<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 11-K
______________________
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-8158
_____________________
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
THE VARCO 1980 EMPLOYEE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office.
VARCO INTERNATIONAL, INC.
743 NORTH ECKHOFF STREET
ORANGE, CALIFORNIA 92868
This annual report on Form 11-K relates to the Varco 1980 Employee Stock
Purchase Plan (the "Plan") of Varco International, Inc. (the "Company").
ITEM 1. CHANGES IN THE PLAN
- ----------------------------
No changes were made to the Plan during the fiscal year ended March 31, 1998.
<PAGE>
ITEM 2. CHANGES IN THE INVESTMENT POLICY
- ----------------------------------------
No changes were made during the fiscal year with respect to investment policy.
ITEM 3. CONTRIBUTIONS UNDER THE PLAN
- ------------------------------------
There have been no Company contributions to the Plan since the effective date of
the Plan on April 1, 1980.
ITEM 4. PARTICIPATING EMPLOYEES
- -------------------------------
There were approximately 874 participating employees in the Plan on March 31,
1998.
ITEM 5. ADMINISTRATION
- ----------------------
(a) The Plan is administered by the Compensation Committee of the Company's
Board of Directors (the "Committee"). For the Plan year ended March 31,
1998, the members of the Committee and their positions with the Company and
its affiliates were:
Member Position
------ --------
James D. Woods Director of the Company
Jack W. Knowlton Director of the Company
Robert A. Teitsworth Director of the Company
The address of each member listed above is c/o Varco International, Inc.
743 North Eckhoff Street, Orange, California 92868.
(b) During the fiscal year ended March 31, 1998, no compensation was received
from the Plan by any of the members of the Committee.
ITEM 6. CUSTODIAN OF INVESTMENTS
- --------------------------------
The Company is the custodian of funds received in respect of contributions by
employees under the Plan. The Company receives no compensation from the Plan.
Under the provisions of the Plan all funds received or held by the Company under
the Plan are included in the general funds of the Company free of any trust or
other restrictions, and may be used for any corporate purpose. Pursuant to the
Plan no interest on funds contributed under the Plan is paid or credited to
participants' accounts.
ITEM 7. REPORTS TO PARTICIPATING EMPLOYEES
- ------------------------------------------
Participating employees are furnished a semi-annual statement reflecting the
number of shares of the Company's Common Stock purchased for such employees'
accounts during the most recent period of the Plan and the balance remaining in
the participation account to be refunded to such employees.
<PAGE>
ITEM 8. INVESTMENT OF FUNDS
- ---------------------------
All funds received or held by the Company under the Plan are included in the
general funds of the Company. Reference is made to Item 6 hereof.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
- -----------------------------------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
(a) Financial Statements
Report of Independent Auditors F-1
Statements of Financial Condition F-2
Statements of Changes in Plan Equity F-3
Notes to Financial Statements F-4
Schedules -- Schedules I, II, and III have
been omitted because they are not
applicable.
(b) Exhibits
Exhibit 23, Consent of Independent Auditors F-5
</TABLE>
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Compensation Committee of the Board of Directors of Varco International, Inc.
has duly caused this annual report to be signed by the undersigned, thereunto
duly authorized.
THE VARCO 1980 EMPLOYEE STOCK PURCHASE PLAN
/s/ DONALD L. STICHLER
----------------------
Donald L. Stichler
Vice President
Controller-Treasurer and Secretary
June 26, 1998
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Compensation Committee of the Board of Directors
Varco International, Inc.
Orange, California
We have audited the accompanying statements of financial condition of The Varco
1980 Employee Stock Purchase Plan (the "Plan") as of March 31, 1998 and 1997,
and the related statements of changes in Plan equity for each of the three years
in the period ended March 31, 1998. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Varco 1980 Employee Stock
Purchase Plan as of March 31, 1998 and 1997 and the changes in Plan equity for
each of the three years in the period ended March 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Orange County, California
June 23, 1998
F-1
<PAGE>
STATEMENTS OF FINANCIAL CONDITION
THE VARCO 1980 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
March 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
Plan Assets:
Accounts receivable from Varco International, Inc. $929,540 $520,051
======== ========
Plan Liabilities and Equity:
Obligations to purchase Varco International, Inc.
