Iri International Corp – ‘10-K’ for 12/31/99

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Iri International Corporation                         53    283K 
 2: EX-10.3     Credit Agreement                                      43    180K 
 3: EX-23.1     Consent of Kpmg LLP                                    1      6K 
 4: EX-24       Power of Attorney                                      1      9K 
 5: EX-27.1     Financial Data Schedule                                1      6K 

10-K   —   Iri International Corporation
Document Table of Contents

10-K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 

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 1-13593
------------------------------

IRI INTERNATIONAL CORPORATION 
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                                                [Download Table]
                                                                
          DELAWARE                               75-2044681     
-------------------------------           ----------------------
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER    
INCORPORATION OR ORGANIZATION)            IDENTIFICATION NUMBER)

                                                                [Download Table]
                                                              
    1000 LOUISIANA, SUITE 5900                                
           HOUSTON, TEXAS                           77002     
---------------------------------------             ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 651-8002 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 

                                                                [Download Table]
                                                                         
    TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH REGISTERED
----------------------------    -----------------------------------------
COMMON STOCK, $.01 PAR VALUE             NEW YORK STOCK EXCHANGE         

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

 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 __                                                  

       INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,  
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION       
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY       
AMENDMENT TO THIS FORM 10-K.[ ]                                                 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY 
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

       INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS
AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES   
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN  
CONFIRMED BY A COURT.                                                           

YES __   NO __                                                

       AS OF MARCH 24, 2000, THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD
BY NON-AFFILIATES OF THE REGISTRANT WAS $125,001,772 BASED ON THE LAST          
REPORTED SALE PRICE OF THE REGISTRANT'S COMMON STOCK ON THE NEW YORK STOCK      
EXCHANGE.                                                                       

39,900,000 SHARES OF COMMON STOCK WERE OUTSTANDING ON MARCH 24, 2000.           

DOCUMENTS INCORPORATED BY REFERENCE 
----------------------------------- 
NONE

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ITEM 1.  BUSINESS                                                               

      IRI International Corporation (the "Company" or "we" or "us") is one
of the world's largest manufacturers of land-based drilling, well-servicing     
rigs and rig component parts for use in the global oil and gas industry. We are 
principally engaged in the design, manufacture, service, sale and rental of     
on-shore and off-shore oil field equipment for the domestic and international   
markets. Our Oilfield Equipment Division designs and produces rigs to meet the  
special requirements of our global clientele for service in remote areas and    
harsh climatic conditions. Our Downhole Products Division is a major            
manufacturer of down hole fishing and drilling tools. It offers a complete line 
of oil field power equipment, including top drives, power swivels, wireline     
pressure control equipment and coiled tubing systems, which complement our      
drilling and well-servicing rigs. We also manufacture and maintain a            
significant inventory of replacement parts for rigs produced by us and others,  
enabling us to meet the needs of our customers on a timely basis. Our Specialty 
Steel Division produces premium alloy steel for commercial and military use and 
for use in manufacturing oil field equipment products.                          

   We market our oil field equipment primarily through our own sales
force and through designated agents and distributors in every major oil and gas 
producing region in the world. We maintain 25 domestic and 7 international      
sales, parts and service centers in areas of significant drilling and           
production operations. Our network of service centers in the United States      
provides our customers with refurbishment or repair services as well as ready   
access to replacement parts for equipment in the field. Our worldwide sales and 
marketing activities are closely coordinated with and supported by a staff of   
engineers and design technicians. This network allows us to provide our         
customers with products meeting their customized design specifications.         

Our predecessor was founded in 1985 through the combination of
Ingersoll-Rand Oilfield Products Company and the Ideco Division of Dresser      
Industries, Inc., and was later acquired by Energy Services International Ltd.  
in 1994 ("ESI"). We acquired the business and operations of the Bowen Tools     
Division (the "Bowen Acquisition") on March 31, 1997 and Cardwell               
International, Ltd. (the "Cardwell Acquisition") on April 17, 1997 (together,   
the "Acquisitions"). In October 1997, we merged with ESI, and ESI, as the       
surviving entity, changed its name to IRI International Corporation. In         
November 1997, we consummated the initial public offering of 13,800,000 shares  
(which included 3,900,000 shares sold by certain stockholders) of our Common    
Stock.                                                                          

    On March 16, 2000, we announced the signing of a definitive merger
agreement with National-Oilwell, Inc., (the "NOI Merger") a worldwide leader in 
the design, manufacture and sale of comprehensive systems and components used   
in oil and gas drilling and production, as well as in the provision of supply   
chain integration services to the upstream oil and gas industry.                

       The merger agreement, unanimously approved by each company's board of
directors, calls for our stockholders to receive .3385 share of National Oilwell
common stock for each common share of the Company. National-Oilwell will issue  
approximately 14.4 million shares of its common stock for all common shares of  
the Company issued and outstanding and all options to purchase common shares of 
the Company, which options will become fully vested at closing. This transaction
is expected to be accounted for as a pooling of interests and be tax-free to    
both companies and our stockholders.                                            

Holders of the majority of our outstanding shares as well as  
National-Oilwell's largest stockholder and its CEO have entered into voting     
agreements in support of the transaction. The voting agreements do not prohibit 
any of the shareholders from selling shares in accordance with applicable law,  
including SEC Rule 144, unless such sale would affect adversely the accounting  
and regulatory treatment of the NOI Merger as a "pooling of interests." Subject 
to shareholder approval, the closing of the transaction is expected to occur    
during the second quarter of this year.                                         

DRILLING AND WELL-SERVICING RIGS                                                

Products                                                      

We design, construct and sell a total of 48 standard models of
drilling and well-servicing rigs under the IDECO(R), FRANKS(R), CARDWELL(TM)    
and IRI(TM) brand names. Our products include:                                  

