<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, 2001

                         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 11,
2001, 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, 2001

<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements:

        Condensed Consolidated Balance Sheets as of
        September 30, 2000 and March 31, 2001..............................    3

        Condensed Consolidated Statements of Income and Comprehensive
        Income for the three months ended March 31, 2000 and 2001..........    4

        Condensed Consolidated Statements of Income and Comprehensive
        Income for the six months ended March 31, 2000 and 2001............    5

        Condensed Consolidated Statements of Cash Flows for
        the six months ended March 31, 2000 and 2001.......................    6

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

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations..........................................   13

Item 3. Quantitative and Qualitative Disclosures About Market Risk.........   17

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,
                                                                                                    2000          2001
                                                                                             --------------    ----------
<S>                                                                                          <C>               <C>
CURRENT ASSETS:
     Cash                                                                                    $        4,315    $    3,651
     Receivables, less allowance for doubtful accounts of $740 and $665....................          12,369         9,685
     Inventory.............................................................................          13,695        15,125
     Prepaid expense and other current assets..............................................           1,352         2,436
                                                                                             --------------    ----------
         TOTAL CURRENT ASSETS..............................................................          31,731        30,897
EQUIPMENT AND OTHER PROPERTY:
     Lighting and sound equipment..........................................................         123,210       100,259
     Machinery and tools...................................................................           5,678         3,410
     Furniture and fixtures................................................................           5,089         4,293
     Office and computer equipment.........................................................          10,377        10,612
     Work in progress and raw materials inventory..........................................             680             -
                                                                                             --------------    ----------
                                                                                                    145,034       118,574
         Less accumulated depreciation and amortization....................................          84,097        68,018
                                                                                             --------------    ----------
                                                                                                     60,937        50,556
OTHER ASSETS...............................................................................           2,035         2,256
                                                                                             --------------    ----------
         TOTAL ASSETS......................................................................  $       94,703    $   83,709
                                                                                             ==============    ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued expenses.................................................  $       10,873    $    6,885
     Unearned revenue......................................................................           3,272         1,907
     Income taxes payable..................................................................              82           447
     Current portion of long-term obligations..............................................          19,599         5,849
                                                                                             --------------    ----------
         TOTAL CURRENT LIABILITIES.........................................................          33,826        15,088
LONG-TERM OBLIGATIONS......................................................................          18,136        19,029
DEFERRED INCOME TAXES......................................................................             993         3,090
                                                                                             --------------    ----------
         TOTAL LIABILITIES.................................................................          52,955        37,207
COMMITMENTS AND CONTINGENCIES  (Note 8)                                                                  -              -
STOCKHOLDERS' EQUITY:
     Preferred Stock, $0.10 par value (10,000,000 shares authorized; no shares issued).....              -              -
     Common Stock, $0.10 par value (40,000,000 shares authorized;
        7,845,167 shares issued; 7,800,003 shares outstanding).............................             785           785
     Treasury Stock........................................................................            (186)         (186)
     Additional paid-in capital............................................................          25,026        25,026
     Stockholder notes receivable..........................................................             (19)            -
     Accumulated other comprehensive income (loss) - foreign currency translation
        adjustment.........................................................................            (319)          242
     Retained earnings.....................................................................          16,461        20,635
                                                                                             --------------    ----------
         TOTAL STOCKHOLDERS' EQUITY........................................................          41,748        46,502
                                                                                             --------------    ----------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................  $       94,703    $   83,709
                                                                                             ==============    ==========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

               FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                     2000                       2001
                                                                                   ---------                 ---------
<S>                                                                                <C>                       <C>
Rental revenues.............................................................         $16,432                   $11,414
Product sales and services revenues.........................................           4,287                     6,923
                                                                                   ---------                 ---------

     TOTAL REVENUES.........................................................          20,719                    18,337
Rental cost.................................................................           8,033                     5,576
Product sales and services cost.............................................           2,450                     4,234
                                                                                   ---------                 ---------

     TOTAL COST OF SALES....................................................          10,483                     9,810
                                                                                   ---------                 ---------

     GROSS PROFIT...........................................................          10,236                     8,527
Selling, general and administrative expense.................................           9,755                     7,229
Research and development expense............................................           1,272                     1,183
                                                                                   ---------                 ---------
     TOTAL OPERATING EXPENSES...............................................          11,027                     8,412
                                                                                   ---------                 ---------

OPERATING INCOME (LOSS).....................................................            (791)                      115
Interest expense (net)......................................................           1,260                       491
                                                                                   ---------                 ---------