Common Stock $929,540 $520,051
Plan Equity -- --
-------- --------
Total Plan Liabilities and Equity $929,540 $520,051
======== ========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
STATEMENTS OF CHANGES IN PLAN EQUITY
THE VARCO 1980 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
Year Ended March 31,
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Plan Income:
Employees' contribution $1,653,205 $998,333 $828,216
Plan Expenses:
Purchases of Varco International,
Inc. Common Stock 1,640,101 992,508 825,356
Amounts refunded to Plan
participants 13,104 5,825 2,860
---------- -------- --------
Plan Equity at March 31 $ -0- $ -0- $ -0-
========== ======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
THE VARCO 1980 EMPLOYEE STOCK PURCHASE PLAN
March 31, 1998
NOTE A--SIGNIFICANT ACCOUNTING POLICIES AND PLAN DESCRIPTION
The accompanying financial statements have been prepared on the accrual basis of
accounting. Asset valuations are stated at cost which is equivalent to fair
value.
The Varco 1980 Employee Stock Purchase Plan (the "Plan") was adopted by the
Company's Board of Directors in December 1979, and became effective on April 1,
1980. The Plan permits eligible employees to make regular and systematic
purchases of Common Stock of the Company through payroll deductions.
Substantially all regular full-time employees are eligible to participate in the
Plan. Voluntary employee contributions are deducted from the employee
compensation each payday and paid into the Plan for the employee's account.
All funds received or held by the Company under the Plan are included in the
general funds of the Company. The Company issues stock certificates to each
participant to the extent that the balance in the participant's account at the
end of the Plan period is sufficient to purchase whole shares of the Company's
stock. The Plan provides for two six-month purchase periods per year in lieu of
a twelve-month purchase period. The first purchase period commences on April 1
and ends on September 30. The second period begins on October 1 and ends on
March 31. The purchase price per share to be paid by each participant is 85% of
the fair market value of the Company's Common Stock on the first or last day of
a purchase period, whichever amount is lower. Any Participant may terminate
contributions and withdraw from the Plan at any time.
In February 1995, the Plan was amended by the Board of Directors, and
subsequently ratified by the shareholders in May 1995, to increase the number of
shares subject to the Plan from 1,000,000 to 2,000,000, and to extend the term
of the Plan from fifteen to twenty-five years following its effective date
unless it is sooner terminated by resolution adopted by the Company's Board of
Directors.
A two-for-one stock split of the Company's Common Stock occurred on November 20,
1997. The number and price of shares have been adjusted on a retroactive basis
in the related notes to reflect this split.
NOTE B--PURCHASE OF COMMON STOCK
For the fiscal year ended March 31, 1998, the Company issued 67,540 shares of
its Common Stock to 690 participants at a price of $10.625 a share for the
Plan's first purchase period (April 1, 1997 through September 30, 1997). For
the Plan's second period (October 1, 1997 through March 31, 1998), the Company
issued 43,088 shares of its Common Stock to 874 participants at a price of
$21.4094 a share.
For the fiscal year ended March 31, 1997, the Company issued 89,586 shares of
its Common Stock to 468 participants at a price of $5.3125 a share for the
Plan's first purchase period. For the Plan's second period, the Company issued
68,964 shares of its Common Stock to 511 participants at a price of $7.4906 a
share.
For the fiscal year ended March 31, 1996, the Company issued 121,204 shares of
its Common Stock to 410 participants at a price of $3.2407 a share for the
Plan's first purchase period. For the Plan's second period, the Company issued
99,300 shares of its Common Stock to 416 participants at a price of $4.3563 a
share.
Amounts remaining in participant's accounts after issuance of shares, which were
insufficient to purchase whole shares of the Company's Common Stock, were
refunded to such participants.
NOTE C--FEDERAL INCOME TAXES
The Plan qualifies as an Employee Stock Purchase Plan under Section 423 of the
Internal Revenue Code of 1986. Accordingly, transfers of shares under this Plan
are not intended to result in taxable income to employees.
F-4
<PAGE>
EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 2-66830, Form S-8 No. 2-96290 and Form S-8 No. 33-61861)
pertaining to The Varco 1980 Employee Stock Purchase Plan of Varco
International, Inc. and in the related prospectuses of our report dated June 23,
1998, with respect to the financial statements of The Varco 1980 Employee Stock
Purchase Plan included in this Annual Report (Form 11-K) for the year ended
March 31, 1998.
/s/ ERNST & YOUNG LLP
Orange County, California
June 26, 1998
F-5