-    land-based skid mounted rigs;                            
-    off-shore drilling and well-servicing rigs;              

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-        self-propelled drilling and well-servicing rigs;     
-        slant hole drilling rigs; and                        
-        heli-rigs.                                           

In addition to our standard models, we manufacture customized drilling and      
well-servicing rigs to customer specifications to accommodate, among other      
things, extreme weather conditions, moving systems or hook load capacities. We  
also design, manufacture and sell component products used in the original       
construction, modernization or repair of land and off-shore rigs, including     
masts, derricks, substructures and other components used in hoisting, power     
transmission, pumping and mud systems. The sale of drilling and well-servicing  
rigs and component parts accounted for $27.3 million (or 29.6%), $55.8 million  
(or 31.8%) and $74.2 million (or 40.0%) of our revenues for 1999, 1998 and 1997,
respectively.                                                                   

Competition                                                   

Our competitors in our diverse areas of manufacturing are     
National-Oilwell, Inc., Tulsa Industries, Inc., Hydralift A.S.A., Maritime      
Hydraulics U.S., Inc., Bentec GMBH, and Crown Industries Inc. We compete on the 
basis of price, quality, the ability to introduce new and improved products and 
the ability to supply and deliver products in a timely and cost effective       
manner.                                                                         

Backlog                                                       

Sales of our drilling and well-servicing rigs are made almost 
exclusively on the basis of written purchase orders or contracts. We include in 
our rig backlog those orders or purchase commitments that we are reasonably     
certain will be consummated based on industry practice, the historical          
relationship between us and the customer or the financial terms of the sale,    
including cash advances, letters of credit or similar credit support            
arrangements. The total value of our rig backlog as of December 31, 1999 and    
1998 was $41.0 million and $21.3 million, respectively. We cannot assure that   
the contracts included in our backlog will ultimately generate anticipated      
revenues in the period expected or otherwise.                                   

We attempt to mitigate the financial risks in sales to our    
international customers by requiring, where commercially feasible, cash         
advances, irrevocable letters of credit or similar credit support arrangements. 
As of December 31, 1999, we had received approximately $1.9 million in cash down
payments and approximately $40.8 million in letters of credit or assignments of 
letters of credit to support customer orders.                                   

Customers                                                     

Sales of drilling and well-servicing rigs are made to various 
customers, which change from year to year depending on the size and timing of   
rig purchase orders. During 1999, our largest revenue customer accounted for    
33.5% of the revenues of our oil field equipment segment and our second largest 
revenue customer accounted for 11.5 % of the revenues of our oil field equipment
segment. In 1999, we received a significant order from Surgutneftgaz, a customer
based in the former Soviet Union, the majority of which order we expect to      
fulfill in 2000.                                                                

FISHING AND DRILLING TOOLS                                                      

       Our Downhole Products Division designs, manufactures, sells and rents
fishing and drilling tools under the BOWEN(R) brand name. These include:        

-        external and internal catch fishing tools;           
-        junk catch fishing tools;                            
-        milling and cutting tools;                           
    -        accessory tools such as jars, jar intensifiers and bumper
subs; and                                   
-        repair and remedial tools.                           

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Fishing and drilling tool sales and rentals accounted for $36.3 million (or     
39.4%), $56.7 million (or 32.4%) and $47.8 (or 25.8%) of our revenues for 1999, 
1998 and 1997, respectively.                                                    

Competition                                                   

       In the fishing and drilling tool business, like the rig manufacturing
business, we compete on the basis of price, quality, the ability to introduce   
new and improved products and the ability to supply and deliver products in a   
timely and cost effective manner. Our primary competitors are Smith             
International, Inc. and Spring Engineers, Inc. in the manufacture of fishing    
tools, and Weatherford International, Inc., National-Oilwell, Inc., and Smith   
International, Inc. in the manufacture of drilling tools. We are the leading    
provider of fishing tools. We are a minor player in the drilling tool market,   
but we have plans to expand this part of our business.                          

POWER AND WIRELINE/PRESSURE CONTROL EQUIPMENT                                   

Power Equipment                                               

  In addition to fishing and drilling tools, our Downhole Products
Division also manufactures products for the power equipment market, including:  

   -        power-swivel systems used in well-servicing and drilling
applications;                               
-        top drives;                                          
-        power subs;                                          
-        bucking units;                                       
-        power tongs; and                                     
-        coiled tubing systems.                               

     The market for power equipment is very competitive. Our competitive
position varies by product. We compete on the basis of product design, quality, 
ability to meet delivery requirements and price. Our competitors in this segment
are Tesco Corporation, Canadian Rig Ltd., Maritime Hydraulics US, Inc., Varco   
International, Inc., King Oil Tools Inc., Stewart & Stevenson Services, Inc.,   
and Hydra Rig.                                                                  

Wireline/Pressure Control Equipment                           

        We also manufacture wire line and pressure control equipment under the
BOWEN(R) brand name. These products include:                                    

-        small blowout preventers;                            
-        unions;                                              
-        tool traps;                                          
-        tool catchers;                                       
-        lubricator risers;                                   
-        control heads;                                       
-        stuffing boxes; and                                  
-        wellhead adapters.                                   

      Like the market for power equipment, the market for pressure control
equipment is very competitive. Similarly, our competitive position varies by    
product. We compete on the basis of product design, quality, ability to meet    
delivery requirements and price. Our competitors in the market include Elmar    
Services Ltd. and Tuboscope Inc.                                                

    Sales and rentals of power and wireline/pressure control equipment
products accounted for $6.6 million (or 7.2%), $19.5 million (or 11.1%) and     
$17.5 million (or 9.4%) of our revenues for 1999, 1998 and 1997, respectively.  

