period ended March 31, 1999, from 9.8% 
in the three-month period ended March 31, 1998. This decrease was primarily 
the result of a decrease in employee-related costs as a result of employee 
terminations from the restructuring of the Company in fiscal 1998.

      INTEREST EXPENSE. Interest expense increased 74.5%, or $0.4 million, to 
$1.0 million in the three-month period ended March 31, 1999, compared to $0.6 
million in the three-month period ended March 31, 1998. This increase was due 
to higher interest rates and a higher debt level in the period ended March 
31, 1999.

      INCOME TAXES. Effective tax rates in the three-month periods ended 
March 31, 1999 and 1998 were 40.6% and 39.5%, respectively.

SIX MONTHS ENDED MARCH 31, 1999 COMPARED TO SIX MONTHS ENDED MARCH 31, 1998

      REVENUES. Total revenues increased 16.0%, or $6.7 million, to $48.4 
million in the six-month period ended March 31, 1999, compared to $41.7 
million in the six-month period ended March 31, 1998. The revenue increase 
was attributable primarily to the factors set forth below.

      Rental revenues increased 23.9%, or $8.4 million, to $43.5 million in 
the six-month period ended March 31, 1999, compared to $35.1 million in the 
six-month period ended March 31, 1998. This increase was primarily due to the 
acquisition of several of the Company's European distributors in fiscal 1998. 
Prior to acquiring each distributor, the Company received and recognized 
approximately one-half of the rental revenue earned by the distributor in 
accordance with the terms of the distributor agreement. After acquiring each 
distributor, the Company's results reflect all of the revenues the 
distributor would have earned. In addition, the Company's

                                       13
<PAGE>

sales-type lease revenues increased as a result of the conversion of several 
of our North American dealers from a monthly rental arrangement to a fully 
paid long term lease program. Sales-type lease revenues increased by $2.1 
million to $3.0 million in the six-month period ended March 31, 1999, 
compared to $0.9 million in the six-month period ended March 31, 1998. 
Finally, additional revenue increases resulted from the opening of two new 
offices in fiscal 1998.

      Product sales and services revenues decreased 25.8%, or $1.7 million, 
to $4.9 million in the six-month period ended March 31, 1999, compared to 
$6.6 million in the six-month period ended March 31, 1998. This decrease was 
primarily due to the sale of the Company's Irideon-R- automated lighting 
product line in October 1998 and substantially all of the assets of Brilliant 
Stages in December 1998.

      RENTAL COSTS. Rental costs increased 46.1%, or $7.0 million, to $22.0 
million in the six-month period ended March 31, 1999, compared to $15.0 
million in the six-month period ended March 31, 1998. Rental costs as a 
percentage of rental revenues increased to 50.5% in the six-month period 
ended March 31, 1999, from 42.8% in the six-month period ended March 31, 
1998. The increase in rental costs as a percentage of total rental revenues 
was primarily due to increased costs associated with the higher level of 
conventional equipment rentals, pricing pressures from competitors which 
resulted in increased costs associated with renting more equipment without a 
corresponding increase in revenue and the inclusion of all of the costs of 
the European distributors that were acquired in fiscal 1998. Prior to 
acquiring each distributor, the Company's rental costs associated with 
distributor rental revenues were almost exclusively the depreciation on the 
equipment assigned to the distributor. After acquiring the distributor, the 
Company's results reflect all of the additional rental costs incurred from 
operating the business previously operated by the distributor.