LOSS BEFORE INCOME TAX......................................................          (2,051)                     (376)
Income tax benefit..........................................................            (810)                     (147)
                                                                                   ---------                 ---------

NET LOSS....................................................................          (1,241)                     (229)

Other comprehensive loss - foreign currency translation adjustments.........            (143)                     (247)
                                                                                   ---------                 ---------
COMPREHENSIVE LOSS..........................................................       $  (1,384)                $    (476)
                                                                                   =========                 =========

WEIGHTED AVERAGE BASIC  AND DILUTED SHARES OUTSTANDING......................       7,800,003                 7,800,003
                                                                                   =========                 =========


PER SHARE INFORMATION
BASIC AND DILUTED:

    Net loss................................................................       $   (0.16)                $   (0.03)
                                                                                   =========                 =========
</TABLE>

           See notes to condensed consolidated financial statements.

                                       4
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 2001

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                    2000                       2001
                                                                                  ---------                 ---------
<S>                                                                               <C>                       <C>
Rental revenues.............................................................        $40,308                   $29,336
Product sales and services revenues.........................................          8,090                     9,379
                                                                                  ---------                 ---------

     TOTAL REVENUES.........................................................         48,398                    38,715
Rental cost.................................................................         18,877                    12,755
Product sales and services cost.............................................          4,848                     6,226
                                                                                  ---------                 ---------

     TOTAL COST OF SALES....................................................         23,725                    18,981
                                                                                  ---------                 ---------

     GROSS PROFIT...........................................................         24,673                    19,734
Selling, general and administrative expense.................................         19,635                    16,092
Research and development expense............................................          2,467                     2,398
                                                                                  ---------                 ---------
     TOTAL OPERATING EXPENSES...............................................         22,102                    18,490
                                                                                  ---------                 ---------
Gain on sale of concert sound reinforcement business........................              -                     7,100
                                                                                  ---------                 ---------

OPERATING INCOME............................................................          2,571                     8,344
Interest expense (net)......................................................          2,520                     1,562
                                                                                  ---------                 ---------

INCOME BEFORE INCOME TAX....................................................             51                     6,782
Income tax expense..........................................................             20                     2,608
                                                                                  ---------                 ---------

NET INCOME..................................................................             31                     4,174

Other comprehensive loss - foreign currency translation adjustments.........           (500)                     (432)
Reclassification adjustment - sale of continental European operations.......              -                       993
                                                                                  ---------                 ---------
COMPREHENSIVE INCOME (LOSS).................................................      $    (469)                $   4,735
                                                                                  =========                 =========

WEIGHTED AVERAGE BASIC SHARES OUTSTANDING...................................      7,800,003                 7,800,003
                                                                                  =========                 =========


WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING.................................      7,833,682                 7,871,165
                                                                                  =========                 =========

PER SHARE INFORMATION
BASIC AND DILUTED:
    Net income..............................................................      $    0.00                 $    0.53
</TABLE>

           See notes to condensed consolidated financial statements.

                                       5
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 2001

                                   (UNAUDITED)

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                      2000                   2001
                                                                                                    ---------             ---------
<S>                                                                                                 <C>                   <C>
Cash flows from operating activities:
     Net income............................................................................         $      31             $   4,174
     Adjustments to reconcile net income to net cash provided by operating activities:
         Depreciation and amortization.....................................................             7,080                 5,220
         Amortization of note discount and deferred loan fees..............................                94                   335
         Provision for doubtful accounts...................................................                30                    30
         Deferred income taxes.............................................................              (249)                2,097
         Gain on sale of concert sound reinforcement business..............................                 -                (7,100)
         Gain on sale of equipment and other property......................................              (583)                  130
           Net change in assets and liabilities:

             Accounts receivable...........................................................             1,629                   219
             Prepaid expenses..............................................................                (3)               (1,170)
             Inventory.....................................................................            (1,324)               (1,430)
             Other assets..................................................................                (1)                 (499)
             Accounts payable, accrued liabilities and income taxes payable................            (2,249)               (2,060)
             Unearned revenue..............................................................              (307)               (1,032)
                                                                                                    ---------             ---------

             Net cash provided by (used in) operating activities...........................             4,148                (1,086)

Cash flows from investing activities:

     Capital expenditures, including rental equipment......................................            (2,341)               (5,318)
     Proceeds from sale of concert sound reinforcement business............................                 -                11,946
     Proceeds from sale of European operations.............................................                 -                 5,258
     Proceeds from sale of equipment.......................................................             1,528                    29
                                                                                                    ---------             ---------

             Net cash (used in) provided by investing activities...........................              (813)               11,915

