<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 DECEMBER 31, 1997
                                       
                      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 February 11, 1998, 
            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 DECEMBER 31, 1997
<TABLE>
PART I. - FINANCIAL INFORMATION                                         Page
                                                                        ----
<S>                                                                     <C>
Item 1. Financial Statements 
        Consolidated Balance Sheets as of 
        September 30, 1997 and December 31, 1997. . . . . . . . . . . .   3
     
        Consolidated Statements of Income for 
        the three months ended December 31, 1996 and 1997 . . . . . . .   4
     
        Consolidated Statement of Stockholders' Equity for
        the three months ended December 31, 1997. . . . . . . . . . . .   5
     
        Consolidated Statements of Cash Flows for
        the three months ended December 31, 1996 and 1997 . . . . . . .   6
     
        Notes to Consolidated Financial Statements. . . . . . . . . . .   7

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations . . . . . . . . . . . . . . . . . . .   9
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk. . .  12


PART II. - OTHER INFORMATION

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . .  13

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .  13

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
</TABLE>

                                       2
<PAGE>

                    VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                    (UNAUDITED)
                           (IN THOUSANDS EXCEPT SHARE DATA)
                                        ASSETS

<TABLE>
                                                                       SEPTEMBER 30,  DECEMBER 31,  
                                                                           1997          1997       
                                                                       -------------  -----------   
<S>                                                                    <C>            <C>
CURRENT ASSETS:
  Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    1,862     $    2,262    
  Receivables, less allowance for doubtful accounts of $450 and $483 .      14,445         15,029    
  Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       4,050          5,531    
  Prepaid expense and other current assets . . . . . . . . . . . . . .       2,536          2,501    
                                                                        ----------     ----------    
      TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . .      22,893         25,323    
EQUIPMENT AND OTHER PROPERTY:
  Lighting and sound equipment . . . . . . . . . . . . . . . . . . . .     102,487        107,005    
  Machinery and tools. . . . . . . . . . . . . . . . . . . . . . . . .       2,929          2,819    
  Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . .       3,945          3,958    
  Office and computer equipment. . . . . . . . . . . . . . . . . . . .       9,189          9,845    
  Work in progress and raw materials inventory . . . . . . . . . . . .       5,343          4,259    
                                                                        ----------     ----------    
                                                                           123,893        127,886    
      Less accumulated depreciation and amortization . . . . . . . . .      55,248         58,375    
                                                                        ----------     ----------    
                                                                            68,645         69,511    
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5,166          5,260    
                                                                        ----------     ----------    
      TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . .  $   96,704     $  100,094    
                                                                        ----------     ----------    
                                                                        ----------     ----------    

                             LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses. . . . . . . . . . . . . . . .  $   12,086     $    9,168    
  Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . .       2,992          2,600    
  Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . .         820            807    
  Current portion of long-term obligations . . . . . . . . . . . . . .       7,824          3,655    
                                                                        ----------     ----------    
      TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . .      23,722         16,230    
LONG-TERM OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . .      38,418         27,630    
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . .       7,023          6,742    
                                                                        ----------     ----------    
      TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . .      69,163         50,602    
COMMITMENTS AND CONTINGENCIES
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; 
    5,800,003 and 7,800,003 shares outstanding). . . . . . . . . . . .         585            785    
  Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .        (186)          (186)   
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . .       3,344         24,451    
  Stockholder notes receivable . . . . . . . . . . . . . . . . . . . .        (176)          (166)   
  Stock purchase warrants. . . . . . . . . . . . . . . . . . . . . . .         600            600
  Cumulative foreign currency translation adjustment . . . . . . . . .         361            474    
  Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . .      23,013         23,534    
                                                                        ----------     ----------    
      TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . .          27,541         49,492    
                                                                        ----------     ----------    
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . .      $   96,704     $  100,094    
                                                                        ----------     ----------    
                                                                        ----------     ----------    
</TABLE>

            See accompanying notes to the consolidated financial statements.