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SPECIALTY STEEL PRODUCTS                                                        

   Our Specialty Steel Division manufactures premium specialty steel
forgings for commercial and military use and for use in manufacturing oil field 
equipment products. Specialty steel products accounted for $4.9 million (or 5.4 
%), $10.4 million (or 5.9%) and $13.5 million (or 7.3%) of our revenues for     
1999, 1998 and 1997, respectively.                                              

     We manufacture over 100 different alloys to form forged products in
round, square and rectangular solid, trepanned, counter bored and stepped forms 
to meet customer specifications. We sell our specialty steel products primarily 
to customers in the heavy equipment, aircraft, petroleum and power generation   
industries in North America and to the United States military. We also sell our 
specialty steel products as feedstock directly to forgers and extruders.        

Competition                                                   

        The U.S. specialty steel market is highly competitive due primarily to
the high cost of freight associated with moving small amounts of high tonnage   
finished goods. Competitive factors include price, delivery, quality and        
service. Steel ingots and billets are commodities and are extremely price       
competitive. Our major competitors in the specialty steel market are National   
Forge Company, Ellwood Group, Inc., Scot Forge Co., Erie Forge and Steel,       
Inc. and FirstMiss Steel Inc.                                                   

Customers                                                     

       The Specialty Steel Division sold 31.3% of its production for 1999 to
the governmental and military sectors. Besides the governmental and military    
sectors, its two largest customers accounted for 20.0% and 10.3%, respectively, 
of its revenues for 1999. The loss of any of these customer may materially      
adversely affect the revenues and operating results of the Specialty Steel      
Division, though it will not materially adversely affect our revenues and       
operating results taken as a whole.                                             

REPLACEMENT PARTS AND REFURBISHMENT                                             

    We manufacture and maintain a significant inventory of replacement
parts and replacement components. We also refurbish older rigs for our          
customers. We believe that these businesses will grow over the next several     
years because of increased worldwide rig utilization and the age of the         
international rig fleet, most of which were constructed prior to 1982. We       
believe we are well positioned to provide replacement parts and refurbishment   
services as a result of the large number of operating rigs manufactured under   
our brand names and the preference of equipment owners to obtain replacement    
parts and refurbishment services from the original manufacturer. Replacement    
parts and refurbishment services accounted for $17.0 million (or 18.5 %), $32.6 
million (or 18.6%) and $32.3 million (or 17.4%) of our revenues for 1999, 1998  
and 1997, respectively.                                                         

ENGINEERING AND PRODUCT DEVELOPMENT                                             

We maintain a staff of engineers and design technicians to:   

       -        design and test new products, components and systems for use
in manufacturing and drilling applications; 

-        enhance the capabilities of existing products; and   

   -        assist our sales organization and customers with special
requirements and products.                  

We intend to continue our research, engineering and product development programs
to develop safer and more environmentally-friendly and efficient products that  
are complementary to our existing products and equipment. Our total engineering 
and product development expenses for 1999, 1998 and 1997 were $2.7 million, $3.4
million and $4.3 million, respectively. We have budgeted $3.4 million for       
engineering and product development expenses for 2000.                          

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MARKETING, SALES AND DISTRIBUTION                                               

        We market our oil field products primarily through our own sales force
and through designated agents and distributors in every major oil and gas       
producing region in the world. Our customers include international and domestic 
drilling contractors and international and domestic oil and gas exploration and 
production companies, including foreign state-owned oil and gas enterprises. We 
maintain 25 domestic and 7 international sales, parts and service centers in    
areas of significant drilling and production operations.                        

    See Note 14 to the Consolidated Financial Statements for financial
information related to our revenues by geographic region.                       

RAW MATERIALS                                                                   

  We purchase our components, parts and raw materials from several
commercial sources. These materials are readily available from suppliers and    
based on past experience, we anticipate that such materials will continue to be 
available, although we can give no assurances in this regard. We believe that   
the loss of any of our suppliers would not have a material adverse effect on our
operations.                                                                     

WORKING CAPITAL ITEMS                                                           

       Consistent with industry practice, we maintain significant amounts of
inventory, which enables us to readily meet the demands of our customers.       

INTELLECTUAL PROPERTY                                                           

     We own or have licenses to use a number of U.S. and foreign patents
covering a variety of products. Although on the whole the patents are important 
to us, no single patent is essential to our business. In general, we depend upon
product name recognition, manufacturing quality control and application of our  
expertise rather than patented technology in the conduct of our business. We    
enjoy product brand name recognition, principally through our BOWEN(R),         
IDECO(R), FRANKS(R), CARDWELL(TM), and IRI(TM) trademarks, and consider such    
trademarks to be important to our business.                                     

EMPLOYEES                                                                       

        Generally, we consider our relations with our employees to be good. As
of December 31, 1999, we employed a total of 775 persons, of whom 27 were       
employed outside the United States. Approximately 35% of these employees were   
salaried and the balance were compensated on an hourly basis.                   

      Approximately 33% of our employees are represented by a union or are
parties to a collective bargaining agreement. The collective bargaining         
agreement between us and our employees is effective for the period from July    
1997 until July 2000, covers approximately 250 employees and contains customary 
provisions with respect to wages, hours and working conditions for certain      
production and maintenance employees in the Downhole Products Division. The     
collective bargaining agreement required a 4.5% wage increase in its first year,
and 3% increases in its second and third years.                                 

  Unless one of the parties to the collective bargaining agreement
notifies the other party in writing, not less than 60 days prior to the         
expiration of the term of the agreement, of an intention to modify or terminate 
the agreement, the current collective bargaining agreement will be renewed in   
July 2000.                                                                      

RISKS AND INSURANCE                                                             

Our operations are subject to the usual hazards inherent in   
manufacturing products and providing services for the oil and gas industry.     
These hazards include:                                                          

-        personal injury and loss of life;                    

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-        business interruptions;                              
-        property and equipment damage; and                   
-        pollution or environmental damage.                   