      PRODUCT SALES AND SERVICES COSTS. Product sales and services costs 
decreased 21.8%, or $1.0 million, to $3.7 million in the six-month period 
ended March 31, 1999, compared to $4.7 million in the six-month period ended 
March 31, 1998. Product sales and services costs as a percentage of product 
sales and services revenue increased to 74.5% in the six-month period ended 
March 31, 1999, from 70.6% in the six-month period ended March 31, 1998. The 
increase in product sales and services costs as a percentage of the related 
revenues was primarily due to costs incurred in connection with a Brilliant 
Stages construction contract that was in progress when the Brilliant Stages 
business was sold at December 31, 1998.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and 
administrative expense increased 16.8%, or $2.7 million, to $18.6 million in 
the six-month period ended March 31, 1999, compared to $15.9 million in the 
six-month period ended March 31, 1998. This increase resulted primarily from 
the acquisition of certain of the Company's European distributors in fiscal 
1998, partially offset by a $0.5 million gain from a lease cancellation in 
December 1998. This expense as a percentage of total revenues increased to 
38.3% in the six-month period ended March 31, 1999, from 38.1% in the 
six-month period ended March 31, 1998.

      RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense 
decreased 28.3%, or $1.0 million, to $2.5 million in the six-month period 
ended March 31, 1999, compared to $3.5 million in the six-month period ended 
March 31, 1998. This expense as a percentage of total revenues decreased to 
5.1% in the six-month period ended March 31, 1999, from 8.3% in the six-

                                       14
<PAGE>

month period ended March 31, 1998. This decrease was primarily the result of 
a decrease in employee-related costs as a result of employee terminations 
from the restructuring of the Company in fiscal 1998.

      INTEREST EXPENSE. Interest expense increased 56.7%, or $0.7 million, to 
$2.0 million in the six-month period ended March 31, 1999, compared to $1.3 
million in the six-month period ended March 31, 1998. This increase was due 
to higher interest rates and a higher debt level in the period ended March 
31, 1999.

      EXTRAORDINARY LOSS. A non-cash extraordinary loss of $0.7 million was 
recorded in the six-month period ended March 31, 1998, net of $0.4 million of 
tax benefit, relating to the early extinguishment of debt.

      CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. During the 
six-month period ended March 31, 1998, the Company recorded a cumulative 
effect of change in accounting principle loss of $0.2 million, net of $0.1 
million of tax benefit, relating to start-up costs that had previously been 
capitalized.

      INCOME TAXES. The effective tax rate in the six-month periods ended 
March 31, 1999 and 1998 was 39.5%.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, the Company has financed its operations and capital 
expenditures with cash flow from operations, bank borrowings and advances 
from distributors and customers. The Company's operating activities generated 
cash flow of $0.3 million and $1.9 million for the six-month periods ended 
March 31, 1998 and 1999, respectively.

         During fiscal 1997, the Company borrowed under a multicurrency 
credit agreement (the "Old Credit Agreement") to partially finance its 
operations and capital expenditures. On October 21, 1997, the Company 
consummated the initial public offering of its common stock and used the net 
proceeds thereof, approximately $21.3 million, to repay indebtedness under 
the Old Credit Agreement. On December 19, 1997, the Company entered into a 
five-year $50.0 million multicurrency revolving credit facility (the "New 
Credit Facility") and canceled its existing credit facility. The initial 
$50.0 million committment on the New Credit Facility, as amended in April 
1999, decreases by $1.0 million during each of the third and fourth quarters 
of fiscal 1999 and $1.5 million per quarter thereafter through maturity. 
Borrowings under the New Credit Facility were $45.4 million at March 31, 1999 
and bear interest at the lender's base rate plus a rate margin ranging from 
0.00% to 1.00% or LIBOR plus a rate margin ranging from 1.00% to 3.50% based 
upon the Company's ratio of Adjusted Funded Debt to EBITDA (as defined in the 
New Credit Facility) and are secured by substantially all of the assets owned 
by the Company's domestic subsidiaries and a pledge of 65% of the outstanding 
capital stock of the Company's foreign subsidiaries. A commitment fee is 
charged on the average daily unused portion of the New Credit Facility at a 
rate ranging from 0.20% to 0.50% per annum based upon the ratio of Adjusted 
Funded Debt to EBITDA. The New Credit Facility contains compliance covenants, 
including requirements that the Company achieve certain financial ratios. In 
addition, the New 

                                       15
<PAGE>

Credit Facility places limitations on annual capital expenditures and on the 
ability to incur additional indebtedness, make certain loans or investments, 
sell assets, pay dividends or reacquire the Company's stock. In December 
1997, the Company expensed deferred financing costs related to the prior debt 
facility of $0.7 million (net of tax benefit of $0.4 million) relating to the 
early extinguishment of debt, which have been reflected in the consolidated 
statements of income as an extraordinary loss.