                                       3

<PAGE>
                    VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF INCOME
                FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1997
                                    (UNAUDITED)
                           (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
                                                              1996          1997
                                                           ----------    ----------   
<S>                                                        <C>           <C>
Rental revenues. . . . . . . . . . . . . . . . . . . . . . $   18,488    $   19,170   
Product sales and services revenues. . . . . . . . . . . .      3,838         3,349   
                                                           ----------    ----------   
      TOTAL REVENUES . . . . . . . . . . . . . . . . . . .     22,326        22,519   
Rental cost. . . . . . . . . . . . . . . . . . . . . . . .      6,793         7,567   
Product sales and services cost. . . . . . . . . . . . . .      2,686         2,314   
                                                           ----------    ----------   
      TOTAL COST OF SALES. . . . . . . . . . . . . . . . .      9,479         9,881   
                                                           ----------    ----------   
      GROSS PROFIT . . . . . . . . . . . . . . . . . . . .     12,847        12,638   
Selling, general and administrative expense. . . . . . . .      8,969         8,257   
Research and development expense . . . . . . . . . . . . .      1,454         1,573   
                                                           ----------    ----------   
      TOTAL OPERATING EXPENSES . . . . . . . . . . . . . .     10,423         9,830   
                                                           ----------    ----------   
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . .      2,424         2,808   
Interest expense (net) . . . . . . . . . . . . . . . . . .        873           729   
                                                           ----------    ----------   
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS. . . . .      1,551         2,079   
Income taxes . . . . . . . . . . . . . . . . . . . . . . .        625           821   
                                                           ----------    ----------   
INCOME BEFORE EXTRAORDINARY LOSS . . . . . . . . . . . . .        926         1,258   
Extraordinary loss . . . . . . . . . . . . . . . . . . . .          0           737   
                                                           ----------    ----------   
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $      926    $      521   
                                                           ----------    ----------   
                                                           ----------    ----------   
WEIGHTED AVERAGE SHARES OUTSTANDING. . . . . . . . . . . .  5,822,676     7,452,177
                                                           ----------    ----------   
                                                           ----------    ----------   
PER SHARE INFORMATION
Income before extraordinary loss:
      BASIC. . . . . . . . . . . . . . . . . . . . . . . . $     0.16    $     0.17   
                                                           ----------    ----------   
                                                           ----------    ----------   
      DILUTED  . . . . . . . . . . . . . . . . . . . . . . $     0.16    $     0.17   
                                                           ----------    ----------   
                                                           ----------    ----------   
Net income:
      BASIC. . . . . . . . . . . . . . . . . . . . . . . . $     0.16    $     0.07   
                                                           ----------    ----------   
                                                           ----------    ----------   
      DILUTED  . . . . . . . . . . . . . . . . . . . . . . $     0.16    $     0.07   
                                                           ----------    ----------   
                                                           ----------    ----------   
Dividends declared . . . . . . . . . . . . . . . . . . . . $   0.0525    $   0.0000   
                                                           ----------    ----------   
                                                           ----------    ----------   
</TABLE>

          See accompanying notes to the consolidated financial statements.

                                       4

<PAGE>
                                       
                VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                 FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
                                 (UNAUDITED)
                      (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
                                                                                                                     
                                                                                                                     
                                              PREFERRED STOCK       COMMON STOCK       TREASURY STOCK    ADDITIONAL  
                                              ----------------    ----------------    ----------------    PAID-IN    
                                              SHARES    AMOUNT    SHARES    AMOUNT    SHARES    AMOUNT    CAPITAL    
                                              ------    ------    ------    ------    ------    ------    -------    
<S>                                           <C>       <C>     <C>         <C>      <C>        <C>      <C>         
BALANCE, SEPTEMBER 30, 1997                     -        $ -    5,845,167    $585    (45,164)   $(186)    $ 3,344    
Payments on stockholder notes receivable                                                                             
Initial public offering                                         2,000,000     200                          21,107    
Net effect of translation adjustment                                                                                 
Net income                                                                                                           
                                              ------    ------  ---------   ------    ------    -----     -------    
BALANCE, DECEMBER 31, 1997                      -        $ -    7,845,167    $785    (45,164)   $(186)    $24,451    
                                              ------    ------  ---------   ------    ------    -----     -------    
                                              ------    ------  ---------   ------    ------    -----     -------    