We maintain comprehensive insurance covering our assets and insuring against    
risks at levels that we believe are appropriate and in accordance with industry 
practice. We cannot assure, however, that our insurance coverage will be        
adequate in all circumstances or against all hazards or risks, or that we will  
be able to maintain adequate insurance coverage in the future at commercially   
reasonable rates or on acceptable terms.                                        

Our services and products are used in drilling, production and
well-servicing operations. These types of operations are subject to inherent    
risks, including:                                                               

-        property damage;                                     
-        personal injury;                                     
-        suspension of operations; and                        
-        loss of production.                                  

We maintain product liability and worker's compensation insurance. Although the 
limits of our insurance coverage against an accident are generally in accordance
with industry practice, such insurance may not be adequate to protect us against
liability or losses accruing from the consequences of such an incident.         

ENVIRONMENTAL MATTERS                                                           

       Our manufacturing operations are subject to a broad range of federal,
state and local environmental laws, both in the United States and in foreign    
jurisdictions, including those governing:                                       

-        discharges into the air and water;                   
   -        handling and disposal of solid and hazardous wastes; and
-        remediation of contaminated soil and groundwater.    

Our policy is to eliminate and minimize generation of wastes at our facilities  
through plant operations, process design and maintenance. We continually strive 
to reduce wastes by sending these materials off-site for recycling and/or       
re-use.                                                                         

      The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") imposes liability without regard to fault, on certain classes of 
persons for the release of a hazardous substance into the environment. These    
persons include the owner and operator of the disposal site or sites where the  
release occurred and companies that sent hazardous substances to such sites.    
Persons who are responsible for releases of hazardous substances under CERCLA   
may be subject to joint and several liability for the costs of cleaning up      
hazardous substances that have been released into the environment.              

  We currently own or lease, and have in the past owned or leased,
numerous properties that have been used for the manufacture and storage of      
products and equipment containing or requiring oil and/or other hazardous       
substances. Although we have used standard operating and disposal practices,    
hazardous substances may have been disposed of or released on or under the      
properties owned or leased by us or on or under other locations where such      
wastes have been taken for disposal. In addition, many of these properties have 
been operated by third parties whose treatment and disposal or release of       
hydrocarbons or other wastes was not under our control. These properties and the
wastes disposed thereon may be subject to CERCLA, the Resource Conservation and 
Recovery Act and analogous state laws. Under such laws, we could be required to 
remediate any hazardous substances or wastes discovered on or under these       
properties.                                                                     

   Various federal, state and local laws, regulations and ordinances
govern the removal, encapsulation or disturbance of asbestos containing         
materials ("ACM"). These laws and regulations may impose liability for the      
release of ACM. We are aware of the presence of ACM at our facilities, but we   
believe that such material is in                                                

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acceptable condition at this time. Although we cannot give any assurances, we   
believe that any future costs related to remediation of ACM at these sites will 
not be material, either on an annual basis or in the aggregate.                 

  We have tried to reduce the impact of costs related to actual or
potential environmental conditions at the Downhole Products Division facilities 
through our contractual arrangements with Air Liquide America Corporation ("Air 
Liquide"). Air Liquide and Bowen agreed to indemnify us for costs relating to   
environmental conditions existing at these facilities prior to our purchase of  
the Bowen Tools Division. We cannot assure that Air Liquide or Bowen will meet  
its obligations under the indemnification arrangements or that there will not be
future contamination for which we might be fully liable and that may require us 
to incur significant costs that could have a material adverse effect on our     
financial condition and results of operations.                                  

     Although we believe we are currently in substantial compliance with
environmental laws and regulations, as is the case with most industrial         
manufacturers, we could incur significant costs related to environmental        
compliance in the future. Future environmental compliance may involve           
remediating existing conditions at our facilities or modifying our operations.  
These potential costs may have a material adverse effect on our financial       
condition and results of operations. Moreover, other developments, such as      
stricter environmental laws, regulations and enforcement policies thereunder,   
could result in additional, presently unquantifiable, costs or liabilities to   
us.                                                                             

ITEM 2. PROPERTIES                                                              

      The principal offices and facilities owned or leased by us and their
current uses are described in the following table:                              

                                                                [Download Table]

                  FACILITY SIZE  PROPERTY SIZE                               
LOCATION           (SQ. FT.)      (ACRES)       TENANCY  USE                 
                                                                             
Pampa, TX          1,000,000      499           Owned    Rig and specialty   
                                                         steel manufacturing,
                                                         administration and  
                                                         warehousing         
Houston, TX          539,700       19           Owned    Drilling tool       
                                                         manufacturing,      
                                                         administration and  
                                                         warehousing         
Beaumont, TX(1)      350,000       10           Owned    Rig parts sales and 
                                                         warehousing         
El Dorado, KS(2)     139,912       23           Owned    Rig parts sales and 
                                                         warehousing         
Houston, TX           16,249      N/A           Leased   Executive Offices   
Houston, TX           50,154        2           Owned    Administration      

-------------                                                                   
(1)      Rig manufacturing was ceased at this facility in early 1999.           
(2)      Rig manufacturing was ceased at this facility in December 1998.        

  We also own or lease facilities at 32 domestic and international
locations, substantially all of which are sales, service or warehouse locations.

ITEM 3. LEGAL PROCEEDINGS                                                       

         There are pending or threatened against us various claims, lawsuits and
administrative proceedings all arising from the ordinary course of business with
respect to commercial product liability and employee matters. Although no       
assurance can be given with respect to the outcome of these or any other pending
legal and administrative proceedings and the effects such outcomes may have on  
us, we believe that any ultimate liability resulting from the outcome of such   
proceedings to the extent not otherwise provided for will not have a material   
adverse effect on our consolidated financial statements.                        

