<PAGE>
FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO. 333-02869
6,596,041 Shares
[LOGO OF VARCO/R/ INTERNATIONAL, INC. APPEARS HERE]
Common Stock
--------
All 6,596,041 of the shares of Common Stock (the "Common Stock") of Varco
International, Inc., a California corporation ("Varco" or the "Company")
offered hereby (the "Offering") are being sold by certain shareholders of
the Company (collectively, the "Selling Shareholders"). The Company
will not receive any of the proceeds from the sale of the shares by
the Selling Shareholders.
The Common Stock is listed on the New York Stock Exchange under the
symbol "VRC." On May 22, 1996 the last reported sale price of
the Common Stock on the New York Stock Exchange
Composite Tape was $15.875 per share.
--------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK,
SEE "RISK FACTORS" ON PAGE 5.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Shareholders(1)(2)
------------- ------------- ------------------
<S> <C> <C> <C>
Per Share.................................. $15.875 $.83 $15.045
Total(3)................................... $104,712,151 $5,474,714 $99,237,437
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) The Company will pay certain expenses of the Offering estimated at
$200,000.
(3) The Company has granted the Underwriters an option exercisable for 30 days
from the date of this Prospectus to purchase a maximum of 989,406
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $120,418,971,
Underwriting Discounts and Commissions will be $6,295,921, and the total
Proceeds to the Company will be $14,885,613. See "Underwriting."
------------
The shares are offered by the Underwriters when, as and if delivered to and
accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that the shares will be ready for delivery on
or about May 29, 1996, against payment in immediately available funds.
CS First Boston
Howard, Weil, Labouisse, Friedrichs
I n c o r p o r a t e d
Simmons & Company
International
The date of this Prospectus is May 22, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus and in
the consolidated financial statements, including the notes thereto, and other
documents which are incorporated herein by reference. As used herein, the terms
"Varco" and the "Company" refer to Varco International, Inc. or Varco and its
subsidiaries, as the context may require.
THE COMPANY
Varco International, Inc. is a leading manufacturer of products used in the
oil and gas well drilling industry worldwide. The Company has the leading
market position in most of its product lines and is widely recognized for the
development of new technology and equipment which enhances the productivity and
safety of the drilling process.
The Company's products are sold for use in approximately 82 countries, and
international revenues accounted for approximately 69% of total revenues for
the fiscal year ended December 31, 1995.
Since 1987, Varco has made several strategic acquisitions, which have
significantly increased its revenue base and expanded its product development
opportunities.
Varco operates through five divisions:
Varco Drilling Systems designs and manufactures integrated systems for
rotating and handling the various sizes and types of pipe used on a drilling
rig. It is widely recognized for developing innovative drilling technology and
products. Its principal products are Top Drive Drilling Systems and pipe
handling systems. The Top Drive Drilling System, first introduced in 1982, has
gained acceptance as a safer and more productive technology than conventional
methods for a wide variety of drilling applications. Through mechanization and
automation, Varco's pipe handling systems eliminate the manual handling of pipe
on a drilling rig.
Varco BJ Oil Tools manufactures a complete line of conventional drilling rig
tools and equipment, including pipe handling tools, hoisting equipment and
rotary equipment. Varco BJ is the market leader in virtually all of its product
lines.
Martin-Decker/TOTCO Instrumentation primarily designs, manufactures, sells
and rents products involving the measurement, analysis, recording and display
of information that enhances the productivity and safety of the drilling
process. Its most significant product is the TOTAL System, a computer-based
drilling information system. Based on revenues, Martin-Decker/TOTCO is the
worldwide leader in drilling rig instrumentation.
Shaffer primarily designs and manufactures pressure control equipment,
principally blowout preventers ("BOPs"), for use on drilling rigs. Shaffer also
provides motion compensation equipment for use on floating offshore rigs.
Thule Rigtech designs and sells solids control equipment, which is used on a
drilling rig in the mixing, handling, transport and cleaning of drilling fluids
("drilling mud"). Thule Rigtech is Varco's most recent acquisition, having been
acquired in November 1994.
