<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the quarterly period ended June 30, 1998

                                       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 333-31157


                          IRI INTERNATIONAL CORPORATION
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


             Delaware                                   75-2044681
--------------------------------           -----------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)


 1000 Louisiana, Suite 5900, Houston, Texas                77002
--------------------------------------------       ----------------------
(Address of principal executive offices)                  (Zip code)


Registrant's telephone number, including area code      (713) 651-8002
                                                   ---------------------------

         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 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.


                Class                          Outstanding at August 13, 1998
---------------------------------------        -------------------------------
Common stock, $0.01 par value per share                  39,900,000


<PAGE>   2



                 IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


<TABLE>
<CAPTION>

                                                                                       JUNE 30,        DECEMBER 31,
                                      ASSETS                                             1998              1997
                                   ------------                                      ------------      ------------
                                                                                      (Unaudited)
<S>                                                                                  <C>               <C>      
Current assets:
     Cash and cash equivalents                                                       $     31,822      $     49,473
     Marketable securities, at fair value (cost of $12,765 at June 30, 1998
       and $7,448 at December 31, 1997)                                                    12,469             8,218
     Accounts receivable, less allowance for doubtful accounts of $577 at
       June 30, 1998 and $455 at December 31, 1997                                         26,371            33,130
     Inventories                                                                          112,432           100,901
     Costs and estimated earnings in excess of billings on uncompleted contracts            9,113             8,853
     Other current assets                                                                   2,346             1,444
                                                                                     ------------      ------------
                  Total current assets                                                    194,553           202,019

Property, plant and equipment, net                                                         47,137            43,219

Other assets                                                                                4,972             5,836
                                                                                     ------------      ------------
                                                                                     $    246,662      $    251,074
                                                                                     ============      ============
                       LIABILITIES AND SHAREHOLDERS' EQUITY
                     -----------------------------------------
Current liabilities:
     Accounts payable and accrued liabilities                                        $     16,743      $     27,797
     Customer advances                                                                      9,866             7,546
     Other liabilities                                                                      2,346             4,786
                                                                                     ------------      ------------
                  Total current liabilities                                                28,955            40,129

Negative goodwill, less accumulated amortization                                            6,710             9,393
Accrued postretirement benefits                                                             2,373             2,420
Other long-term liabilities                                                                   544               726
                                                                                     ------------      ------------
                  Total liabilities                                                        38,582            52,668
                                                                                     ------------      ------------

Shareholders' equity:
     Preferred stock, $1 par value, 25,000,000 shares authorized, none issued                  --                --
     Common stock, $0.01 par value, 100,000,000 shares authorized,
       39,900,000 shares issued and outstanding                                               399               399
     Additional paid-in capital                                                           168,514           168,538
     Retained earnings                                                                     40,823            30,926
     Accumulated other comprehensive loss                                                  (1,656)           (1,457)
                                                                                     ------------      ------------
                  Total shareholders' equity                                              208,080           198,406

Commitments and contingencies
                                                                                     $    246,662      $    251,074
                                                                                     ============      ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.




                                       2

<PAGE>   3
                 IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                  THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                                        JUNE                                 JUNE
                                                            ------------------------------      ------------------------------
                                                                1998              1997              1998               1997
                                                            ------------      ------------      ------------      ------------

<S>                                                         <C>               <C>               <C>               <C>
Revenues                                                    $     51,399      $     41,191      $     98,631      $     57,785
Cost of goods sold                                                35,931            32,674            70,314            45,126
                                                            ------------      ------------      ------------      ------------
         Gross profit                                             15,468             8,517            28,317            12,659

Administrative and selling expense                                 6,820             6,630            14,179             8,928
                                                            ------------      ------------      ------------      ------------
         Operating income                                          8,648             1,887            14,138             3,731
                                                            ------------      ------------      ------------      ------------

Other income (expense):
     Interest income                                                 599                25             1,311                79
     Interest expense                                               (132)           (2,882)             (229)           (3,147)
     Unrealized losses on trading securities                      (2,359)               --            (1,976)               --
     Special charge                                                 (631)               --              (631)               -- 
     Other, net                                                     (376)              (98)             (370)              (74)
                                                            ------------      ------------      ------------      ------------
                                                                  (2,899)           (2,955)           (1,895)           (3,142)
                                                            ------------      ------------      ------------      ------------