         We maintain comprehensive liability insurance. We believe such coverage
to be of a nature and amount sufficient to ensure that we are adequately        
protected from any material financial loss as a result of such claims. We       
currently are not the subject of any legal actions for which we are neither     
insured nor indemnified and which we                                            

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believe will individually or in the aggregate have a material adverse effect on 
our financial condition, results of operations or liquidity, nor to our         
knowledge is any such litigation threatened.                                    

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

None.                                                         

PART II.                                                                        

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS   

         Our common stock, par value $0.01 per share (the "Common Stock") became
listed on the New York Stock Exchange on November 14, 1997 under the symbol     
"IIR". Prior to that time there was no public market for our common stock. Our  
common stock closed at $9 1/16 on March 24, 2000. The following table sets forth
(as reported by New York Stock Exchange) for the periods indicated the prices of
the Common Stock.                                                               

FISCAL 2000                                            HIGH           LOW       
-----------                                            ----           ---       

1st Quarter (through March 24, 2000)                  9 7/16         3 3/8      

FISCAL 1999                                            HIGH           LOW       
-----------                                            ----           ---       

1st Quarter                                            4 3/8          2 7/8     
2nd Quarter                                            6 3/16         3 5/8     
3rd Quarter                                            5 5/8          4 1/4     
4th Quarter                                            4 7/8          2 15/16   

FISCAL 1998                                            HIGH           LOW       
-----------                                            ----           ---       

1st Quarter                                            14 1/2         10        
2nd Quarter                                            14 15/16       10 3/4    
3rd Quarter                                            12 1/4         4  3/8    
4th Quarter                                            6  3/4         2  1/2    

       The number of record holders of the Common Stock as of March 24, 2000
was 90. Pursuant to our Incentive Plan, 2,586,000 shares of Common Stock are    
subject to outstanding options at March 24, 2000.                               

        We have never declared or paid cash dividends on our capital stock. We
currently expect to retain future earnings to provide for the continual growth  
and development of our business.                                                

         During 1999, we made no sales of equity securities not registered under
the Securities Act of 1933.                                                     

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ITEM 6.  SELECTED FINANCIAL DATA                                                

The following table sets forth selected historical financial  
information for the Company. The information presented for the years ended      
December 31, 1999, 1998 and 1997, and the year ended March 31, 1996, as well as 
the nine month period ended December 31, 1996, is derived from our audited      
consolidated financial statements. The information for the nine month period    
ended December 31, 1995 is derived from our unaudited consolidated financial    
statements. The following information should be read in conjunction with        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and the Consolidated Financial Statements of the Company, including 
the notes thereto, included elsewhere in this annual report.                    

                                                        [Enlarge/Download Table]

                                                                          NINE MONTHS                        
                                           TWELVE MONTHS                     ENDED             YEAR ENDED    
                                        ENDED DECEMBER 31,                DECEMBER 31,          MARCH 31,    
                                ---------------------------------    ----------------------  ----------------
                                                                                (UNAUDITED)                  
                                   1999        1998       1997(1)       1996        1995           1996      
                                ---------   ---------   ---------    ---------   ----------  ----------------

                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                      
                                                                                                             
OPERATING DATA:                                                                                              
Revenue                         $  92,190   $ 175,045   $ 185,366    $  62,298   $  39,141    $  52,506      
Cost of goods sold (2)             83,156     126,626     139,204       44,968      28,815       36,877      
                                ---------   ---------   ---------    ---------   ---------    ---------      
Gross profit                        9,034      48,419      46,162       17,330      10,326       15,629      
Selling, general and                                                                                         
   administrative expense          27,831      30,526      23,543        8,220       5,400        7,990      
Restructuring charge                1,779         590          --           --          --           --      
                                ---------   ---------   ---------     --------   ---------    ---------      
Operating income (loss)           (20,576)     17,303      22,619        9,110       4,926        7,639      
Interest expense                     (363)       (360)     (8,762)        (615)         --          (47)     
Other income (expense) - net        1,562      (1,278)      1,464          (20)        210          371      
Income taxes                        8,472      (3,283)     (2,786)         (98)         --           --      
                                ---------   ---------   ---------    ---------   ---------    ---------      
Income (loss) before                                                                                         
   extraordinary item             (10,905)     12,382      12,535        8,377       5,136        7,963      
Extraordinary charge on early                                                                                
   extinguishment of debt,                                                                                   
   net of tax benefit                  --          --      (1,512)          --          --           --      
                                ---------   ---------   ---------    ---------   ---------    ---------      
Net income (loss)                 (10,905)     12,382      11,023        8,377       5,136        7,963      
Weighted average shares                                                                                      
   outstanding                     39,900      39,900      31,275       30,000      30,000       30,000      
                                ---------   ---------   ---------    ---------   ---------    ---------      
Income (loss) per common share  $   (0.27)  $    0.31   $    0.35    $    0.28   $    0.17    $    0.27      
                                =========   =========   =========    =========   =========    =========      

                                                        [Enlarge/Download Table]

                                                  DECEMBER 31,                   MARCH 31,
                               -----------------------------------------------  ----------
                                  1999        1998        1997         1996        1996   
                               -----------------------------------------------  ----------
                                                                                          
BALANCE SHEET DATA:                                                                       
Working capital                $ 149,849   $ 164,246   $ 161,890   $  38,658    $  35,461 
Total assets                     217,093     239,166     251,074      58,671       46,631 
Long-term debt and obligation                                                             
under capital lease less                                                                  
current installments                  --         319         586         522           -- 
Shareholder's equity             201,300     210,259     198,406      24,903       16,526 

(1)      The Company acquired the business and operations of the Downhole       
         Products Division on March 31, 1997 and Cardwell International, Ltd. on
April 17, 1997.                                               

(2)      Amortization of negative goodwill decreased cost of goods sold in all  
    periods. Negative goodwill was fully amortized as of September 30,
1999. See Notes to our Consolidated Financial Statements and  
  "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Overview"                             

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS                                                                   

      The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated 
Financial Information," the Consolidated Financial Statements and Notes thereto 
and the other information included elsewhere in this Annual Report on Form 10-K.