The principal executive offices of the Company are located at 743 North
Eckhoff Street, Orange, California 92668 (telephone: (714) 978-1900).
3
<PAGE>
RECENT DEVELOPMENTS
In recent months offshore drilling activity has increased, raising the
capacity utilization of the worldwide mobile offshore rig fleet to 87% in the
first quarter of 1996, from 81% in the comparable period a year ago. In
particular, the demand for "high specification" rigs (i.e., those capable of
drilling in deeper water and/or harsh environments) has been very strong. The
recent levels of offshore rig utilization represent the highest level in more
than ten years.
These trends benefit Varco in two important ways. First, equipment of the
type supplied by Varco is critical to the upgrading of rigs to meet the
capacity and capability requirements associated with more difficult drilling
conditions. Second, Varco's key customers, the offshore drilling contractors,
are recording their best financial results in many years, thus combining the
incentive and the financial resources to invest in the upgrading of drilling
equipment. As a result, Varco's incoming orders have increased. Order bookings
were $76.9 million in the first quarter of 1995, $85.6 million in the fourth
quarter of 1995, and $102.2 million in the first quarter of 1996, in each case
establishing a new all-time high for the Company.
THE OFFERING
All of the shares of Common Stock of the Company offered are being sold by
the Selling Shareholders except to the extent that the over-allotment option
granted by the Company to the Underwriters is exercised. To the extent that the
over-allotment option is exercised, the net proceeds realized by the Company
will be used first for the repayment of indebtedness and then for working
capital or other general corporate purposes. See "Use of Proceeds."
If the over-allotment option is exercised in full, the number of shares of
Common Stock outstanding after the offering will be 31,282,869, based on the
number of shares outstanding at April 19, 1996.
4
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors,
together with the other information appearing in this Prospectus or
incorporated herein by reference before purchasing shares of Common Stock
offered hereby.
VOLATILE INDUSTRY CONDITIONS
The Company's operations are materially dependent upon the level of
worldwide drilling activity, particularly offshore drilling. Such activity
levels are affected by both short-term and long-term trends in world oil and
natural gas prices. In recent years, oil and natural gas prices and, therefore
the level of drilling activity, have been extremely volatile. Any prolonged
reduction in oil and natural gas prices would, in all likelihood, depress the
level of drilling activity and result in a decline in the demand for the
Company's products. Any sustained reduction in such activity would, in all
likelihood, have a material adverse effect on the Company's revenues and
profitability.
MANAGEMENT OF ACCELERATING GROWTH
The Company's orders and revenues have increased substantially in recent
quarters, particularly in its Drilling Systems and Shaffer Divisions.
Following a number of years of dramatic downsizing, the Company's operating
divisions have been, or may be, required to significantly increase their level
of output. Such increases create strains on existing management and
organization structures, systems and procedures, and human resources. There is
no assurance that these strains will not result in a material adverse effect
on the Company's revenues and profitability.
SHARES AVAILABLE FOR FUTURE SALE
Certain shareholders of the Company (including Walter B. Reinhold, one of
the Selling Shareholders) are parties to an Agreement (the "Shareholders'
Agreement") imposing certain restrictions on transfers of certain shares of
Common Stock owned by them and certain of their transferees, which expires on
May 22, 1996. For a further description of these restrictions, see "Selling
Shareholders." Of the approximately 3,200,000 shares of Common Stock subject
to the Shareholders' Agreement, 994,547 shares are beneficially owned by Mr.