Cash flows from financing activities:
     Proceeds from issuance of debt........................................................            22,809                32,226
     Principal payments on debt............................................................           (23,215)              (42,998)
     Principal payments on distributor advances............................................               (51)                    -
     Proceeds from payments on stockholder notes receivable................................                 6                    19
                                                                                                    ---------             ---------

             Net cash used in financing activities.........................................              (451)              (10,753)
Effect of exchange rate changes on cash and cash equivalents...............................               (97)                 (740)
                                                                                                    ---------             ---------

Net increase (decrease) in cash during the period..........................................             2,787                  (664)
Cash, beginning of period..................................................................             1,969                 4,315
                                                                                                    ---------             ---------

Cash, end of period........................................................................         $   4,756             $   3,651
                                                                                                    =========             =========


SUPPLEMENTAL CASH FLOW INFORMATION
     Cash paid for interest expense........................................................         $   2,336             $   1,471
     Cash paid for income taxes............................................................         $     583             $     187
</TABLE>

           See notes to condensed 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 and six-month periods ended March 31,
2001 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, 2001.

     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, 2000. Certain prior year balances have been
reclassified to conform to the current year presentation.

2.   Inventory

     Inventory consists of the following:

<TABLE>
<CAPTION>
                                                   September 30,        March 31,
                                                       2000                2001
                                                      -------            -------
<S>                                                <C>                  <C>
Raw materials.....................................    $12,341            $13,393
Work in progress..................................        698                685
Finished goods....................................        656              1,047
                                                      -------            -------
                                                      $13,695            $15,125
                                                      =======            =======
</TABLE>

3.   Segment Reporting

     The Company's chief operating decision maker is considered to be the
Company's Chief Operating Officer ("COO"). The COO reviews financial
information presented on a consolidated basis accompanied by disaggregated
information about revenues by geographic region and by product lines for
purposes of making operating decisions and assessing financial performance.
The Company has three reportable segments: North America, Europe and Asia,
which are organized, managed and analyzed geographically and operate in a
single industry segment. Information about the Company's operations for the
three and six-month periods ended March 31, 2000 and 2001 is presented below:

                                       7
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                    ----------------------------------------------------------
                                                                    NORTH AMERICA    ASIA     EUROPE    INTERCOMPANY     TOTAL
                                                                    -------------    ----    -------    ------------     -----
<S>                                                                 <C>             <C>      <C>        <C>             <C>
MARCH 31, 2000:
Net Revenues from unaffliliated customers.........................     $12,834      $1,563   $ 6,322    $         -     $ 20,719
Intersegment sales................................................       5,656           -         -         (5,656)           -
                                                                       -------      ------   -------    -----------     --------
   Total net revenues.............................................      18,490       1,563     6,322         (5,656)      20,719
Operating income (loss)...........................................       1,534        (937)      569         (1,957)        (791)
Depreciation and amortization.....................................       3,028          45       432              -        3,505
Total assets......................................................      90,689       7,555    14,836         (9,038)     104,042

MARCH 31, 2001:
Net Revenues from unaffliliated customers..........................    $14,679      $1,162   $ 2,496    $         -     $ 18,337
Intersegment sales................................................       1,724           3        (5)        (1,722)           -
                                                                       -------      ------   -------    -----------     --------
   Total net revenues.............................................      16,403       1,165     2,491         (1,722)      18,337
Operating income (loss)...........................................         216        (755)      654              -          115
Depreciation and amortization.....................................       1,898          44       607              -        2,549
Total assets......................................................      68,374       8,525    15,590         (8,780)      83,709

<CAPTION>
                                                                                        SIX MONTHS ENDED
                                                                    ----------------------------------------------------------
                                                                    NORTH AMERICA    ASIA    EUROPE     INTERCOMPANY     TOTAL
                                                                    -------------    ----    -------    ------------     -----
<S>                                                                 <C>             <C>      <C>        <C>             <C>
MARCH 31, 2000:
Net Revenues from unaffliliated customers.........................     $27,259      $5,808   $15,331    $         -     $ 48,398
Intersegment sales................................................      10,933           -         -        (10,933)           -
                                                                       -------      ------   -------    -----------     --------
   Total net revenues.............................................      38,192       5,808    15,331        (10,933)      48,398
Operating income (loss)...........................................       4,116         (42)    2,426         (3,929)       2,571
Depreciation and amortization.....................................       6,044          92       944              -        7,080
Total assets......................................................      90,689       7,555    14,836         (9,038)     104,042