         The Company has hedged a portion of its currency fluctuation risk by 
borrowing in French francs, British pounds sterling and Japanese yen under 
its New Credit Facility. Cash generated from the Company's France, England 
and Japan offices is typically denominated in French francs, British pounds 
sterling and Japanese yen, respectively, and is used to pay expenses incurred 
in those currencies and service the foreign currency borrowings. The Company 
is a party to two interest rate swap agreements which fix the Company's 
effective interest costs under a portion of the New Credit Agreement.

         The Company's business requires significant capital expenditures. 
Capital expenditures for the six months ended March 31, 1998 and 1999 were 
approximately $9.2 million and $5.7 million, respectively, of which 
approximately $8.7 million and $5.5 million were for rental equipment 
inventories. The majority of the Company's revenues are generated through the 
rental of automated lighting and concert sound systems and, as such, the 
Company must maintain a significant amount of rental equipment to meet 
customer demands.

      The Company had a working capital surplus of $12.3 million and $9.4 
million at March 31, 1998 and 1999, respectively.

         Management believes that cash flow generated from operations and 
borrowing capacity under the New Credit Agreement should be sufficient to 
fund its anticipated operating needs and capital expenditures for at least 
the next twelve months. However, because the Company's future operating 
results will depend on a number of factors, including the demand for the 
Company's products and services, the level of competition, the success of the 
Company's research and development programs, the ability to achieve 
competitive and technological advances and general and economic conditions 
and other factors beyond the Company's control, there can be no assurance 
that sufficient capital resources will be available to fund the expected 
expansion of its business beyond such period.

IMPACT OF THE YEAR 2000 ISSUE

         The term "year 2000 issue" is a general term used to describe the 
various problems that may result from the improper processing of dates and 
date-sensitive calculations by computers and other machinery as the year 2000 
is approached and reached. These problems generally arise from the fact that 
most of the world's computer hardware and software have historically used 
only 2 digits to identify the year in a date, often meaning that the computer 
will fail to distinguish dates in the "2000's" from dates in the "1900's". 
These problems may also arise from other sources as well, such as the use of 
special codes and conventions in software that make use of the date field.

                                       16
<PAGE>

         In 1995 and 1996, the Company invested approximately $2.2 million 
constructing a wide-area network throughout the United States and 
implementing Oracle financial and manufacturing applications. The Company has 
conducted a review of its computer systems to identify the systems that could 
be affected by the year 2000 issue and is attempting to ensure that its 
information systems and technology and computer systems are year 2000 ready. 
This review is part of the Company's overall upgrade of its systems and as a 
result the Company has no separate budget for year 2000 compliance. Expenses 
relating to reviewing and assessing systems are included in historical 
operating expenses as part of information systems and technology and have not 
been separately identified. The Company's upgrades are substantially complete 
and management expects the upgrade to the European-based operations to be 
completed by the middle of the 1999 calendar year. Management believes that 
with the installation of the new systems, conversion to new software and 
modifications to existing software, the year 2000 issue will pose no 
significant operational problems for the Company.

         The Company is currently discussing with its vendors and customers 
the possibility of any year 2000 interface difficulties that may affect the 
Company. The ability of third parties with whom the Company transacts 
business to adequately address their year 2000 issue is, however, outside the 
Company's control.