<CAPTION>

                                                                         CUMULATIVE                      
                                                                          FOREIGN                        
                                               STOCKHOLDER     STOCK      CURRENCY                       
                                                 NOTES        PURCHASE   TRANSLATION   RETAINED          
                                               RECEIVABLE     WARRANTS   ADJUSTMENT    EARNINGS   TOTAL  
                                               ----------     --------   ----------    --------   -----  
<S>                                            <C>            <C>        <C>           <C>       <C>     
BALANCE, SEPTEMBER 30, 1997                      $(176)         $600        $361        $23,013  $27,541 
Payments on stockholder notes receivable            10                                                10 
Initial public offering                                                                           21,307 
Net effect of translation adjustment                                         113                     113 
Net income                                                                                  521      521 
                                                 -----          ----        ----        -------  ------- 
BALANCE, DECEMBER 31, 1997                       $(166)         $600        $474        $23,534  $49,492 
                                                 -----          ----        ----        -------  ------- 
                                                 -----          ----        ----        -------  ------- 
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                       5
<PAGE>
                                       
                VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1997
                                  (UNAUDITED)
                                (IN THOUSANDS)

<TABLE>
                                                                    1996       1997
                                                                   -------   --------
<S>                                                                <C>       <C>
Cash flows from operating activities:
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . .   $   926   $    521
  Adjustments to reconcile net income to net cash provided
   by operating activities:
    Depreciation and amortization. . . . . . . . . . . . . . . .     2,740      3,192
    Amortization of note discount and deferred loan fees . . . .       102         54
    Provision for doubtful accounts. . . . . . . . . . . . . . .        25         31
    Extraordinary loss from early extinguishment of debt . . . .         0        737
    Deferred income taxes. . . . . . . . . . . . . . . . . . . .       170        200
    Loss (gain) on sale of equipment and other property. . . . .        43        (38)
    Cost of rental equipment rented under sales-type leases. . .        38        111
    Provisions for ESOP and ESEP contributions . . . . . . . . .        63         63
      Net change in assets and liabilities:
        Accounts receivable. . . . . . . . . . . . . . . . . . .      (327)      (615)
        Prepaid expenses . . . . . . . . . . . . . . . . . . . .      (973)        22
        Inventory. . . . . . . . . . . . . . . . . . . . . . . .      (446)    (1,481)
        Other assets . . . . . . . . . . . . . . . . . . . . . .      (203)      (893)
        Accounts payable, accrued liabilities and income 
          taxes payable. . . . . . . . . . . . . . . . . . . . .     2,311     (2,993)
        Unearned revenue . . . . . . . . . . . . . . . . . . . .       879       (391)
                                                                   -------   --------

        Net cash provided by (used in) operating activities. . .     5,348     (1,480)
 
Cash flows from investing activities:
  Capital expenditures, including rental equipment . . . . . . .    (4,476)    (4,078)
  Proceeds from sale of equipment. . . . . . . . . . . . . . . .       105         67
                                                                   -------   --------

        Net cash used in investing activities. . . . . . . . . .    (4,371)    (4,011)
 
Cash flows from financing activities:
  Proceeds from issuance of debt . . . . . . . . . . . . . . . .     2,549     43,033
  Principal payments on debt . . . . . . . . . . . . . . . . . .    (2,225)   (58,354)
  Proceeds from issuance of distributor advances . . . . . . . .       195        277
  Principal payments on distributor advances . . . . . . . . . .      (383)      (205)
  Proceeds from payments on stockholder notes receivable . . . .         9         10
  Proceeds from public offering of common stock. . . . . . . . .         0     21,307
  Dividends paid . . . . . . . . . . . . . . . . . . . . . . . .      (403)         0
                                                                   -------   --------

        Net cash provided by (used in) financing activities. . .      (258)     6,068
Effect on cash from foreign currency translation adjustment. . .      (588)      (177)
                                                                   -------   --------

Net increase during the period . . . . . . . . . . . . . . . . .       131        400
Cash, beginning of period. . . . . . . . . . . . . . . . . . . .     2,633      1,862
                                                                   -------   --------
Cash, end of period. . . . . . . . . . . . . . . . . . . . . . .   $ 2,764   $  2,262
                                                                   -------   --------
                                                                   -------   --------

Supplemental Cash Flow Information
  Cash paid for interest expense . . . . . . . . . . . . . . . .   $   950    $    805
  Cash paid for income taxes . . . . . . . . . . . . . . . . . .   $   524    $    477
</TABLE>

          See accompanying notes to the consolidated financial statements.