MARCH 31, 2001:
Net Revenues from unaffliliated customers..........................    $27,213      $5,330   $ 6,172    $         -     $ 38,715
Intersegment sales................................................       3,099          38         5         (3,142)           -
                                                                       -------      ------   -------    -----------     --------
   Total net revenues.............................................      30,312       5,368     6,177         (3,142)      38,715
Operating income..................................................       5,778       1,013     1,553              -        8,344
Depreciation and amortization.....................................       3,876         121     1,223              -        5,220
Total assets......................................................      68,374       8,525    15,590         (8,780)      83,709
</TABLE>

                                       8
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

4.   Debt

     On December 19, 1997, the Company entered into a $50,000 multicurrency
revolving credit facility (the "Old Credit Facility") and canceled its
existing credit facility. Borrowings under the Old Credit Facility were
$32,200 at September 30, 2000. Subsequent to September 30, 2000, the Company
used proceeds of $22,200 from the sale of the Company's concert sound
reinforcement business, the sale of the Company's continental European rental
operations and the funding of the London Bank Loan (hereinafter defined) to
reduce borrowings under the Old Credit Facility to $10,000.

     On December 29, 2000, Vari-Lite, Inc. a wholly owned subsidiary of the
Company ("Vari-Lite"), entered into a three-year $24,500 credit facility (the
"New Credit Facility") which includes a $12,000 term loan (the "Term Loan"),
a $5,000 revolving credit facility (the "Revolver") and a $3,000 term
commitment to fund capital expenditures (the "Capital Expenditure Loan"). The
Revolver and the Capital Expenditure Loan commitments will increase to $7,500
and $5,000, respectively, by January 15, 2002, if the Company achieves
specific financial performance. The Term Loan and Capital Expenditure Loan
amortize over 84 months (subject to a balloon payment on termination of the
New Credit Facility as discussed below). Borrowings under the Revolver are
subject to availability under a borrowing base of eligible inventory and
accounts receivable (as defined in the New Credit Facility). Initially, all
outstanding borrowings under the New Credit Facility bear interest at the
lender's base rate or LIBOR, plus a rate margin of .75% and 2.50%,
respectively. Beginning on January 15, 2002, all outstanding balances under
the New Credit Facility will bear interest at the lender's base rate or
LIBOR, plus a rate margin ranging from 0.25% to 0.75% or 2.00% to 2.50%,
respectively, based upon the Company's ratio of Adjusted Funded Debt to
EBITDA (as defined in the New Credit Facility). The New Credit Facility is
guaranteed by the Company and is secured by all of the stock and
substantially all of the assets of Vari-Lite, and a pledge of 65% of the
outstanding capital stock of the Company's foreign subsidiaries. A commitment
fee of 0.25% is charged on the average daily unused portion of the New Credit
Facility. 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. The
New Credit Facility terminates on December 31, 2003. Upon termination of the
New Credit Facility, the entire outstanding indebtedness thereunder becomes
due and payable in full.

     On November 23, 2000, the Company entered into a British pounds sterling
4,000 (USD 5,800) term loan with a United Kingdom bank (the "London Bank
Loan"). The London Bank Loan, which accrues interest at the rate of 9.1% per
annum and amortizes over 48 months, is secured by all of the assets of the
Company's London operations. Other terms of the London Bank

                                       9
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

Loan include certain financial covenants, limitations on capital expenditures
and intercompany payments and the guarantee of the Company.

     The Company has borrowed money to purchase computer equipment and office
furniture and fixtures and conventional lighting equipment. These loans are
typically amortized over three years and bear interest at various rates
ranging from 1.50% to 10.35%. Proceeds received under this type of financing
were approximately $1,879 and $1,135 for the six-month periods ending March
31, 2000 and 2001, respectively, and borrowings outstanding under this type
of financing at March 31, 2000 and 2001 were approximately $3,587 and $3,572,
respectively.

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.

<TABLE>
<CAPTION>
                                            Three Months ended               Six Months ended
                                                March 31,                        March 31,
                                         -------------------------       ------------------------
                                           2000            2001            2000           2001
                                           ----            ----            ----           ----
<S>                                      <C>             <C>             <C>            <C>
Weighted average shares outstanding...   7,800,003       7,800,003       7,800,003      7,800,003

Dilutive effect of stock options and
    warrants after application of
    treasury stock method............            -               -          33,679         71,162
                                         ---------       ---------       ---------      ---------

Shares used in calculating diluted
    income per share.................    7,800,003       7,800,003       7,833,682      7,871,165
                                         =========       =========       =========      =========
</TABLE>

     For the three-month period ended March 31, 2000 and 2001, earnings per
share excludes stock options of 762,200 and 693,700, respectively, and
warrants of 296,057 and 296,057, respectively, which are anti-dilutive. For
the six-month period ended March 31, 2000 and 2001, earnings per share
excludes stock options of 728,521 and 622,538, respectively, and 296,057
warrants which were anti-dilutive.

