<PAGE>
 
                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q
(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    For the quarterly period ended September 30, 1996

                                      OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from ___________to________________
    Commission File number 1-8158


                           VARCO INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

     California                                 95-0472620
(State or other jurisdiction of             (I.R.S. Employer 
 incorporation or organization)              Identification No.)

                  743 North Eckhoff Street, Orange, Ca 92668
                   (Address of principal executive offices)
                                  (Zip code)

                                (714) 978-1900
             (Registrant's telephone number, including area code)

                                Not Applicable
             (Former name, former address and former fiscal year, 
                         if changed since last report)

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 
                                        -----    -----

                                  31,575,713
      (Number of shares of Common Stock outstanding at October 31, 1996)

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                         PART I-FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS.

          Pursuant to General Instruction D to Form 10-Q, the Condensed
Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets and
Condensed Consolidated Statements of Income of Varco International, Inc., (the
"Company") and its subsidiaries included in the registrant's Third Quarter
Report to Shareholders for the three months ended September 30, 1996, filed as
Exhibit 19 hereto are incorporated herein by reference. Such financial
statements should be read in light of the following:

          ADJUSTMENTS.  The financial statements contained in Exhibit 19 hereto
include all adjustments which in the opinion of management are of a normal
recurring nature, considered necessary to present fairly the results of
operations for the interim periods presented.

          NET INCOME PER SHARE.  Net income per share is based upon an average
of 31,488,163 and 33,910,939 shares outstanding for the nine months ended
September 30, 1996, and 1995 respectively, and upon an average of 32,118,119 and
30,640,435 shares outstanding for the three months ended September 30, 1996 and
1995 respectively.

          INVENTORIES.  The Company estimates the components of inventory at
September 30, 1996, and December 31, 1995, to be as follows:

<TABLE>
<CAPTION>
 
                      SEPTEMBER 30, 1996    DECEMBER 31, 1995
                      -------------------   ------------------
<S>                   <C>                   <C>
 
 Raw Materials            $  5,666,000         $  5,480,000  
 Work in Process            20,663,000           18,061,000  
 Finished Goods             72,185,000           59,426,000  
 LIFO Reserves             (14,005,000)         (13,761,000)  
                          ------------         ------------  
                          $ 84,509,000         $ 69,206,000  
                          ============         ============   
</TABLE>

          FIXED ASSETS.  Fixed assets are stated net of accumulated depreciation
of $52,802,000 at September 30, 1996, and $48,376,000 at December 31, 1995.
<PAGE>
 
          COMMON STOCK AND ADDITIONAL PAID-IN-CAPITAL. On September 30, 1996,
the Company Common Stock account was $21,775,000 and Additional Paid-In-Capital
accounts were $119,467,000.

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

          Pursuant to General Instruction D to Form 10-Q, Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the registrant's Third Quarter Report to Shareholders for the three
months ended September 30, 1996, filed as Exhibit 19 hereto, is incorporated
herein by reference.

                           PART II-OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES

On May 29, 1996 the Company completed the sale of 989,406 shares of its Common
Stock at a price to the public of $15.875 per share.

On March 24, 1995, the Company commenced a "Dutch Auction" type tender offer
(the "Tender Offer") to purchase up to 5,300,000 shares of its Common Stock at 
a purchase price not greater than $8.00 per share nor less than $6.75 per
share.  Pursuant to the Tender Offer, which terminated on April 21, 1995, the
Company purchased 3,150,560 shares of its Common Stock at a purchase price of
$8.00 per share.

     In July 1992 the Company sold $50.0 million aggregate principal amount
of its 8.95% Senior Notes Due June 30, 1999 (the "Senior Notes") to a group
of ten institutional investors pursuant to a Note Agreement dated as of 
July 1, 1992 (as amended, the "Note Agreement").  The principal of the Senior
Notes is payable in five equal annual installments of $10.0 million, the first
of which was made on June 30, 1995.