Reinhold. Based on information available to the Company and the record list of
holders of the Common Stock of the Company as of March 20, 1996, the other
major holders of shares subject to the Shareholders' Agreement and the number
of shares held by them (individually, as trustee, as executor, or as
custodian) which are subject to the transfer restrictions are as follows:
Baldwin Reinhold, Jr. and Mary E. Reinhold, 907,780 shares; Howard P. Lorenz,
600,331 shares; Baldwin Terry Reinhold and Carol Anne Reinhold, 93,264 shares;
Charlotte L. Llanes, 62,252 shares; Darlene M. Reinhold, 58,292 shares; and
John G. Reinhold, 57,685 shares. Upon the expiration of the Shareholders'
Agreement on May 22, 1996, the shares subject thereto will no longer be
subject to the transfer restrictions contained in the Shareholders' Agreement
although to the extent that any holder of shares formerly subject to the
agreement is an affiliate of the Company, sales of shares may be subject to
the volume limitations of Rule 144 ("Rule 144") under the Securities Act of
1933, as amended (the "Securities Act"). Rule 144 permits an affiliate to
sell, within any three-month period, a number of shares not exceeding the
greater of 1% of the then outstanding shares of the Company's Common Stock
(approximately 302,000 shares based on the number of shares outstanding at
March 31, 1996) or the average weekly trading volume during the four weeks
preceding the date of filing of notice of the proposed sale with the
Securities and Exchange Commission pursuant to Rule 144 (approximately
1,450,000 shares for the four weeks ended April 26, 1996). Assuming that
trading in the Common Stock continues at similar levels, the Rule 144 volume
limitations would not limit sales by any such affiliate. However, Walter B.
Reinhold has agreed that for a period of 120 days after the date of this
Prospectus he will not sell or otherwise dispose of any shares of Common Stock
owned by him except for the shares included in the Offering. See
"Underwriting." Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices of the Common
Stock.
5
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Common
Stock offered by the Selling Shareholders. The net proceeds to the Company,
assuming that the over-allotment option is exercised in full and after
deducting underwriting discounts and commissions and estimated expenses
payable by the Company, are estimated at $14,686,000. Any net proceeds to the
Company from the exercise of the over-allotment option, in whole or in part,
will be applied first to the principal payment, due June 30, 1996, in the
amount of $10,000,000 on the Company's 8.95% Senior Notes and then to the
repayment of amounts outstanding under the Company's revolving credit facility
($2,000,000 at March 31, 1996). Advances currently outstanding under the
revolving credit facility bear interest at prime plus .50% (8.75% at March 31,
1996) and mature on October 31, 1998. Any remaining balance of the net
proceeds will be used by the Company for working capital and other general
corporate purposes. In the event that the over-allotment is not exercised or
is not exercised in full, the Company believes that its cash and cash
equivalents and revolving credit facility will be sufficient to meet its
capital expenditures, operating cash needs and the principal payment on the
8.95% Senior Notes in 1996.
PRICE RANGE OF COMMON STOCK
Varco's Common Stock is listed on the New York Stock Exchange (symbol
"VRC"). The following table sets forth for the periods indicated the high and
low sale prices per share of the Common Stock on the New York Stock Exchange
Composite Tape. The last reported sale price of the Common Stock on the New
York Stock Exchange Composite Tape as of a recent date is set forth on the
cover page of this Prospectus. There were 1,847 holders of record of the
Common Stock as of the close of business on April 19, 1996.
<TABLE>
<CAPTION>
COMMON
STOCK
PRICE
-----------
HIGH LOW
---- ---
<S> <C> <C>
1994:
First Quarter................................................. $7 $5 1/4
Second Quarter................................................ 7 5 1/8
Third Quarter................................................. 7 3/8 5 7/8
Fourth Quarter................................................ 7 3/8 6
1995:
First Quarter................................................. 7 3/4 6
Second Quarter................................................ 9 1/2 7 5/8
Third Quarter................................................. 11 7/8 8 1/8
Fourth Quarter................................................ 12 7/8 8 3/8
1996:
First Quarter................................................. 12 7/8 8 3/4
Second Quarter (through May 22, 1996)......................... 17 1/8 12 1/8
</TABLE>
The transfer agent and registrar for the Common Stock is Harris Trust
Company of California.