6.   Accounting Standards Changes

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." As amended by SFAS No. 137
and SFAS No. 138, the Statement is effective for all fiscal years beginning
after June 15, 2000. SFAS No. 133, as amended, establishes accounting and
reporting standards for derivative instruments, including certain deriavative

                                       10
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

instruments embedded in other contracts and for hedging activities. Under
SFAS No. 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The Company adopted SFAS No. 133
effective October 1, 2000. The adoption of SFAS No. 133 did not have a
significant impact on the financial position or results of operations of the
Company because the Company does not have significant derivative activity.

7.   Dispositions

     On October 26, 2000, the Company sold 100% of its interest in Vari-Lite
International Europe, B.V. ("VLI Europe") and 0.4% of its interest in
Vari-Lite Production Services, SAS and Vari-Lite sold all of the VARI*LITE(R)
lighting equipment used in those operations. VLI Europe owned 100% of
Vari-Lite Production Services, N.V., 99.6% of Vari-Lite Production Services,
SAS and 100% of Vari-Lite Production Services, AB. This transaction resulted
in a pre-tax charge of $3,200 which was recorded as an asset impairment in
the fourth quarter of fiscal year 2000.

     On November 17, 2000, the Company transferred substantially all of the
assets of Showco, Inc. to Clearsho, Inc. ("Clearsho"), which assumed certain
of Showco's contract liabilities, in exchange for the sole membership
interest in Clearsho. On November 17, 2000, Showco sold 100% of its interest
in Clearsho which resulted in a net pre-tax gain of $7,100.

8.   Commitments, Contingencies and Legal Proceedings

     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
infringements of its patents by third parties for which the Company has been
subject to counterclaims.

     In November 1999, Coemar S.p.A. and Clay Paky S.p.A. filed separate
lawsuits against the Company in the United States District Court for the
Southern District of New York. The suits were transferred to the United
States District Court for the Northern District of Texas on July 12, 2000.
The lawsuits seek declarations from the court that a certain patent of the
Company is invalid, unenforceable and/or not infringed by Coemar S.p.A. and
Clay Paky S.p.A. In December 2000, the Company negotiated a settlement with
Coemar S.p.A. and Clay Paky S.p.A, the specific terms of which are
confidential, but included a cash settlement paid to the Company and
authorization for Coemar S.p.A. and Clay Paky S.p.A to continue to sell all
existing products that were subject to the Company's patents. The lawsuits
are currently stayed pending dismissal.

                                       11
<PAGE>

                 VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

                        (IN THOUSANDS EXCEPT SHARE DATA)

9.   Pro Forma Financial Statements

     Pro forma adjustments to the condensed consolidated statement of
operations for the three and six months ended March 31, 2000 and 2001 reflect
adjustments to eliminate the results of the continental European operations
sold in October 2000 and Showco sold in November 2000 (See Note 7) and the
reduction of interest expense as a result of the decrease in debt. The Pro
Forma Financial Statements are presented for informational purposes only and
do not purport to be indicative of the results of operations that actually
would have been achieved had the disposition been consummated on the
financial statement date or for any future period.

<TABLE>
<CAPTION>
                                     Three Months Ended           Six Months Ended
                                          March 31                    March 31
                                     2000          2001          2000          2001
                                     ----          ----          ----          ----
<S>                                <C>            <C>           <C>           <C>
Total revenues.................    $16,085        $18,337       $37,366       $37,088
Total cost of sales............      7,925          9,810        17,815        18,318
                                   -------        -------       -------       -------
Gross profit...................      8,160          8,527        19,551        18,770
Total operating expenses.......      9,426          8,392        18,933        18,114
                                   -------        -------       -------       -------
Operating income (loss)........     (1,266)           135           618           656
Interest expense (net).........        882            186         1,755           945
                                   -------        -------       -------       -------
Loss before income taxes.......     (2,148)           (51)       (1,137)         (289)
Income tax benefit.............       (848)           (20)         (449)         (185)
                                   -------        -------       -------       -------
Net loss.......................    $(1,300)       $   (31)      $  (688)      $  (104)
                                   =======        =======       =======       =======
</TABLE>



                                       12
<PAGE>

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

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31,
2000

     REVENUES. Total revenues decreased 11.5%, or $2.4 million, to $18.3
million in the three-month period ended March 31, 2001, compared to $20.7
million in the three-month period ended March 31, 2000. The revenue decrease
was attributable primarily to the factors set forth below.