       Our fiscal year was changed from the twelve-month period ending March
31 to the calendar year, effective December 31, 1996.                           

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OVERVIEW                                                                        

General                                                       

    We manufacture land-based drilling and well-servicing rigs and rig
component parts for use in the domestic and international markets. 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 have a substantial impact on our revenues.   
Exploration, development and production activity is largely dependent on the    
prevailing view of future oil and natural gas prices, which have been           
significantly volatile for the last 20 years. Oil and natural gas prices are    
influenced by 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 our products in certain emerging market       
countries may be greatly influenced by their need for internal development,     
energy self-sufficiency or hard currency earnings rather than the conventional  
factors relating to the price of oil and natural gas.                           

         During the latter half of 1998 and the first quarter of 1999, declining
oil prices coupled with the deteriorating economic conditions in Russia and     
other emerging markets resulted in a sharp drop in customer spending and a      
dramatically lower rig utilization rate worldwide. Our revenues, operating      
income and backlog have been adversely affected by these events and the value of
our receivables and inventory may be further affected by these events. As a     
result of recent increases in oil prices during the second, third and fourth    
quarters of 1999, consumer spending and rig utilization rates have begun to     
increase. Although results of operations for the latter half of 1999 reflect    
this increase in consumer spending, results of operations for 1999 are still    
substantially reduced from the results for 1998 and still reflect the adverse   
market conditions prevalent during the first six months of 1999. In addition,   
our gross margins for 1999 were also adversely affected by restructuring costs  
and other special charges of $5.6 million (after-tax) in the second quarter of  
1999, and an inventory valuation adjustment of $5.9 million in the fourth       
quarter of 1999.                                                                

       During 1999, we have implemented a variety of measures to consolidate
our manufacturing operations in Pampa and Houston, Texas and other cost         
reduction programs. These actions reduced our workforce during 1999 by a total  
of 744 employees. On an ongoing basis, we will continue to consider the         
possibility of further consolidation and cost reduction measures but we cannot  
give any assurance that these or any other measures will be sufficient to offset
the negative impact of the existing industry conditions.                        

Foreign Exchange Transactions                                 

We have attempted to limit our exposure to foreign currency   
fluctuations. Sales denominated in foreign currencies are made only by the      
Downhole Products segment. With the exception of our Canadian subsidiary, we    
maintain our cash, cash equivalents and investments in U.S. dollar denominated  
accounts (except to the extent needed for local operating expenses). We have not
engaged in and do not currently intend to engage in any significant hedging or  
currency trading transactions to compensate for adverse currency fluctuations   
among foreign currencies.                                                       

Negative Goodwill                                             

 On September 20, 1994, all of our outstanding capital stock was
acquired by an affiliate of certain of our stockholders for $5.0 million in cash
(the "Company Acquisition"). The Company Acquisition was recorded using the     
purchase method of accounting and the purchase price allocated to the assets    
acquired and liabilities assumed based upon their estimated fair values at the  
date of the Company Acquisition. The excess of the fair value of net assets     
acquired over the consideration paid was applied against non-monetary assets    
(property, plant and equipment), reducing the balances of these assets at the   
date of the Company Acquisition to zero, and the remaining excess of the fair   
value of net assets acquired over consideration paid was recorded as negative   
goodwill. The purchase price has been allocated to the assets acquired and      
liabilities assumed based upon their fair values at the date of the acquisition 
as follows (in thousands):                                                      

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                                                        [Enlarge/Download Table]
                                                                                     
Inventories.............................................................. $   33,287 
Other current assets.....................................................      7,743 
Current liabilities......................................................     (7,372)
Accrued retirement benefits..............................................     (1,821)
Negative goodwill........................................................    (26,837)
                                                                          ---------- 
                                                                             $ 5,000 
                                                                          ========== 

      Negative goodwill was being amortized using the straight-line method
over five years ended September 19, 1999. See Note 1 to the Consolidated        
Financial Statements. Amortization of negative goodwill decreased cost of goods 
sold by $4.0 million in fiscal year ended December 31, 1999 and by $5.4 million 
in each of the fiscal years ended December 31, 1998 and 1997 and the year ended 
March 31, 1996.                                                                 

RESULTS OF OPERATIONS                                                           

        In June 1997, we changed our fiscal year from a March 31 year-end to a
December 31 year-end, effective with the period ended December 31, 1996, in     
order to harmonize the fiscal years of IRI, Cardwell and Bowen. The following   
discussion of the results of operations of our business units does not reflect  
allocation of corporate overhead expense, unallocated administrative expense or 
amortization of goodwill and negative goodwill. See Note 14 to our Consolidated 
Financial Statements for a presentation of segment information.                 