6
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1996, and as adjusted to reflect the sale by the
Company of 989,406 shares of Common Stock pursuant to the Offering, assuming
that the over-allotment option granted to the Underwriters is exercised in
full, and the application of a portion of the net proceeds therefrom to the
principal payment, due June 30, 1996, on the 8.95% Senior Notes and amounts
outstanding under the Company's revolving credit facility.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current Portion of Long-Term Debt........................ $ 10,000 $ 0
======== ========
Long-Term Debt(1)
8.95% Senior Notes..................................... $ 30,000 $ 30,000
Note payable under revolving credit agreement.......... 2,000 0
Other indebtedness and unamortized issuance costs...... (417) (417)
-------- --------
Total long-term debt................................... $ 31,583 $ 29,583
-------- --------
Shareholders' Equity
Common Stock: 80,000,000 shares authorized, 30,231,786
shares issued and outstanding actual; 31,221,192
shares as adjusted, stated value (2).................. $ 20,600 $ 21,589
Additional paid-in capital............................. 104,491 118,388
Retained earnings...................................... 29,499 29,499
-------- --------
Total shareholders' equity............................. 154,590 169,476
-------- --------
Total Capitalization..................................... $186,173 $199,059
======== ========
</TABLE>
- --------
(1) See Note F of notes to consolidated financial statements incorporated by
reference herein for a description of the Company's long-term debt.
(2) Excludes 257,102 shares of Common Stock issuable upon exercise of options
granted under the Company's 1980 Stock Option Plan; 1,196,616 shares
issuable upon exercise of options granted under the Company's 1990 Stock
Option Plan; 15,000 shares issuable upon exercise of options held by
three non-employee directors; 972,148 shares reserved for issuance
pursuant to the Company's 1980 Employee Stock Purchase Plan; 637,024
shares reserved for issuance pursuant to the Company's Stock Bonus Plan;
and 650,000 shares reserved for issuance pursuant to the Company's 1994
Directors' Stock Option Plan.
7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following information is selected or derived from the consolidated
financial statements of the Company and its subsidiaries. Such consolidated
financial statements for each of the five years in the period ended December
31, 1995 have been audited by Ernst & Young LLP, independent auditors.
Information for March 31, 1995 and 1996 and the three-month periods then ended
are selected or derived from unaudited consolidated financial statements of
the Company and incudes all adjustments (consisting of only normal recurring
accruals) which management considers necessary for a fair presentation of such
financial information for such periods. Operating results for the three-month
period ended March 31, 1996 are not necessarily indicative of results that may
be expected for any other interim period or for the entire year ending
December 31, 1996. This information should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information incorporated by reference herein, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
STATEMENT OF OPERATIONS DATA:
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- -----------------
1991 1992(1) 1993(1) 1994(1) 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues................ $216,622 $173,069 $193,480 $223,601 $273,731 $ 57,645 $ 70,969
Gross Profit............ 79,431 63,049 72,010 86,761 99,214 23,787 24,746
Selling, General and
Administrative
Expenses............... 47,616 49,067 48,423 53,798 61,014 15,145 16,117
Research and
Development............ 10,757 9,818 9,479 11,438 13,156 3,190 3,572
Interest Expense........ 4,509 3,918 5,010 4,766 4,516 1,204 1,005
Income Before Income
Taxes.................. 16,925 852 10,811 18,917 21,908 4,721 4,765
Income Taxes............ 2,894 530 3,715 6,756 7,469 1,808 1,737
Income Before Cumulative
Effect of Change in
Accounting for Income
Taxes.................. 14,031 322 7,096 12,161 14,439 2,913 3,028
Net Income(2)........... 14,031 2,358 7,096 12,161 14,439 2,913 3,028
Depreciation and
Amortization........... 9,943 10,964 10,687 10,996 12,347 3,012 3,012
Income Per Share Before
Cumulative Effect of
Change in Accounting
for Income Taxes....... 0.45 0.01 0.21 0.36 0.46 0.09 0.10
Net Income Per
Share(2)............... 0.45 0.07 0.21 0.36 0.46 0.09 0.10
Average Shares used in
Computing Net Income
Per Share.............. 31,161 32,996 33,400 33,522 31,729 33,592 30,728
BALANCE SHEET DATA:
(in thousands)
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital......... $ 82,748 $102,953 $113,241 $112,342 $ 89,187 $116,203 $ 95,573
Property and Equipment--
Net.................... 43,018 49,797 47,241 47,659 50,622 49,684 50,953
Total Assets............ 204,066 232,301 248,021 257,641 246,571 269,128 258,944
Long Term Debt.......... 25,567 51,326 49,164 39,349 29,539 39,408 31,583
Shareholders' Equity.... 141,919 144,366 152,608 163,728 151,179 167,573 154,590
</TABLE>
- --------
(1) Includes the acquisitions of the Shaffer Division of Baroid Corporation as
of July 17, 1992, Metrox, Inc. as of August 17, 1993 and Rig Technology
Limited as of November 30, 1994.
