<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, 1997

                                      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 92868
                   (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
                                       -----   -----

                                  32,026,464

      (Number of shares of Common Stock outstanding at November 3, 1997)
<PAGE>
 
                         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, 1997, 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 32,576,462 and 31,488,163 shares outstanding for the nine months
ended September 30, 1997, and 1996 respectively and upon an average of
32,711,123 and 32,118,119 shares outstanding for the three months ended
September 30, 1997 and 1996 respectively.

               Inventories. The Company estimates the components of inventory at
September 30, 1997, and December 31, 1996, to be as follows:
<TABLE>
<CAPTION>
 
                       September 30, 1997    December 31, 1996
<S>                    <C>                   <C> 
Raw Materials                $  5,314,000         $  6,545,000
Work in Process                40,406,000           22,646,000
Finished Goods                 90,079,000           77,150,000
LIFO Reserves                 (12,690,000)         (14,468,000)
                             ------------         ------------
                             $123,109,000         $ 91,873,000
                             ============         ============
</TABLE>

               Fixed Assets. Fixed assets are stated net of accumulated
depreciation of $59,738,000 at September 30, 1997, and $54,534,000 at December
31, 1996.

               Common Stock and Additional Paid-In-Capital. On September 30,
1997, the Company Common Stock account was $22,344,000 and Additional Paid-In-
Capital accounts were $124,483,000.

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, 1997, filed as Exhibit 19 hereto, is incorporated herein by
reference.

                           PART II-OTHER INFORMATION

Item 2.   Changes in Securities
<PAGE>
 
  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.

  On June 27, 1997 the Company entered into a seven-year unsecured revolving
credit agreement with three banks (the "Credit Agreement"). The Credit Agreement
provides for a credit facility of $65.0 million, inclusive of a $20.0 million
letter of credit sub-facility. The maximum available under the Credit Agreement
is reduced in equal quarterly amounts over the last four years of the Credit
Agreement.

  The Credit Agreement prohibits any "Restricted Junior Payment" unless (1) at
the time thereof no default exists under the Credit Agreement or will be caused
thereby and (2) the cumulative amount of all Restricted Junior Payments
subsequent to June 27, 1997, would not exceed the sum of $5,000,000 plus 25% of
the Company's consolidated net income arising after June 30, 1997. "Restricted
Junior Payment" is generally defined as (1) any dividend or other distribution
on any class of the Company's capital stock, except a dividend payable solely in
shares of that class; (2) any redemption, purchase or other acquisition for
value of any shares of any class of the capital stock of the Company; (3) any
payment made to retire or obtain the surrender of any outstanding warrants,
options or similar rights to acquire any shares of any class of the capital
stock of the Company; and (4) any payment on the Senior Notes other than
regularly scheduled payments of principal and interest thereon.


Item 6.  Exhibits and Reports on Form 8-K
 

          (a) Exhibits

 
          4.1  Waiver and Consent to Note Agreement, dated as of June 23, 1997,
to Note Agreement included as Exhibit 4.1 to Varco's annual report on Form 10-K
for the year ended December 31, 1996.

          4.2  Waiver and Fourth Amendment to Note Agreement, dated as of
September 30, 1997, to Note Agreement included as Exhibit 4.1 to Varco's annual
report on Form 10-K for the year ended December 31, 1996.
<PAGE>
 
          4.3  Second Amendment to Credit Agreement dated as of August 13, 1997,
to Credit Agreement included as Exhibit Exhibit 4.1 to Varco's quarterly report
on Form 10-Q for the quarter ended June 30, 1997.

          4.4  Third Amendment to Credit Agreement dated as of November 7, 1997
to Credit Agreement included as Exhibit Exhibit 4.1 to Varco's quarterly report
on Form 10-Q for the quarter ended June 30, 1997.


          11   Statement re computation of per share earnings for the three
months ended September 30, 1997 and 1996.

 
          19   Varco International, Inc. Third Quarter Report to Shareholders,
Three Months Ended September 30, 1997.

          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.
<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.



                                    VARCO INTERNATIONAL, INC.



Date: November 12, 1997                   By: /s/Richard A. Kertson
                                             ------------------------------
                                               Vice President-Finance
                                               and Chief Financial Officer
 


Date: November 12, 1997                   By: /s/Donald L. Stichler
                                             ------------------------------
                                               Controller-Treasurer
                                               and Secretary
<PAGE>
 
                                 EXHIBIT INDEX


      4.1   Waiver and Consent to Note Agreement, dated as of June 23, 1997, to
Note Agreement included as Exhibit 4.1 to Varco's annual report on Form 10-K for
the year ended December 31, 1996.

      4.2   Waiver and Fourth Amendment to Note Agreement, dated as of September
30, 1997, to Note Agreement included as Exhibit 4.1 to Varco's annual report on
Form 10-K for the year ended December 31, 1996.

      4.3   Second Amendment to Credit Agreement dated as of August 13, 1997, to
Credit Agreement included as Exhibit Exhibit 4.1 to Varco's quarterly report on
Form 10-Q for the quarter ended June 30, 1997.

      4.4   Third Amendment to Credit Agreement dated as of November 7, 1997 to
Credit Agreement included as Exhibit Exhibit 4.1 to Varco's quarterly report on
Form 10-Q for the quarter ended June 30, 1997.


      11    Statement re computation of per share earnings for the three months
ended September 30, 1997 and 1996.


      19    Varco International, Inc. Third Quarter Report to Shareholders,
Three Months Ended September 30, 1997.

      27    Financial Data Schedule