         Income before income taxes                                5,749            (1,068)           12,243               589

Income taxes                                                         224               168             2,346               168
                                                            ------------      ------------      ------------      ------------
         Net income (loss)                                  $      5,525      $     (1,236)     $      9,897      $        421
                                                            ============      ============      ============      ============

Basic and diluted net income (loss) per common share        $       0.14      $      (0.04)     $       0.25      $       0.01
                                                            ============      ============      ============      ============

Weighted average shares outstanding                               39,900            30,000            39,900            30,000
                                                            ============      ============      ============      ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                       3

<PAGE>   4



                 IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                 (IN THOUSANDS)

                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                                    ACCUMULATED
                                                                      ADDITIONAL                       OTHER             TOTAL
                                                         COMMON        PAID-IN         RETAINED    COMPREHENSIVE     SHAREHOLDERS'
                                                         STOCK         CAPITAL         EARNINGS         LOSS            EQUITY
                                                       ----------     ----------      ----------     ----------      ------------
<S>                                                    <C>            <C>             <C>            <C>             <C>      
Balances at
   December 31, 1997                                   $      399     $  168,538      $   30,926     $   (1,457)     $  198,406

Net income (unaudited)                                         --             --           9,897             --           9,897

Direct costs of initial public offering
   (unaudited)                                                 --            (24)             --             --             (24)

Translation adjustment (unaudited)                             --             --              --           (199)           (199)
                                                       ----------     ----------      ----------     ----------      ----------

Balances at June 30, 1998
   (unaudited)                                         $      399     $  168,514      $   40,823     $   (1,656)     $  208,080
                                                       ==========     ==========      ==========     ==========      ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.



                                       4



<PAGE>   5
                 IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                 SIX MONTHS ENDED
                                                                                      JUNE 30
                                                                           ------------------------------
                                                                               1998              1997
                                                                           ------------      ------------
<S>                                                                        <C>               <C>    
Cash flows from operating activities:
   Net income                                                              $      9,897      $        421
   Adjustments to reconcile net income to net cash
     provided by operations:
       Depreciation and amortization                                              2,792             1,073
       Amortization of negative goodwill                                         (2,683)           (2,684)
       Change in employee benefit accounts                                         (107)             (272)
       Changes in assets and liabilities:
         Marketable securities                                                   (4,251)               --
         Accounts receivable                                                      6,759            (1,770)
         Inventories                                                            (11,531)           (6,755)
         Other current assets                                                    (1,162)            2,054
         Other non current assets                                                   226                --
         Accounts payable and accrued liabilities,
             customer advances and other liabilities                            (11,151)             (244)
         Change in cumulative translation adjustment                               (199)               --
                                                                           ------------      ------------
                  Net cash flows used in operations                             (11,410)           (8,177)
                                                                           ------------      ------------
Cash flows from investing activities:
   Capital expenditures                                                          (6,072)           (1,191)
   Acquisition of Bowen assets, net of
     liabilities assumed                                                             --           (74,978)
   Acquisition costs of Cardwell, net of liabilities assumed                         --           (12,565)
                                                                           ------------      ------------
                  Net cash flows used in investing activities                    (6,072)          (88,734)
                                                                           ------------      ------------
Cash flows from financing activities:
   Proceeds from notes payable                                                       --            99,503
   Payments on notes payable                                                        (64)           (5,000)
   IPO costs                                                                        (24)           (3,807)
   Payments on capital lease obligation                                             (81)              (54)
                                                                           ------------      ------------
                  Net cash flows provided by (used in) financing
                     activities                                                    (169)           90,642
                                                                           ------------      ------------
Decrease in cash and cash equivalents                                           (17,651)           (6,269)
Cash and cash equivalents at beginning of period                                 49,473             8,635
                                                                           ------------      ------------
Cash and cash equivalents at end of period                                 $     31,822      $      2,366
                                                                           ============      ============

Supplemental cash flow information:
   Interest paid                                                           $        229      $         81
                                                                           ============      ============
   Income taxes paid                                                       $      5,019      $         --
                                                                           ============      ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>   6





                 IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

(1)    General

       The accompanying condensed consolidated financial statements of IRI
       International Corporation and subsidiaries (the Company) as of June 30,
       1998 and for the three and six months ended June 30, 1998 and 1997 have
       been prepared pursuant to the rules and regulations of the Securities and
       Exchange Commission and are unaudited; however, they include all
       adjustments (consisting only of normal recurring adjustments) which, in
       the opinion of management, are necessary for a fair presentation for such
       periods. Accounting measurements at interim dates inherently involve
       greater reliance on estimates than at year-end. The results of operations
       for the interim periods presented are not necessarily indicative of the
       results to be expected for the entire year.