                                       6

<PAGE>

                VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                      (IN THOUSANDS EXCEPT SHARE DATA)


1.  Interim Financial Information

      The accompanying unaudited 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 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 months ended December 31, 1997 are not indicative of the results of
operations that may be expected for any other interim periods or for the fiscal
year ending September 30, 1998.

     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, 1997.

2.  Inventory

      Inventory consists of the following:
<TABLE>
                                       September 30,    December 31,
                                           1997            1997
                                         --------        --------
<S>                                    <C>              <C>
      Raw materials                       $3,483          $4,923
      Work in progress                       350             418
      Finished goods                         217             190
                                          ------          ------
                                          $4,050          $5,531
                                          ------          ------
                                          ------          ------
</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. Share amounts and the weighted-average 
shares outstanding for all periods presented give retroactive effect to the 
recapitalization of the common stock. In addition, the Company authorized 
10,000,000 shares of preferred stock which the Company's Board of Directors 
may issue for such consideration and on such terms as it deems desirable, 
including voting and conversion rights that could adversely affect the 
holders of common stock. 

     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 

                                      7
<PAGE>

amount of $24,000 and certain stockholders of the Company sold 300,000 of 
common stock for $12.00 per share for an aggregate amount of $3,600.

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.  Borrowings under the New Credit 
Facility bear interest at prime or LIBOR plus a rate margin ranging from 
1.00% to 2.50% based upon the Company's ratio of Adjusted Funded Debt (as 
defined in the New Credit Facility) to EBITDA (as defined in the New Credit 
Facility) and are secured by 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 0.375% 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 the Company's ability to incur 
additional indebtedness, make certain loans or investments, sell assets or 
reacquire the Company's stock. 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 statement of income as an extraordinary loss.

5.  Net Income Per Share

     The Company adopted the provisions of Statement of Financial Accounting 
Standards ("SFAS") No. 128, "Earnings per Share," in fiscal 1998.  Under this 
standard, basic earnings per share is calculated using weighted average 
shares outstanding, whereas diluted earnings per share is calculated using 
weighted average shares outstanding including common stock equivalents, 
including stock options when dilutive.  The weighted average number of shares 
of common stock outstanding during the three months ended December 31, 1996 
and 1997 was 5,822,676 and 7,452,177, respectively.  The effect of this 
change was less than $0.01 per share for both periods presented.

     Net income per common share for the three months ended December 31, 1997 
was computed on a pro forma basis, which gives effect to the Company's 
initial public offering as if it had occurred on the first day of the fiscal 
quarter and reflects the pro forma reduction of interest expense.

                                      8
<PAGE>

VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED 
DECEMBER 31, 1996

   REVENUES.  Total revenues increased  0.9%, or $0.2 million, to $22.5 
million in the three-month period ended December 31, 1997, compared to $22.3 
million in the three-month period ended December 31, 1996.  The revenue 
increase was attributable primarily to the factors set forth below. 
   
   Rental revenues increased  3.7%, or $0.7 million, to $19.2 million in the 
three-month period ended December 31, 1997, compared to $18.5 million in the 
three-month period ended December 31, 1996, which was primarily due to a 
strong performance in North America across all key market segments.  
Partially offsetting the increased North American revenues was a decrease in 
rental revenues earned in the Asian markets.  Rental revenues from sales-type 
leases accounted for approximately $0.4 million of the increase in rental 
revenues for the three-month period ended December 31, 1997. 
   
   Product sales and service revenues decreased  12.7%, or $0.5 million, to 
$3.3 million in the three-month period ended December 31, 1997, compared to 
$3.8 million in the three-month period ended December 31, 1996.  This 
decrease was primarily due to lower sales of the Company's Irideon-Registered 
Trademark- automated lighting products which decreased 42.1%, or $0.8 million,
to $1.1 million in the three-month period ended December 31, 1997, compared 
to $1.9 million in the three-month period ended December 31, 1996.  In the 
three-month period ended December 31, 1996 the Company introduced two new 
Irideon-Registered Trademark- products - AR5-TM- and Composer-Registered 
Trademark- - and consequently shipped a large backlog during the quarter.  
The decrease in Irideon-Registered Trademark- product sales was partially 
offset by an increase of $0.3 million from the design and production 
management services provided to the Company's customers.
   