     RENTAL REVENUES. Rental revenues decreased 30.5%, or $5.0 million, to
$11.4 million in the three-month period ended March 31, 2001, compared to
$16.4 million in the three-month period ended March 31, 2000. This decrease
was primarily due the sale the Company's continental European rental
operations in October 2000 and the sale of its concert sound reinforcement
business in November 2000.

     PRODUCT SALES AND SERVICES REVENUES. Product sales and services revenues
increased 61.5%, or $2.6 million, to $6.9 million in the three-month period
ended March 31, 2001, compared to $4.3 million in the three-month period
ended March 31, 2000. This increase was primarily due to sales of new and
used VARI*LITE(R) automated lighting equipment.

     RENTAL COSTS. Rental cost decreased 30.6%, or $2.5 million, to $5.6
million in the three-month period ended March 31, 2001, compared to $8.0
million in the three-month period ended March 31, 2000. The decrease was
primarily due to the sale of the Company's continental European rental
operations in October 2000 and the sale of its concert sound reinforcement
business in November 2000. Rental cost as a percentage of rental revenues in
the three-month period ended March 31, 2001 was unchanged compared to the
three-month period ended March 31, 2000 at 48.9%.

     PRODUCT SALES AND SERVICES COSTS. Product sales and services cost
increased 72.8%, or $1.8 million, to $4.2 million in the three-month period
ended March 31, 2001, compared to $2.5 million in the three-month period
ended March 31, 2000. Product sales and services cost as a percentage of
product sales and services revenues increased to 61.2% in the three-month
period ended March 31, 2001, from 57.1% in the three-month period ended March
31, 2000, primarily due to the higher costs associated with the manufacture
of new automated lighting equipment sold in the three-month period ended
March 31, 2001 as compared to the lower costs associated with the sale of
used automated lighting equipment in the three-month period ended March 31,
2000.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense decreased 25.9%, or $2.5 million, to $7.2 million in
the three-month period ended March 31, 2001, compared to $9.8 million in the
three-month period ended March 31, 2000. This expense as a percentage of
total revenues decreased to 39.4% in the three-month period ended March 31,
2001, from 47.1% in the three-month period ended March 31, 2000, primarily
due to the sale of the Company's continental European rental operations in
October 2000, the sale of its concert sound reinforcement business in
November 2000 and the closing of the Company's Hong Kong rental operations
during the three-months ended March 31, 2001.

                                       13
<PAGE>

     RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
decreased 7.0%, or $0.1 million, to $1.2 million in the three-month period
ended March 31, 2001, compared to $1.3 million in the three-month period
ended March 31, 2000. This expense as a percentage of total revenues
increased to 6.5% in the three-month period ended March 31, 2001, from 6.1%
in the three-month period ended March 31, 2000 as a result of decreased
revenues for the period ended March 31, 2001.

     INTEREST EXPENSE. Interest expense decreased 61.0%, or $0.8 million, to
$0.5 million in the three-month period ended March 31, 2001, compared to $1.3
million in the three-month period ended March 31, 2000 as a result of a lower
debt balance and a lower interest rate in the three-month period ended March
31, 2001.

     INCOME TAXES. The effective tax rate in the three-month periods ended
March 31, 2001 and 2000 were 39.1% and 39.5%, respectively.

SIX MONTHS ENDED MARCH 31, 2001 COMPARED TO SIX MONTHS ENDED MARCH 31, 2000

     REVENUES. Total revenues decreased 20.0%, or $9.7 million, to $38.7
million in the six-month period ended March 31, 2001, compared to $48.4
million in the six-month period ended March 31, 2000. The revenue decrease
was attributable primarily to the factors set forth below.

     RENTAL REVENUES. Rental revenues decreased 27.2%, or $11.0 million, to
$29.3 million in the six-month period ended March 31, 2001, compared to $40.3
million in the six-month period ended March 31, 2000. This decrease was
primarily due the sale of the Company's continental European rental
operations in October 2000 and the sale of its concert sound reinforcement
business in November 2000 which accounted for $1.6 million of rental revenues
in the six-month period ended March 31, 2001 compared to $11.0 million in the
six-month period ended March 31, 2000.

     PRODUCT SALES AND SERVICES REVENUES. Product sales and services revenues
increased 15.9%, or $1.3 million, to $9.4 million in the six-month period
ended March 31, 2001, compared to $8.1 million in the six-month period ended
March 31, 2000. This increase was primarily due to the sale of new and used
VARI*LITE(R) automated lighting equipment.