(2) 1992 net income includes cumulative effect of adopting Statement of
Financial Accounting Standards No. 109.
See notes to consolidated financial statements incorporated herein by
reference.
8
<PAGE>
SELLING SHAREHOLDERS
The Selling Shareholders listed in the following table have indicated their
intention to sell such number of shares of Common Stock in the Offering as is
set forth opposite their respective names. The numbers of shares of Common
Stock shown as being owned by the Selling Shareholders prior to the Offering
are as of March 31, 1996.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK TO BE
BENEFICIALLY OWNED BENEFICIALLY
PRIOR TO THE OWNED AFTER THE
OFFERING OFFERING
--------------------- NUMBER OF ------------------
PERCENT SHARES PERCENT
NUMBER OF OF TO BE SOLD NUMBER OF OF
SHARES CLASS(1) IN THE OFFERING SHARES CLASS(1)
--------- -------- --------------- --------- --------
<S> <C> <C> <C> <C> <C>
Baker Hughes
Incorporated........... 6,346,041 21.0% 6,346,041 0 0%
Walter B. Reinhold...... 1,118,167(2) 3.7% 250,000 868,167 2.9%
</TABLE>
- --------
(1) Based upon 30,231,786 shares outstanding at March 31, 1996.
(2) Includes (a) 78,400 shares held by a trust of which Mr. Reinhold and Leo
J. Pircher, a director of the Company, are trustees and share voting and
investment power and as to which Mr. Reinhold disclaims beneficial
ownership, (b) 200 shares Mr. Reinhold owns jointly with his spouse, with
respect to which he shares voting and investment power with his spouse,
and (c) 45,020 additional shares, all owned by Mr. Reinhold's spouse, with
respect to which Mr. Reinhold shares voting and investment power and
disclaims beneficial ownership. Does not include 58,292 shares with
respect to which Mr. Reinhold's spouse acts as custodian and with respect
to which she has sole voting and investment power and Mr. Reinhold
disclaims beneficial ownership.
All 6,596,041 shares of Common Stock included in the Offering are being sold
by the Selling Shareholders. The Company has granted to the Underwriters an
option to purchase up to 989,406 additional shares solely to cover over-
allotments, if any.
Of the 6,346,041 shares of Common Stock beneficially owned by Baker Hughes
Incorporated ("Baker Hughes") (1) 3,000,000 were issued to Baker Hughes in
September 1988, as part of the consideration for the acquisition by the
Company of Baker Hughes' BJ Machinery Division, pursuant to the provisions of
an Asset Purchase Agreement, dated as of August 10, 1988 (the "BJ Purchase
Agreement"), (2) an additional 1,000,000 shares were issued to Baker Hughes in
December 1990 upon the exercise (for an aggregate exercise price of
$4,000,000) of a Warrant issued to Baker Hughes as an additional part of the
consideration for the BJ Machinery Division acquisition, and (3) the balance
of 2,346,041 shares were issued to Baker Hughes in November 1990, as part of
the consideration for the acquisition by the Company of Baker Hughes' TOTCO
Product Line, pursuant to the provisions of an Amended and Restated Asset
Purchase Agreement, dated as of August 1, 1990 (the "TOTCO Purchase
Agreement").