       Certain footnote disclosures normally included in annual consolidated
       financial statements prepared in accordance with generally accepted
       accounting principles have been omitted herein. The interim information
       should be read in conjunction with the Company's Annual Report on Form
       10-K for the year ended December 31, 1997.

       Effective January 1, 1998, the Company adopted Statement of Financial
       Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
       SFAS No. 130 establishes standards for reporting and display of
       comprehensive income in a full set of general-purpose financial
       statements. Comprehensive income includes net income and other
       comprehensive income which is generally comprised of changes in the fair
       value of available-for-sale marketable securities, foreign currency
       translation adjustments and adjustments to recognize additional minimum
       pension liabilities. The Company had accumulated other comprehensive loss
       at December 31, 1997 of $1,457,000 consisting entirely of an adjustment
       to recognize additional minimum pension liability. The Company had other
       comprehensive income for the three and six months ended June 30, 1998 of
       $(199,000) consisting of foreign currency translation adjustments.

(2)    Inventories

       Inventories consist of the following at June 30, 1998 and December 31,
       1997 (in thousands):

<TABLE>
<CAPTION>
                                                                                   1998                     1997
                                                                                ---------                ---------

<S>                                                                            <C>                      <C>       
             Raw materials                                                     $   43,458                $  39,087
             Work-in-process                                                       33,471                   28,771
             Finished goods                                                        35,503                   33,043
                                                                                ---------                ---------
                               Total                                            $ 112,432                $ 100,901
                                                                                =========                =========
</TABLE>

(3)    Commitments and Contingencies

       The Company has contract commitments aggregating $56.4 million at June
       30, 1998 for the manufacture and delivery of drilling rigs during the
       remainder of fiscal 1998. At June 30, 1998, the Company was contingently
       liable for approximately $6.0 million in letters of credit which
       guarantee the Company's performance for payment to third parties in
       accordance with



                                       6
<PAGE>   7

       specified contractual terms and conditions. These letters of credit are
       primarily secured by the Company's cash, accounts receivable and
       inventory. Management does not expect any material losses to result from
       these off-balance-sheet instruments as it anticipates full performance on
       the related contracts.

(4)    Net Income (Loss) per Common Share

       Stock options outstanding at June 30, 1998 of 3,866,000 shares were
       not considered in the computation of net income per common share because
       the exercise price exceeded the average market price for the period and
       are therefore antidilutive.

(5)    Acquisitions

       On March 31, 1997, the Company acquired certain assets and assumed
       certain liabilities of Bowen Tools, Inc. ("Bowen"), a wholly-owned
       subsidiary of the French chemical concern L'Air Liquide, for a total cash
       consideration of $75.1 million. On April 17, 1997, the Company also
       acquired the stock of Cardwell International Ltd. ("Cardwell"), a
       privately owned company, as well as certain assets held by affiliates of
       Cardwell for approximately $12 million in cash at closing and partial
       payment ($3 million) of a note payable to bank. In addition, the Company
       incurred approximately $3.2 million ($2.6 million for Bowen and $.6
       million for Cardwell) of transaction costs in connection with the
       acquisitions.

       The following sets forth selected consolidated financial information for
       the Company on a pro forma basis for the six months ended June 30, 1997,
       assuming the Bowen and Cardwell acquisitions had occurred on January 1,
       1997 (in thousands, except per share amounts):

<TABLE>
<S>                                                                   <C>     
             Revenues                                                 $     80,195
                                                                      ============
             Gross profit                                             $     22,507
                                                                      ============
             Operating income                                         $      5,294
                                                                      ============
             Net loss                                                 $     (1,231)
                                                                      ============
             Net loss per common share                                $      (0.04)
                                                                      ============
</TABLE>

       Pro forma adjustments primarily relate to additional interest expense
       resulting from debt to finance the acquisitions, additional depreciation
       and amortization expenses as a result of the purchase price allocations
       to property, plant and equipment and excess of cost over net tangible
       assets purchased and the related tax effects of these adjustments.