        Sales of new rigs manufactured by us 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 or rig packages range from  
six to nine months. These fluctuations may affect our quarterly revenues and    
operating income.                                                               

Results of Segment Operations                                 

        The following discussion of the results of operations of our oil field
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 our Consolidated Financial Statements is as       
follows:                                                                        

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                                                                [Download Table]

                               THE COMPANY                                         
-----------------------------------------------------------------------------------
                              TWELVE MONTHS                                        
                                  ENDED                                            
                              DECEMBER 31,                                         
-----------------------------------------------------------------------------------
                                      1999                 1998              1997  
                                  --------              --------          ---------
                                                                                   
Revenues                                                                           
  Oil field equipment...........  $ 44,365              $ 88,395          $106,529 
  Downhole Products.............    42,892                76,249            65,336 
  Specialty steel...............     4,933                10,401            13,501 
                                  --------              --------          -------- 
    Total.......................  $ 92,190              $175,045          $185,366 
                                  ========              ========          ======== 
Segment operating income (loss)                                                    
   Oil field                                                                       
   equipment....................  $ (5,850)             $ 13,533          $ 15,617 
   Downhole Products............     2,543                17,186            11,869 
   Specialty steel..............       722                 1,668             4,503 
                                  --------              --------          -------- 
     Total......................    (2,585)               32,387            31,989 
Corporate overhead                                                                 
   and unallocated                                                                 
   administrative                                                                  
   expenses.....................   (18,982)              (18,606)          (13,862)
Restructuring Charge............    (1,779)                 (590)               -- 
   Amortization of negative                                                        
     goodwill...................     4,026                 5,367             5,370 
   Amortization of goodwill.....    (1,254)               (1,255)              878 
                                  ---------             ---------         -------- 
   Operating income (loss)......  $(20,576)             $ 17,303          $ 22,619 
                                  =========             ========          ======== 

FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,  
1998                                                                            

Oil Field Equipment                                           

   The economic and financial turmoil in Russia and the Asia-Pacific
region together with the downward turn in oil prices during the latter half of  
1998 and the beginning of 1999 led to a sharp decrease in the demand for our    
products. Decreased sales of rig packages resulted in decreases in revenues and 
operating income for 1999. As a result of decreased revenue, our gross margin   
was: (6.1)% for 1999 as compared to 19.5% for 1998. In addition, our gross      
margin for 1999 was negatively affected by: a $3.0 million write-off for        
pre-contract engineering and design costs and a $1.3 million charge for contract
adjustments, each of which occurred during the second quarter of 1999.          

Downhole Products                                             

As a result of decreased sales volume, our gross margin was   
significantly lower for 1999: 18.0% as compared to 33.0% for 1998. In addition, 
our gross margin for 1999 was adversely affected by an inventory valuation      
adjustment of $2.0 million during the second quarter of 1999 and $5.9 million in
the fourth quarter of 1999.                                                     

Specialty Steel                                               

   Reduced demand caused by an industry-wide recession significantly
impacted our revenues and operating income. However, our gross margins remained 
almost unchanged at 17.4% for 1999 versus 17.5% for 1998.                       

Corporate and Administrative Expenses                         

        The $0.4 million increase in corporate and administrative expenses for
1999, as compared to 1998, occurred as a result of a $3.5 million increase in   
corporate costs offset by a $3.1 million decrease in administrative expenses.   
Corporate expenses increased in 1999 in the areas of professional services,     
promotion, and employee-related costs. The Oilfield Equipment Division          
experienced a net decrease in administrative expenses of $2.6 million as a      
result of a reduction of salaries and related expenses of $1.8 million and the  
reduction of other costs by $0.8 million. The Downhole Products Division        
decreased its expenses by $1.7 million, which resulted primarily from a         
reduction of its administrative staff. This decrease was offset by a $1.2       
million provision for doubtful accounts recorded  in the second quarter of 1999.

Restructuring Charge                                          

      The Company incurred a restructuring charge of $1.8 million in 1999,
and $0.6 million in 1998 in connection with its restructuring program.          
Accordingly, the Company consolidated manufacturing operations, closing two     
plants in 1999, and reduced its workforce.                                      

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Other Income (Expense)                                        

      Other income for 1999 reflected a gain of $1.6 million compared to a
loss of $1.3 million in 1998, which reflected a $0.7 million gain on            
investments in marketable securities in 1999, compared to a loss of $2.7 million
in 1998.                                                                        

Income Taxes                                                  

      The change in the effective income tax rate to (43.7)% for 1999 from
21.0% for 1998 is attributable primarily to the 1999 net operating loss and the 
recognition of a deferred tax benefit of $5.3 million in 1999.                  

FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,  
1997                                                                            

Oil Field Equipment                                           

   The economic and financial turmoil in Russia and the Asia-Pacific
region together with the downward turn in oil prices resulted in a decreased    
demand for our products. Gross margin for the fiscal year ended December 31,    
1998 was 19.5%, as compared to 17.8% for the fiscal year ended December 31,     
1997. This increase resulted principally from an extensive cost restructuring   
program and a favorable mix between manufactured equipment and buy-outs.        

Downhole Products                                             

         The downward trend in the oil industry prevailing in the latter half of
1998 had a negative impact on our customers' demands for fishing tools and power
equipment. Accordingly, our revenues for 1998 decreased compared to 1997. Gross 
margin for the fiscal year ended December 31, 1998 was 33.0%, as compared to    
26.5% for the fiscal year ended December 31, 1997. The increase in monthly      
operating income and gross margin was primarily due to the full impact of price 
increases in the last two quarters of 1997, an increase in the amount of        
manufacturing overhead absorbed into inventory and management's cost-cutting    
initiatives.                                                                    

Specialty Steel                                               

     The decrease in revenues was primarily the result of reduced demand
from a major customer. Because of the loss of the high margin business that we  
transacted with this major customer, our gross margins also decreased from 34.6%
for the fiscal year ended December 31, 1997 to 17.5% for the fiscal year ended  
December 31, 1998.                                                              

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Corporate Administrative and Interest Expenses                