   RENTAL COSTS.  Rental costs increased 11.4%, or $0.8 million, to $7.6 
million in the three-month period ended December 31, 1997, compared to $6.8 
million in the three-month period ended December 31, 1996.  Rental costs as a 
percentage of rental revenues increased to 39.5% in the three-month period 
ended December 31, 1997, from 36.7% in the three-month period ended December 
31, 1996.  The increase in rental costs as a percentage of total rental 
revenues was primarily due to an increase in depreciation associated with an 
increase in the Company's rental inventory.

   PRODUCT SALES AND SERVICE COSTS.  Product sales and service costs 
decreased 13.9%, or $0.4 million, to $2.3 million in the three-month period 
ended December 31, 1997, compared to $2.7 million in the three-month period 
ended December 31, 1996.  Product sales and service costs as a percentage of 
product sales and service revenue decreased to 69.1% in the three-month 
period ended December 31, 1997, from 70.0% in the three-month period ended 
December 31, 1996.  

                                      9
<PAGE>

The decrease in product sales and service costs as a percentage of the 
related revenues was primarily due to the Company's Irideon-Registered 
Trademark- product line, which experienced improved production efficiencies.
Partially offsetting this decrease was an increase in product sales and 
service costs as a percentage of the related revenues for the Company's 
design and production management services to businesses, which includes costs 
subcontracted to others by the Company.  Product sales and service costs 
associated with subcontracted services constituted a higher percentage of the 
total product sales and services revenue in the three-month period ended 
December 31, 1997 as compared to the three-month period ended December 31, 
1996.
   
   SELLING, GENERAL AND ADMINISTRATIVE EXPENSE.  Selling, general and 
administrative expense decreased 7.9%, or $0.7 million, to $8.3 million in 
the three-month period ended December 31, 1997, compared to $9.0 million in 
the three-month period ended December 31, 1996.  This decrease resulted 
primarily from lower contract labor, payroll and related costs and other 
discretionary expenses.  This expense as a percentage of total revenues 
decreased to 36.7% in the three-month period ended December 31, 1997, from 
40.2% in the three-month period ended December 31, 1996.
   
   RESEARCH AND DEVELOPMENT EXPENSE.  Research and development expense 
increased 8.2%, or $0.1 million, to $1.6 million in the three-month period 
ended December 31, 1997, compared to $1.5 million in the three-month period 
ended December 31, 1996.  This expense as a percentage of total revenues 
increased to 7.0% in the three-month period ended December 31, 1997, from 
6.5% in the three-month period ended December 31, 1996.  This increase was 
primarily the result of an increase in the employee-related  costs associated 
with adding research and development engineers during three-month period 
ended December 31, 1997.
   
   INTEREST EXPENSE.  Interest expense decreased 16.5%, or $0.2 million, to 
$0.7 million in the three-month period ended December 31, 1997, compared to 
$0.9 million in the three-month period ended December 31, 1996.  This 
decrease was attributable to the reduction in indebtedness from the use of 
the proceeds from the initial public offering to repay $21.3 million of 
indebtedness.
   
   EXTRAORDINARY LOSS.  A non-cash extraordinary loss of $0.7 million was 
recorded in the three-month period ended December 31, 1997, net of $0.4 
million of tax benefit, relating to the early extinguishment of debt.

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 $5.3 million and ($1.5) million for the three-month 
periods ended December 31, 1996 and 1997, 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 