The shares being sold by Baker Hughes are being included in the Company's
Registration Statement for the Offering pursuant to certain registration
rights agreed to by the Company in connection with the BJ Machinery Division
and the TOTCO Product Line acquisitions. The Company agreed to pay all
expenses of registering shares on behalf of Baker Hughes other than
underwriting discounts and commissions and any fees or disbursements of Baker
Hughes' counsel. The Company and Baker Hughes have agreed to indemnify each
other against certain liabilities under the Securities Act.
Pursuant to the BJ Purchase Agreement, the Company agreed that, during the
period commencing on the closing date of the BJ Machinery acquisition and
terminating on the earlier of (a) the date on which the Company shall have
discharged in full its obligations to make certain royalty payments to Baker
Hughes under the provisions of the BJ Purchase Agreement and (b) September 29,
1996, it would use its best efforts to cause a designee of Baker Hughes to be
elected to the Company's Board of Directors. Pursuant to the foregoing, James
D. Woods, Chairman and Chief Executive Officer of Baker Hughes, was named as
Baker Hughes' designee and has served as a director of the Company during the
period October 1988 through May 1990 and the period December 1990 to the
present.
9
<PAGE>
Pursuant to the TOTCO Purchase Agreement, Baker Hughes agreed that (subject
to certain exceptions) so long as Baker Hughes or any subsidiary beneficially
owned any of the shares of Common Stock issued in connection with the BJ
Machinery Division acquisition or the TOTCO Product Line acquisition, and in
any event for at least seven years from November 28, 1990, the date of the
closing of the TOTCO Product Line acquisition, neither Baker Hughes nor any
subsidiary would acquire any additional shares of the Common Stock or rights
or options to acquire the Common Stock if such acquisition would result in
Baker Hughes and its affiliates owning more than 21.8% of Varco's outstanding
Common Stock. Baker Hughes also agreed not to participate in any solicitation
of proxies with respect to Varco during such period.
In addition, Baker Hughes agreed that it would not dispose of any shares of
Common Stock constituting more than 5% of the outstanding shares of such stock
in a privately negotiated transaction or series of transactions to any person
or group of related persons without first offering such shares to the Company
at the price and upon the terms upon which such shares were proposed to be
sold. In such event, the Company may elect to purchase either (i) all of such
shares or (ii) any or all of such shares in excess of 3,000,000 shares on the
terms of the proposed sale. Baker Hughes also agreed that it would not dispose
of any shares of Common Stock constituting more than 3% of the outstanding
shares of stock in open market transactions or in any other manner (other than
a privately negotiated transaction) over a period of six months or less
without first offering to the Company such shares as would cause the total
number of shares sold by Baker Hughes during such period to exceed 3% of the
outstanding shares. The Company has waived its rights of first refusal in
connection with the Offering.
Walter B. Reinhold is Chairman of the Board of Directors of the Company. All
of the shares included in the Offering by Mr. Reinhold were acquired by him by
gift or inheritance from his father prior to 1977.
Mr. Reinhold, Baldwin Reinhold, Jr., the estate of Charlotte Reinhold
Lorenz, deceased, and Baldwin T. Reinhold, the son of Baldwin Reinhold, Jr.,
are parties to an Agreement dated as of June 11, 1981 (the "Shareholders'
Agreement") imposing certain restrictions on transfers of shares of Common
Stock owned by them at the time the Shareholders' Agreement became effective
and any additional voting securities of the Company issued with respect
thereto by way of stock dividend, stock split or other distribution.