       The pro forma information is not necessarily indicative of the results
       that actually would have been achieved had such transactions been
       consummated as of January 1, 1997, or that may be achieved in the future.

(6)    Special Charge

       On April 28, 1998, the Company terminated a proposed merger with Hitec
       ASA, a Norwegian Corporation. External expenses incurred in connection
       with the merger have been reported as a special charge of $631,000 for
       the three and six months ended June 30, 1998.




                                       7
<PAGE>   8


(7)      New Accounting Pronouncements

         In April 1998, the American Institute of Certified Public Accountants
         issued Statement of Position 98-5 ("SOP 98-5"), Reporting of the Costs
         of Start-up Activities, which is effective for financial statements
         issued for periods beginning after December 15, 1998. The Company
         believes SOP 98-5 will not have a material impact on its financial
         statements or accounting policies. The Company will adopt the
         provisions of SOP 98-5 in the first quarter of 1999.

         The Company is assessing the reporting and disclosure requirements of
         SFAS No. 131, Disclosures about Segments of an Enterprise and Related
         Information. This statement requires a public business enterprise to
         report financial and descriptive information about its reportable
         operating segments. The statement is effective for financial statements
         for periods beginning after December 15, 1997, but is not required for
         interim financial statements in the initial year of its application.
         The Company will adopt the provisions of SFAS No. 131 in its December
         31, 1998 consolidated financial statements.

         The Company is also assessing the reporting and disclosure requirements
         of SFAS No. 133, Accounting for Derivative Instruments and Hedging
         Activities. This statement establishes accounting and reporting
         standards for derivative instruments and hedging activities. The
         statement is effective for financial statements for fiscal years
         beginning after June 15, 1999. The Company believes SFAS No. 133 will
         not have a material impact on its financial statements or accounting
         policies. The Company will adopt the provisions of SFAS No. 133 in the
         first quarter of 2000.









                                       8
<PAGE>   9



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

         The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto.

OVERVIEW

         The Company manufactures land-based drilling and well-servicing rigs,
rig component parts, and downhole tools and related equipment for use in the
domestic and international markets. The Company's revenues are substantially
dependent upon the condition of the oil and gas industry and worldwide levels of
exploration, development and production activity, including the number of oil
and gas wells being drilled, the depth and drilling conditions of such wells,
the number of well completions and the level of workover activity. Exploration,
development and production activity is largely dependent on the prevailing view
of future oil and natural gas prices, which have been characterized by
significant volatility over the last 20 years. Oil and natural gas prices are
influenced by numerous factors affecting the supply of and demand for oil and
gas, including the level of drilling activity, worldwide economic activity,
interest rates and the cost of capital, environmental regulation, tax policies,
political requirements of national governments, coordination by OPEC and the
cost of producing oil and gas. Demand for the Company's products in certain
emerging market countries may depend somewhat less on the prevailing view of
future oil and natural gas prices as such countries may generally place greater
emphasis on their need for internal development, energy self-sufficiency or hard
currency earnings.

RESULTS OF OPERATIONS

         Sales of new rigs manufactured by the Company can produce large
fluctuations in revenues depending on the size and the timing of the
construction of orders. Individual orders of rig packages range from $1 million
to $25 million and cycle times for the design, engineering and manufacturing of
rig packages range from six to nine months. These fluctuations may affect the
Company's quarterly revenues and operating income.