                                      10
<PAGE>

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.  In December 1997, the 
Company entered into a new multicurrency credit agreement, with SunTrust 
Bank, Atlanta ("SunTrust"), as agent for the lenders thereunder (the "New 
Credit Agreement"), which replaced the Old Credit Agreement.  The New Credit 
Agreement has a five-year term and provides the Company with a $50 million 
revolving credit facility, which is secured by the pledge of 65% of the 
capital stock of the Company's foreign subsidiaries.  The commitment fee on 
the unused portion of the facility and the interest charged on the 
outstanding balance of the facility are determined by a pricing grid based on 
the Company's ratio of Adjusted Funded Debt (as defined in the New Credit 
Agreement) to EBITDA (as defined in the New Credit Agreement).  The 
commitment fee ranges from 0.2% to 0.375% and the interest rate ranges from 
1.0% to 2.5% above the London interbank offering rate ("LIBOR") or SunTrust's 
base rate.  The initial commitment fee and margin above LIBOR are fixed 
through March 31, 1998, at 0.25% and 1.5%, respectively, and can be fixed 
through June 30, 1998 by payment of a $25,000 fee.  The New Credit Agreement 
includes customary negative covenants such as restrictions on the Company's 
ability to incur debt, make acquisitions or investments or sell assets.  
Also, the New Credit Agreement includes financial covenants regarding the 
Company's net worth, ratio of Adjusted Funded Debt to total capitalization, 
the ratio of Adjusted Funded Debt to EBITDA and the ratio of EBITR (as 
defined in the New Credit Agreement) to interest and rent expenses.  As of 
December 31, 1997, $26.5 million was outstanding under the New Credit 
Agreement (based on currency exchange rates as of that date).

     The Company has hedged a portion of its currency fluctuation risk by 
borrowing in British pounds sterling and Japanese yen under both the Old 
Credit Agreement and the New Credit Agreement.  Cash generated from the 
Company's England and Japan offices is typically denominated in 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 three interest rate swap agreements which will 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 three months ended December 31, 1996 and 1997 
were approximately $4.5 million and $4.1 million, respectively, of which 
approximately $3.9 million were for rental equipment inventories for both 
years. 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 deficit of $2.1 million at December 
31, 1996 and a working capital surplus of $9.1 million at December 31, 1997.  
The Company has historically maintained working capital deficits since the 
bulk of its revenue-generating assets are classified as long-term assets 
rather than current assets.  The working capital surplus at December 31, 1997 
is primarily due to higher accounts receivable and lower long-term debt as a 
result of  the New Credit Agreement.

                                      11
<PAGE>

     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.       

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," "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; capitalized litigation costs; 
dependence on entertainment industry; competition; dependence on management; 
foreign exchange risk; international trade risk; dependence on key suppliers 
and dependence on manufacturing facility.  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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Not applicable.



                                      12

<PAGE>

PART II  OTHER INFORMATION

ITEM 5.  OTHER INFORMATION
         SUMMARY OF SALES OF SECURITIES
         
              The Company filed a Registration Statement (Commission file 
         no. 333-33559) for the public offering of 2,300,000 shares of 
         common stock, $0.10 par value with the Securities and Exchange 
         Commission, which became effective October 16, 1997.  The managing 
         underwriters were A.G. Edwards & Sons, Inc. and EVEREN Securities, 
         Inc.  The Company sold 2,000,000 shares of common stock for $12.00 
         per share for an aggregate amount of $24,000,000 on October 21, 
         1997. Certain stockholders of the Company sold 300,000 shares of 
         common stock for $12.00 per share for an aggregate amount of 
         $3,600,000 on November 19, 1997.

              Expenses incurred for the Company's account in connection with 
         the issuance and distribution of the common stock registered were 
         as follows:
<TABLE>
<S>                                                                     <C>
            Underwriting discounts and commissions                      $1,680,000
            Other Expenses ($288,000 accrued as of December 31, 1997)    1,013,000(1)
                                                                        ----------
               Total                                                    $2,693,000
                                                                        ----------
                                                                        ----------
</TABLE>
               (1) There were no direct or indirect payments to directors, 
                   officers or persons owning ten percent or more of the 
                   Company's securities, or their associates or affiliates.  
                   However, out-of-pocket expenses (i.e., travel, lodging 
                   and meals) incurred directly in connection with the 
                   offering were reimbursed and are included in other 
                   expenses. 

               The net offering proceeds to the Company were $21,307,000 all 
          of which was used to repay indebtedness under the Company's credit 
          facility in effect at the time of the offering.  The offering has 
          terminated.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a) Exhibits

              11.1 Computation of Earnings per Common Share for the 
                   three months ended December 31, 1997

              27.1 Financial Data Schedule

          (b) No reports on Form 8-K were filed for the quarter ended 
              December 31, 1997.

                                       13
<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:  February 11, 1998                By: /s/ MICHAEL P. HERMAN
                                            ------------------------------
                                            Michael P. Herman
                                            Vice President - Finance,
                                            Chief Financial Officer
                                            and Secretary




                                       14