Specifically, the Shareholders' Agreement prohibits any transfer except (1)
any transfer pursuant to a registration statement under the Securities Act,
(2) the sale by any party of not more than 20,000 shares (adjusted to reflect
any stock dividends, stock splits or reverse stock splits) during any 12-month
period pursuant to Rule 144, (3) inter vivos gifts, provided that the
aggregate value given by any party to any one person during any 12-month
period does not exceed $50,000 ($500,000 in the case of direct or indirect
gifts to a member of the donor's family or the donor's former spouse), (4)
bequests or inter vivos gifts, direct or indirect, to charitable institutions,
provided that the aggregate value given by any party to charitable
institutions during any 12-month period does not exceed $2,000,000, (5)
transfers by will or the laws of descent and distribution, or (6) transfers
with the written consent of the holders of 80% of the shares then subject to
the Shareholders' Agreement. Any transferee under clause (3) or (6) above must
agree to be bound by the provisions of the Shareholders' Agreement restricting
transfers unless, in the case of any transfer under clause (6), otherwise
agreed by the parties approving such transfer, and any transferee under clause
(5) above other than a charitable institution is deemed to be bound by such
provisions. Unless sooner terminated by the parties, the foregoing
restrictions terminate on May 22, 1996. Approximately 3,200,000 shares of
Common Stock, or 10.6% of the shares outstanding at March 31, 1996, are
currently subject to the Shareholders' Agreement.
10
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement (the "Underwriting Agreement"), the form of which is filed as an
exhibit to the Registration Statement, the underwriters named below (the
"Underwriters"), for whom CS First Boston Corporation ("CS First Boston"),
Howard, Weil, Labouisse, Friedrichs Incorporated and Simmons & Company
International are acting as representatives (the "Representatives") have
severally and not jointly agreed to purchase from the Selling Shareholders the
number of shares of Common Stock set forth opposite their respective names
below at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
CS First Boston Corporation........................................ 1,578,681
Howard, Weil, Labouisse, Friedrichs Incorporated................... 1,578,680
Simmons & Company International.................................... 1,578,680
Bear, Stearns & Co. Inc. .......................................... 120,000
Sanford C. Bernstein & Co., Inc. .................................. 60,000
Dillon, Read & Co. Inc. ........................................... 120,000
Donaldson, Lufkin & Jenrette Securities Corporation................ 120,000
Goldman, Sachs & Co. .............................................. 120,000
Jefferies & Company, Inc. ......................................... 60,000
Johnson Rice & Company L.L.C. ..................................... 60,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................. 120,000
NatWest Securities Limited......................................... 120,000
Needham & Company, Inc. ........................................... 120,000
PaineWebber Incorporated........................................... 120,000
Petrie Parkman & Co., Inc. ........................................ 60,000
Prudential Securities Incorporated................................. 120,000
Rodman & Renshaw, Inc. ............................................ 60,000
Salomon Brothers Inc............................................... 120,000
Schroder Wertheim & Co. Incorporated............................... 120,000
Southcoast Capital Corporation..................................... 60,000
Sutro & Co. Incorporated........................................... 60,000
Van Kasper & Company............................................... 60,000
Williams MacKay Jordan & Co., Inc. ................................ 60,000
---------
Total............................................................ 6,596,041
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than those shares covered by the over-allotment option described below) if any
are purchased. The Underwriting Agreement provides that, in the event of a
default by an Underwriter, in certain circumstances the purchase commitments
of non-defaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
The Company has granted the Underwriters an option expiring at the close of
business on the 30th day after the date of this Prospectus, exercisable by CS
First Boston, to purchase up to an additional 989,406 shares from the Company
at the public offering price less underwriting discounts and commissions, all
as set forth on the cover page of this Prospectus. Such option may be
exercised only to cover over-allotments in the sale of shares of the Common
Stock. To the extent that the Underwriters exercise such option, each
Underwriter will become obligated, subject to certain conditions, to purchase
a number of option shares proportionate to such Underwriter's initial
commitment as indicated in the preceding table.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares to the public initially at the public offering
price set forth on the cover of this Prospectus and through the
11
<PAGE>
Representatives to certain dealers at such price less a concession of $.49 per
share, and the Underwriters and such dealers may allow a discount of $.10 per
share on sales to certain other dealers. After the initial public offering,
the public offering price and concession and discount to dealers may be
changed by the Representatives.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or contribute to payments which the Underwriters may be
required to make in respect thereof.