Results of Segment Operations

         The following discussion of the results of operations of the Company's
oilfield equipment, downhole products and specialty steel segments does not 
reflect the allocation of corporate and unallocated administrative expenses,
amortization of negative goodwill and amortization of goodwill on an individual
segment basis. Certain information that reconciles the discussion of the results
of operations of the individual segments to the Company's Condensed Consolidated
Financial Statements is as follows:







                                       9
<PAGE>   10
<TABLE>
<CAPTION>

                                                         THREE MONTHS                     SIX MONTHS
                                                            ENDED                            ENDED
                                                           JUNE 30,                        JUNE 30,
                                                  --------------------------      --------------------------
                                                     1998            1997            1998            1997
                                                  ----------      ----------      ----------      ----------

<S>                                             <C>             <C>               <C>          <C>    
REVENUES
   Oilfield equipment                             $   25,118      $   18,433      $   50,180      $   31,330
   Downhole products                                  23,600          19,676          43,176          19,676
   Specialty steel                                     2,694           3,082           5,600           6,779
   Eliminations                                          (13)             --            (325)             --
                                                  ----------      ----------      ----------      ----------
       Total                                      $   51,399      $   41,191      $   98,631      $   57,785
                                                  ==========      ==========      ==========      ==========

SEGMENT OPERATING INCOME
   Oilfield equipment                             $    4,772      $    1,822      $    9,813      $    2,644
   Downhole products                                   5,655           1,982           8,793           1,982
   Specialty steel                                       737             587           1,255           1,766
                                                  ----------      ----------      ----------      ----------
       Total                                          11,164           4,391          19,861           6,392

   Corporate overhead and unallocated
       administrative expenses                        (3,527)         (3,592)         (7,769)         (5,091)
   Amortization of negative goodwill                   1,342           1,342           2,684           2,684
   Amortization of goodwill                             (331)           (254)           (638)           (254)
                                                  ----------      ----------      ----------      ----------
   Operating income                               $    8,648      $    1,887      $   14,138      $    3,731
                                                  ==========      ==========      ==========      ==========
</TABLE>


THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997

Oilfield Equipment

         Revenues and operating income for the oilfield equipment unit were
$25.1 million and $4.8 million, respectively, for the three months ended June
30, 1998, as compared to $18.4 million and $1.8 million, respectively, for the
three months ended June 30, 1997. The increase in revenues resulted from strong
demand domestically for rigs and related equipment and increased spare parts and
refurbishment activity. Increased operating income resulted from increased sales
volume and a favorable mix between manufactured equipment and buyouts. Revenues 
for the three months ended June 30, 1998, compared to the same period for the
prior year, included a higher ratio of manufactured equipment to equipment
purchased from third parties. Equipment purchased from third parties is
commonly referred to as buyouts and normally carries a lower gross margin. Gross
margin for the three months ended June 30, 1998 was 23.2%, as compared to 14.9%
for the three months period ended June 30, 1997. The increase in gross margin
was due primarily to increased productivity and a favorable mix between
manufactured equipment and buyouts.

Downhole Products

         Revenues and operating income for the downhole products unit were $23.6
million and $5.7 million, respectively, for the three months ended June 30,
1998, as compared to $19.7 million and $2.0 million, respectively, for the three
months ended June 30, 1997. Increased revenues and operating income for the
downhole products unit were primarily attributable to improved pricing and
increased demand for fishing tools and power equipment, primarily in
international markets. Gross margin for the three months ended June 30, 1998
was 33.3%, as compared to 20.6% for the three months ended June 30, 1997. The
increase in gross margin was primarily due to improved pricing and increased
sales volume.


                                       10
<PAGE>   11

Specialty Steel

         Revenues and operating income for the specialty steel unit were $2.7
million and $0.7 million, respectively, for the three months ended June 30,
1998, as compared to $3.1 and $0.6 million, respectively, for the three months
ended June 30, 1997. The decrease in revenues was primarily the result of
reduced demand from a major customer. Gross margin for the three months ended
June 30, 1998 was 28.8%, as compared to 20.3% for the three months ended June
30, 1997. The increase in gross margin was primarily due to an aggressive cost
reduction program, which has more than offset the reduced sales volume.

Corporate and Administrative Expenses

         Corporate and administrative expenses were $3.5 million for the three
months ended June 30, 1998, as compared to $3.6 million for the three months
ended June 30, 1997.