     The Note Agreement prohibits any "Restricted Payment" subsequent to July
17, 1992 unless after giving effect thereto, (i) the aggregate amount of all
Restricted Payments subsequent to such date would not exceed $5,000,000 plus
the cumulative sum of 50% of the Company's consolidated net income (or minus
100% in the case of a deficit) subsequent to March 31, 1992 and (ii) the
Company could incur at least $1.00 of additional indebtedness under the Note
Agreement covenant limiting indebtedness.  The term "Restricted Payment"
includes (a) any dividend (other than dividends payable in shares of capital
stock) or other distributions on any shares of capital stock of the Company;
(b) any purchase, redemption or other acquisition of any shares of the capital
stock of the Company or any rights or options to purchase or acquire such
shares; and (c) any "Restricted Investment", which is generally defined as any
investment other than an investment in a subsidiary of the Company or an
investment in certain designated government or rated securities.  In addition, 
the Company may purchase, redeem or otherwise acquire shares of its capital 
stock or make Restricted Investments from the net cash proceeds of the 
substantially concurrent sales of shares of capital stock or from the sale of 
securities convertible into such shares upon conversion.

     Pursuant to a waiver and amendment dated as of March 8, 1995, the holders 
of the Senior Notes (1) waived compliance with the limitations on Restricted 
Payments discussed above, (2) agreed that the amount expended in the Tender 
Offer would not constitute a Restricted Payment, and (3) amended certain 
covenants to take into account the effect of the consummation of the Tender 
Offer on certain financial ratios.

     On February 25, 1993 the Company entered into an unsecured revolving credit
agreement with Citicorp USA, Inc. and Citibank, N.A. (as amended, the "Credit
Agreement"). Effective as of March 17, 1995 the Credit Agreement was amended to
(1) extend the maturity date from March 31, 1996 to October 31, 1998; (2)
increase the total maximum facility from $20.0 to $35.0 million, consisting of a
loan facility of $25.0 million and a letter of credit facility of $10.0 million;
and (3) to amend certain convenants to permit the Tender Offer and to take into
account the effect of the consummation of the Tender Offer on certain financial
ratios.

     Under the terms of the Credit Agreement, the amount available for the
payment of dividends on, and repurchases of, Common Stock is limited to 25% of
the Company's consolidated net income arising after January 1, 1992, computed on
a cumulative basis. In addition, pursuant to the December 31, 1995 amendment to
the Credit Agreement discussed above, the Company may repurchase at any time
prior to December 31, 1996 shares of its Common Stock for an aggregate cost not
exceeding $50.0 million, including shares purchased pursuant to the Tender
Offer. The Company may also purchase or otherwise acquire shares of Common Stock
from the proceeds of the substantially concurrent sale of shares of Common
Stock.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
 
          (a)  Exhibits


               11   Statement re computation of per share earnings for the three
                    months and nine months ended September 30, 1996 and 1995.

 
               19   Varco International, Inc. Third Quarter Report to
                    Shareholders, Three Months Ended September 30, 1996.

               27   Financial Data Schedule


          (b)  Reports on Form 8-K.

               No reports on Form 8-K were filed during the quarter for which
               this report is filed.
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                                  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.



                                       VARCO INTERNATIONAL, INC.



DATE: NOVEMBER 12, 1996                    BY: /s/ RICHARD A. KERTSON
                                               ---------------------------
                                               VICE PRESIDENT-FINANCE
                                               AND CHIEF FINANCIAL OFFICER



DATE: NOVEMBER 12, 1996                    BY: /s/ DONALD L. STICHLER
                                               ---------------------------
                                               CONTROLLER-TREASURER
                                               AND SECRETARY
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                                 EXHIBIT INDEX


     11   Statement re computation of per share earnings for the three months
          and nine months ended September 30, 1996 and 1995.

     19   Varco International, Inc. Third Quarter Report to Shareholders, Three
          Months Ended September 30, 1996.

     27   Financial Data Schedule