The Company and its executive officers and directors have agreed that, for a
period of 120 days after the date of this Prospectus, they will not, without
the prior written consent of CS First Boston, sell, contract to sell or
otherwise dispose of any shares of Common Stock owned by them, directly or
indirectly, except for grants of options under the Company's existing stock
option plans, the issuance of shares pursuant to awards under the Company's
Stock Bonus Plan, the issuance of shares of Common Stock upon exercise of
outstanding options, and the issuance and sale by the Company of Common Stock
pursuant to the Company's Employee Stock Purchase Plan and will not pledge,
file a registration statement or announce the filing of a registration
statement covering the shares.
12
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company or the
Selling Shareholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made
in accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Selling Shareholders and/or
the Company and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities
laws to purchase such Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "Resale Restrictions."
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR 95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
13
<PAGE>
LEGAL OPINIONS
The validity of the Common Stock offered hereby will be passed upon for
Varco by Pircher, Nichols & Meeks, Los Angeles, California. Mr. Leo J.
Pircher, a member of the firm of Pircher, Nichols & Meeks, is a director of
Varco. Mr. Pircher owns beneficially 5,200 shares of Varco's Common Stock and
holds options to purchase an additional 10,000 shares. In addition, Mr.
Pircher is a holder of record of, and has sole or shared voting or investment
power with respect to, 347,648 shares of Common Stock in fiduciary capacities.
Certain legal matters will be passed upon for the Underwriters by Latham &
Watkins, Los Angeles, California.
EXPERTS
The consolidated financial statements of Varco International, Inc.
incorporated by reference in Varco International, Inc.'s Annual Report (Form
10-K) for the year ended December 31, 1995, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The information included under the caption "Selected Consolidated Financial
Data" for each of the five years in the period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been derived from
consolidated financial statements audited by Ernst & Young LLP.
AVAILABLE INFORMATION
Varco is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files, reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at its principal office at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. and at its regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Varco's Common Stock is listed on the New York Stock Exchange, and such
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
Varco has filed with the Commission a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. Statements contained in this
Prospectus concerning the provisions of documents filed with the Registration
Statement as exhibits accurately describe the relevant material provisions of
such documents, but are necessarily summaries of such documents, and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission. For further information,
reference is made to such Registration Statement, exhibits and schedules,
which may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies thereof may be obtained upon payment of the fees
prescribed by the Commission.
14
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference herein:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 and Amendment No. 1 thereto filed on May 20, 1996.
(c) The description of the Company's Common Stock contained in the
Company's Form 8-A Registration Statement filed May 29, 1981, including any
amendment or report filed for the purpose of updating such description.
In addition, each document filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Common Stock
pursuant hereto shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing such document.
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference in this Prospectus shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained in this Prospectus, or in
any subsequently filed document that also is or is deemed to be incorporated
by reference in this Prospectus, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Registration Statement or
this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any and all of the documents that are incorporated by reference in
this Prospectus (not including the exhibits to any such document unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates by reference). Requests for such copies should be
directed to Varco International, Inc., Attention: Investor Relations, 743
North Eckhoff Street, Orange, California 92668, telephone number (714) 978-
1900.
15
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY UNDER-
WRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 6
Price Range of Common Stock................................................ 6
Capitalization............................................................. 7
Selected Consolidated Financial Data....................................... 8
Selling Shareholders....................................................... 9
Underwriting............................................................... 11
Notice to Canadian Residents............................................... 13
Legal Opinions............................................................. 14
Experts.................................................................... 14
Available Information...................................................... 14
Incorporation of Certain Documents by Reference............................ 15
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6,596,041 Shares
LOGO
Common Stock
PROSPECTUS
CS First Boston
Howard, Weil, Labouisse, Friedrichs
Incorporated
Simmons & Company
International
- -------------------------------------------------------------------------------