Other Income (Expense)

         Interest income increased $574,000 for the three months ended June 30,
1998 over the comparable period in 1997 due to higher average cash balances in
the current year. Interest expense decreased $2.8 million for the three months
ended June 30, 1998, as compared to the prior year quarter, as a result of the
repayment of debt in November 1997 with the proceeds from the Company's initial
public offering. The Company incurred a special charge of $631,000 in the second
quarter of 1998 relating to expenses incurred in connection with the Company's
proposed acquisition of Hitec ASA, which was terminated on April 28, 1998. 

Income Taxes

         The Company's effective income tax rate for financial reporting
purposes for the three months ended June 30, 1998 of approximately 4 percent was
significantly lower than the U.S. federal statutory rate of 35 percent. The
lower effective rate was primarily the result of the tax benefits from the
projected use of a Foreign Sales Corporation, non-taxable income arising from
the amortization of negative goodwill, and a reduction in the valuation
allowance of approximately $1.5 million against deferred tax assets which are
more likely than not of being realized.


SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

Oilfield Equipment

         Revenues and operating income for the oilfield equipment unit were
$50.2 million and $9.8 million, respectively, for the six months ended June 30,
1998, as compared to $31.3 million and $2.6 million, respectively, for the six
months ended June 30, 1997. The increase in revenues resulted from increased
sales of rig packages by the IRI Division, an increase in spare parts and
refurbishment activity, and the inclusion of the operating results of the
Company's subsidiary, Cardwell International, Ltd., for the full 1998 period
compared to three months in 1997. Increased operating income resulted from
increased sales volume and a favorable mix between manufactured equipment and
buyouts in the period. Gross margin for the six months ended June 30, 1998 was
23.8%, as compared to 13.8% for the six month period ended June 30, 1997. The
increase in gross margin was due primarily to increased productivity and a
favorable mix between manufactured equipment and buyouts.


                                       11
<PAGE>   12

Downhole Products

         Revenues and operating income for the downhole products unit were $43.2
million and $8.8 million, respectively, for the six months ended June 30, 1998,
as compared to $19.7 million and $2.0 million, respectively, for the six months
ended June 30, 1997. Increased revenues and operating income for the downhole
products unit were primarily attributable to increased demand for fishing tools
and power equipment, primarily in international markets, and the inclusion of
the operating results of the Bowen Tools Division for the full 1998 period
compared to three months in 1997. Gross margin for the six months ended June
30, 1998 was 30.3%, as compared to 20.6% for the six months ended June 30,
1997. The increase in gross margin was primarily due to improved pricing and
increased sales volume.

Specialty Steel

         Revenues and operating income for the specialty steel unit were $5.6
million and $1.3 million, respectively, for the six months ended June 30, 1998,
as compared to $6.8 and $1.8 million, respectively, for the six months ended
June 30, 1997. The decrease in revenues was primarily the result of reduced
demand from a major customer. Gross margin for the six months ended June 30,
1998 was 23.8%, as compared to 27.2% for the six months ended June 30, 1997. The
decrease in gross margin was primarily due to the reduction of high margin
business from a major customer.

Corporate and Administrative Expenses

         Corporate and administrative expenses were $7.8 million for the six
months ended June 30, 1998, as compared to $5.1 million for the six months ended
June 30, 1997. The increase was due primarily to the inclusion of Bowen and
Cardwell for the full 1998 period compared to three months in 1997.

Other Income (Expense)

         Interest income increased $1.2 million for the six months ended
June 30, 1998 over the comparable period in 1997 due to higher average cash
balances in the current year. Interest expense decreased $2.9 million for the
six months ended June 30, 1998 as compared to the prior year period as a result
of the repayment of debt in November 1997. The Company incurred a special charge
of $631,000 in the first six months of 1998 relating to expenses incurred in
connection with the Company's proposed acquisition of Hitec ASA, which was
terminated on April 28, 1998. 

Income Taxes

         The Company's effective income tax rate for financial reporting
purposes for the six months ended June 30, 1998 of approximately 19 percent was
significantly lower than the U.S. federal statutory rate of 35 percent. The
lower effective rate was primarily the result of the tax benefits from the
projected use of a Foreign Sales Corporation, non-taxable income arising from
the amortization of negative goodwill, and a reduction in the valuation
allowance of approximately $1.2 million against deferred tax assets which are
more likely than not of being realized.