         To date, the Company has not identified any information technology 
assets under the control of the Company that represent a material risk of not 
being year 2000 ready or for which a suitable alternative cannot be 
implemented. The Company does not have a contingency plan with respect to the 
year 2000 issue if the information systems and technology upgrade is not 
completed or is delayed beyond the end of 1999.

  DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

         This report includes "forward-looking statements" as that phrase is 
defined in Section 27A of the Securities Act of 1933, as amended, and Section 
21E of the Securities Exchange Act of 1934, as amended. When used in this 
report, the terms "anticipate," "believe," "estimate," "expect," "will," 
"could," "may" and similar expressions, as they relate to management or the 
Company, are intended to identify forward-looking statements. Such statements 
reflect the current views of management with respect to future events and are 
subject to certain risks, uncertainties and assumptions, including without 
limitation the following as they relate to the Company: fluctuations in 
operating results and seasonality; ability to introduce new products; 
technological changes; reliance on intellectual property; dependence on 
entertainment industry; competition; dependence on management; foreign 
exchange risk; international trade risk; dependence on key suppliers and 
dependence on manufacturing facility; and the year 2000 issue. Should one or 
more of these risks or uncertainties materialize, or should underlying 
assumptions prove incorrect, actual results may vary materially from those 
described herein.

                                       17
<PAGE>


PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         In August 1995, the Company brought suit asserting a number of 
claims of infringement of several of its patents by High End Systems, Inc. 
("High End") in the United States District Court for the Northern District of 
Texas seeking monetary damages and injunctive relief to prevent future patent 
infringement. In December 1998, the court approved a negotiated settlement 
between the Company and High End, the specific terms of which are 
confidential but included cash paid to the Company, a cross license of 
certain patents and authorization for High End to continue to sell all of the 
products that were the subject of the suit. The settlement, recorded in 
December 1998, does not affect the sale or use of any of the Company's or 
High End's products or services that existed at the time of settlement

         In November 1998, the Company brought suit asserting several claims 
of patent infringement by Martin Gruppen A/S and Martin Professional A/S in 
the United States Federal District Court of Sherman, Texas seeking monetary 
damages and injunctive relief to prevent future infringement. Discovery in 
this matter is proceeding and a preliminary injunction hearing is currently 
scheduled for July 1999.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  On February 26, 1999, the Annual Meeting of
         Stockholders was held in Dallas, Texas. The stockholders were
         asked to elect two Class II directors to serve until 2002. The
         vote was as follows:

<TABLE>
<CAPTION>
                                                                     Against or
                                                       For            Withheld      Abstentions
                                                       ---            --------      -----------
<S>                                                 <C>              <C>            <C>
                  James H. Clark, Jr.               7,231,431          16,851             200
                  John R. Rettberg                  7,231,631          16,651              -
</TABLE>

                     Messrs. Brutsche', Smith, Maxson and Prothro will 
               continue as directors of the Company.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                     10.40    Amendment No. 1, effective January 1, 1998, to the
                              Vari-Lite International, Inc. Employees' Stock
                              Ownership Plan dated September 27, 1995

                     10.41    Amendment No. 1, effective January 1, 1998, to the
                              Vari-Lite International, Inc. Employees' Stock
                              Ownership Trust dated September 27, 1995

                     10.42    Amendment No. 4, dated April 1, 1999 to the
                              Multicurrency Credit Agreement, dated as of
                              December 19, 1997, among the Company and SunTrust
                              Bank, Atlanta, as agent for the banks thereunder

                     27.1     Financial Data Schedule

        (b) No reports on Form 8-K were filed for the quarter ended 
March 31, 1999.

                                       18
<PAGE>

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.

                                   VARI-LITE INTERNATIONAL, INC.

Date:    May 12, 1999              By:    /s/ MICHAEL P. HERMAN
      ---------------                 ---------------------------
                                          Michael P. Herman
                                          Vice President - Finance,
                                          Chief Financial Officer
                                          and Secretary (Principal Financial
                                          and Accounting Officer)


                                       19