     RENTAL COSTS. Rental cost decreased 32.4%, or $6.1 million, to $12.8
million in the six-month period ended March 31, 2001, compared to $18.9
million in the six-month period ended March 31, 2000. Rental cost as a
percentage of rental revenues decreased to 43.5% in the six-month period
ended March 31, 2001, from 46.8% in the six-month period ended March 31,
2000. The decrease in rental cost as a percentage of total rental revenues
was primarily due to the sale of the Company's continental European
operations in October 2000 and the sale of its concert sound reinforcement
business in November 2000.

     PRODUCT SALES AND SERVICES COSTS. Product sales and services cost
increased 28.4%, or $1.4 million, to $6.2 million in the six-month period
ended March 31, 2001, compared to $4.8 million in the six-month period ended
March 31, 2000. Product sales and services cost as a percentage of product
sales and services revenues increased to 66.4% in the six-month period ended
March 31, 2001, from

                                       14
<PAGE>

59.9% in the six-month period ended March 31, 2000, primarily due to the
higher costs associated with the manufacture of new automated lighting
equipement sold in the six-month period ended March 31, 2001 as compared to
the lower costs associated with the sale of used automated lighting equipment
in the six-month period ended March 31, 2000.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense decreased 18.0%, or $3.5 million, to $16.1 million in
the six-month period ended March 31, 2001, compared to $19.6 million in the
six-month period ended March 31, 2000. This decrease is primarily due to the
sale of the Company's continental European rental operations in October 2000,
the sale of its concert sound reinforcement business in November 2000 and the
closing of the Company's Hong Kong rental operations in the six-months ended
March 31, 2001. This expense as a percentage of total revenues increased to
41.6% in the six-month period ended March 31, 2001, from 40.6% in the
six-month period ended March 31, 2000.

     RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
decreased 2.8%, or $0.1 million, to $2.4 million in the six-month period
ended March 31, 2001, compared to $2.5 million in the six-month period ended
March 31, 2000. This expense as a percentage of total revenues increased to
6.2% in the six-month period ended March 31, 2001, from 5.1% in the six-month
period ended March 31, 2000 as a result of decreased revenues for the period
ended March 31, 2000.

     INTEREST EXPENSE. Interest expense decreased 38.0%, or $1.0 million, to
$1.6 million in the six-month period ended March 31, 2001, compared to $2.5
million in the six-month period ended March 31, 2000 as a result of a lower
debt balance and a lower interest rate in the six-month period ended March
31, 2001.

     INCOME TAXES. The effective tax rate in the six-month periods ended
March 31, 2001 and 2000 were 38.5% and 39.2%, respectively.

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 $4.1 million in the six-month period ended March 31, 2000 and
used cash flow of $1.1 million for the six-month period ended March 31, 2001.

     On December 19, 1997, the Company entered into the Old Credit Facility
and canceled its existing credit facility. Borrowings under the Old Credit
Facility were $32.2 million at September 30, 2000. Subsequent to September
30, 2000, the Company used proceeds of $22.2 million from the sale of the
Company's concert sound reinforcement business, the sale of the Company's
continental European rental operations and the funding of the London Bank
Loan to reduce borrowings under the Old Credit Facility to $10.0 million.

     On December 29, 2000, Vari-Lite entered into the New Credit Facility
which includes the $12.0 Term Loan, the $5.0 million Revolver and the $3.0
million Capital Expenditure Loan. The Revolver and the Capital Expenditure
Loan commitments will increase to $7.5 million and $5.0 million,
respectively, by January 15, 2002, if the Company achieves specific financial
performance. The Term Loan and

                                       15
<PAGE>

Capital Expenditure Loan amortize over 84 months (subject to a balloon
payment on termination of the New Credit Facility as discussed below).
Borrowings under the Revolver are subject to availability under a borrowing
base of eligible inventory and accounts receivable (as defined in the New
Credit Facility). Initially, all outstanding borrowings under the New Credit
Facility bear interest at the lender's base rate or LIBOR, plus a rate margin
of .75% and 2.50%, respectively. Beginning on January 15, 2002, all
outstanding balances under the New Credit Facility will bear interest at the
lender's base rate or LIBOR, plus a rate margin ranging from 0.25% to 0.75%
or 2.00% to 2.50%, respectively, based upon the Company's ratio of Adjusted
Funded Debt to EBITDA (as defined in the New Credit Facility). The New Credit
Facility is guaranteed by the Company and is secured by all of the stock and
substantially all of the assets of Vari-Lite, and a pledge of 65% of the
outstanding capital stock of the Company's foreign subsidiaries. A commitment
fee of 0.25% is charged on the average daily unused portion of the New Credit
Facility. 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. The
New Credit Facility terminates on December 31, 2003. Upon termination of the
New Credit Facility, the entire outstanding indebtedness thereunder becomes
due and payable in full.