                                       12
<PAGE>   13


LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 1998, the Company had cash, cash equivalents and marketable
securities of $44.3 million, compared to $57.7 million at December 31, 1997. At
June 30, 1998, the Company's working capital was $165.6 million, compared to
$161.9 million at December 31, 1997.

         Management believes that current working capital in conjunction with
borrowings under its current credit facility will be sufficient to meet the
Company's short-term (i.e., less than one year) and long-term liquidity needs.

YEAR 2000

         The Company has established a task force that is currently working, and
will continue to work, to ascertain and resolve the potential problems
associated with the year 2000, and the processing of date sensitive information
by the Company's computer and other systems. Based on preliminary information
available to date, the Company believes that it will be able to implement
successfully the systems and programming changes necessary to address the year
2000 issues, and does not expect the cost of such changes to have a material
impact on the Company's financial position, results of operations or cash flows
in future periods, though there can be no assurance in this regard.

         In addition, the year 2000 problem may adversely affect the suppliers
of the products used by the Company to in turn manufacture its products. While
the Company believes such suppliers fully intend to achieve year 2000
compliance, there can be no assurance they will, or of the impact on the Company
that any such failure may cause. 

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

         With the exception of the historical information contained in this
report, the matters described herein contain forward-looking statements that
involve risk and uncertainties including, but not limited to, economic and
competitive factors outside of the control of the Company. These factors more
specifically include: dependence on the oil and gas industry, competition from
various entities, the impact of government regulations, the instability of
certain foreign economies, currency fluctuations, risks of expropriation and
changes in law affecting international trade and investment. Forward-looking
statements are typically identified by the words "believe," "expect,"
"anticipate," "intend," "estimate," and similar expressions. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates.



                                       13
<PAGE>   14




                           PART II - OTHER INFORMATION


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

    (a)  The Annual Meeting of Stockholders of the Company was held on June 25,
         1998.

    (c)  At the Annual Meeting the following matters were voted upon:

         1.  Election of Directors
          
             Name                  Votes For           Votes Against
             ----                  ---------           -------------
             H. Ansary             35,769,047             922,902 
             D. Moriarity          35,770,072             921,877
             A. Andrawos           35,769,797             922,152
             N. Ansary             35,768,897             923,052
             F. Carlucci           35,818,372             873,577
             P. David              35,818,372             873,577
             M. Hidayatallah       35,769,922             922,027
             R. Higginbotham       35,769,322             922,627
             J. Macomber           35,818,372             873,577
             E. Palmer             35,817,569             874,380
             S. Solarz             35,783,272             908,677
             G. Stratulate         35,770,072             921,877
             A. Teichgraeber       35,802,672             889,277
             A. Trowbridge         35,818,372             873,577
             J. West               35,818,372             873,577

         2.  Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
             Company's independent auditors for the fiscal year ending December 
             31, 1998.

             Votes For             Votes Against        Abstentions
             ---------             -------------        -----------

             36,685,499                 4,350               2,100


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)         Exhibits

                The exhibits listed on the Exhibit Index following the signature
                page hereof are filed herewith in response to this item.

    (b)         Reports on Form 8-K

                The Company filed a report on Form 8-K on March 16, 1998
                regarding the press release announcing the Hitec Transaction.


                                       14
<PAGE>   15



SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly consented this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date:  August 14, 1998

                                        IRI INTERNATIONAL CORPORATION



                                        /s/ Munawar H. Hidayatallah
                                        ---------------------------------------
                                        Munawar H. Hidayatallah
                                        Executive Vice President,
                                        Chief Financial and Accounting Officer


                                       15
<PAGE>   16



                                INDEX TO EXHIBITS




<TABLE>
<CAPTION>
Exhibit No.       Description

<C>                          <S>     
*  3.1 --         Form of Restated Certificate of Incorporation of IRI International Corporation

*  3.2 --         Amended and Restated Bylaws of the Company

  27.1 --         Financial  Data  Schedule  (submitted as an exhibit only in the  electronic  format of
                  this  Quarterly  Report  on  Form  10-Q  submitted  to  the  Securities  and  Exchange
                  Commission).
</TABLE>



--------------------

*  Exhibit  incorporated herein by reference to the Registrant's registration 
   statement on Form S-1 (Registration No. 333-31157) dated September 8, 1997,
   as amended.