     On November 23, 2000, the Company entered into the British pounds
sterling 4.0 million (USD 5.8 million) London Bank Loan. The London Bank
Loan, which accrues interest at the rate of 9.1% per annum and amortizes over
48 months, is secured by all of the assets of the Company's London
operations. Other terms of the London Bank Loan include certain financial
covenants, limitations on capital expenditures and intercompany payments and
the guarantee of the Company.

     The Company has borrowed money to purchase computer equipment and office
furniture and fixtures and conventional lighting equipment. These loans are
amortized over six months to five years and bear interest at various rates
ranging from 1.50% to 10.35%. Proceeds received under this type of financing
were approximately $1.9 million and $1.1 million for the six-month periods
ending March 31, 2000 and 2001, respectively, and borrowings outstanding
under this type of financing at March 31, 2000 and 2001 were approximately
$3.6 million for both years.

     The Company's business requires significant capital expenditures.
Capital expenditures for the six months ended March 31, 2000 and 2001 were
approximately $2.3 million and $5.3 million, respectively, of which
approximately $1.6 million and $4.6 million were for rental equipment
inventories. The majority of the Company's revenues are generated through the
rental of automated lighting 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 $32.3 million at March 31,
2000 and a working capital surplus of $15.8 million at March 31, 2001. The
working capital deficit at March 31, 2000 was primarily due to the scheduled
maturity of the New Credit Facility on January 1, 2001, which was recorded as
current debt as of March 31, 2000. The working capital surplus at March 31,
2001 is primarily the result of the refinancing of the Company's senior bank
debt and the overall reduction in outstanding debt.

                                       16
<PAGE>

     Management believes that cash flow generated from operations and
borrowing capacity under the New Credit Facility will be sufficient to meet
the Company's anticipated operating cash and capital expenditure needs for
the next twelve months. 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 success of the Company to market, sell and support
products, the level of competition, the success of the Company's research and
development programs, the Company's 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 words "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; the success of the Company to market, sell
and support products; technological changes; reliance on intellectual
property; dependence on the 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

     The Company does not believe that the market risks for the three-month
and six-month periods ended March 31, 2001 substantially changed from those
risks outlined for the year ended September 30, 2000 in the Company's Form
10-K.

                                       17
<PAGE>

PART II  OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

               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 infringements of its patents by third parties for which the
Company has been subject to counterclaims.

               In November 1999, Coemar S.p.A. and Clay Paky S.p.A. filed
separate lawsuits against the Company in the United States District Court for
the Southern District of New York. The suits were transferred to the United
States District Court for the Northern District of Texas on July 12, 2000.
The lawsuits seek declarations from the court that a certain patent of the
Company is invalid, unenforceable and/or not infringed by Coemar S.p.A. and
Clay Paky S.p.A. In December 2000, the Company negotiated a settlement with
Coemar S.p.A. and Clay Paky S.p.A, the specific terms of which are
confidential, but included a cash settlement paid to the Company and
authorization for Coemar S.p.A. and Clay Paky S.p.A to continue to sell all
existing products that were subject to the Company's patents. The lawsuits
are currently stayed pending dismissal.

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

               On March 2, 2001, the Annual Meeting of  Stockholders  was
held in Dallas,  Texas.  The  stockholders  were asked to elect one Class I
director to serve until 2004. The vote was as follows:

<TABLE>
<CAPTION>
                                                    Against or
                                         For         Withheld    Abstentions
                                         ---         --------    -----------
<S>                                    <C>          <C>          <C>
          John D. Maxson               6,676,782      34,830      1,088,391
</TABLE>

               Messrs. Brutsche', Clark, Rettberg and Smith will continue as
directors of the Company. Subsequent to the Annual Meeting of Stockholders on
March 2, 2001, the Company's Board of Directors appointed Jon Tinkle and
William Scott to serve as directors of the Company.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a) Exhibits

<TABLE>
<S>                      <C>
               10.58     Employment Agreement, dated January 1, 2001, between
                         the Company and T. Clay Powers
               10.59     Employment Agreement, dated January 1, 2001 , between
                         the Company and Jerome L. Trojan III
</TABLE>

          (b) No reports on Form 8-K were filed for the quarter ended March
31, 2001.

                                       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 11, 2001                   By: /s/ JEROME L. TROJAN III
      ----------------                    ------------------------------------
                                           Jerome L. Trojan III
                                           Vice President - Finance,
                                           Chief Financial Officer, Treasurer
                                           and Secretary (Principal Financial
                                           and Accounting Officer)




                                       19