        The increase in corporate administrative expenses was due primarily to
the inclusion of corporate administrative expenses for our Downhole Products    
Division and Cardwell operations for the full year in 1998 as compared to only  
nine months for 1997. In addition, corporate administrative expenses increased  
as a result of the higher professional fees associated with being a public      
company and the implementation of new software systems. Interest expense        
decreased mainly because we repaid our debt with the proceeds from the initial  
public offering of our Common Stock.                                            

Restucturing Charge                                           

         The Company incurred a restructuring charge of  $0.6 million in 1998 in
connection with its restructuring program.                                      

Other Income (Expense)                                        

Other expense for 1998 includes:                              

       -        $2.2 million of interest income (due to higher cash balances
in 1998);                                   

         -        $2.7 million of losses on trading securities (as compared to a
gain of $0.8 million for 1997);             

         -        $0.6 million of special charges (relating to expenses incurred
             in connection with the proposed acquisition of Hitec ASA,
which was terminated on April 28, 1998); and

-        $0.2 million of miscellaneous other expenses.        

Income Taxes                                                  

      The increase in the effective income tax rate to 21.0% for 1998 from
18.2% for 1997 is attributable primarily to an increase in non-deductible       
goodwill amortization and the change in the valuation allowance for deferred tax
assets.                                                                         

RECENT ACCOUNTING PRONOUNCEMENTS                                                

     Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued by the Financial      
Accounting Standards Board in June 1998. SFAS 133 standardizes the accounting   
for derivative instruments, including derivative instruments embedded in other  
contracts. Under the standard, entities are required to carry all derivative    
instruments in the statement of financial position at fair value. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging    
relationship and, if so, on the reason for holding it. If specified conditions  
are met, entities may elect to designate a derivative instrument as a hedge of  
exposures to changes in fair values, cash flows, or foreign currencies. If the  
hedged exposure is a fair value exposure, the gain or loss on the derivative    
instrument is recognized in earnings in the period of change together with the  
offsetting loss or gain on the hedged item attributable to the risk being       
hedged. If the hedged exposure is a cash flow exposure the effective portion of 
the gain or loss on the derivative instrument is reported initially as a        
component of other comprehensive income (outside earnings) and subsequently     
reclassified into earnings when the forecasted transaction affects earnings. Any
amounts excluded from the assessment of hedge effectiveness, as well as the     
ineffective portion of the gain or loss, is reported in earnings immediately.   
Accounting for foreign currency hedges is similar to the accounting for fair    
value and cash flow hedges. If the derivative instrument is not designated as a 
hedge, the gain or loss is recognized in earnings in the period of change.      

        The Company will adopt SFAS 133 beginning January 1, 2001. The Company
has not yet determined the impact that SFAS 133 will have on consolidated       
financial statements. Management believes that the determination will not be    
meaningful until closer to the date of initial adoption.                        

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LIQUIDITY AND CAPITAL RESOURCES                                                 

       At December 31, 1999, we had cash and cash equivalents and marketable
securities of $50.4 million, compared to $40.5 million at December 31, 1998. Our
working capital was $149.8 million compared to $164.2 million at December 31,   
1998. This decrease in working capital resulted from a decrease in accounts     
receivable, inventories, and other current assets, partially offset by an       
increase in cash and cash equivalents and marketable securities and income taxes
receivable and a decrease in current liabilities.                               

        We believe that our balance sheet, significant liquidity and cash flow
from operations will be sufficient to meet our short term and long term         
liquidity needs. We believe that any credit facilities that we may need in the  
future will be available on commercially acceptable terms, though there can be  
no assurances in this regard.                                                   

Credit Facility                                               

 The Company had a $9.7 million revolving credit facility with a
maturity date of March 31, 2000. Amounts outstanding under the revolving credit 
facility were secured by substantially all of the assets of the Company and     
accrued interest at a rate per annum equal to the one, two, three or six-month  
LIBOR plus 2-3/4%. The revolving credit facility agreement contained provisions 
that restricted incurrence of indebtedness, guarantees, acquisitions, and       
distributions to shareholders, and required the Company to meet specified       
financial maintenance tests.                                                    

         On December 29, 1999, the revolving credit facility was replaced with a
new $10.0 million revolving credit facility, which matures on December 28, 2000 
and provides exclusively for bank guarantees and commercial and standby letters 
of credit. The new revolving credit facility agreement contains provisions that 
limit liens on accounts receivables, inventory and related general intangibles  
and that require the Company to meet specified financial maintenance tests. At  
December 31, 1999, approximately $5.9 million was available for bank guarantees 
and letters of credit under the new revolving credit facility. The Company had  
no outstanding indebtedness at December 31, 1999.                               

YEAR 2000                                                                       

     We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on 
operations since January 1, 2000, we do not expect any significant impact to our
ongoing business as a result of the "Year 2000 issue." However, it is possible  
that the full impact of the date change, which was of concern due to computer   
programs that use two digits instead of four digits to define years, has not    
been fully recognized. For example, it is possible that Year 2000 or similar    
issues may occur with billing, payroll, or financial closings at month,         
quarterly, or year end. We believe that any such problems are likely to be minor
and correctable. In addition, we could still be negatively affected if our      
customers or suppliers are adversely affected by the Year 2000 or similar       
issues. We currently are not aware of any significant Year 2000 or similar      
problems that have arisen for our customers or suppliers.                       

       We expended approximately $0.5 million on Year 2000 readiness efforts
from 1997 to 1999. These efforts included replacing some outdated, noncompliant 
hardware and noncompliant software as well as identifying and remediating Year  
2000 problems. These efforts did not include, however, certain ERP systems      
upgrades, which were done in the ordinary course of business during 1998 and    
1999 and which had the added benefit of resolving Year 2000 issues with respect 
to those systems.                                                               

CAPITAL EXPENDITURES                                                            

   Capital expenditures for 1999 totaled approximately $2.2 million,
essentially all of which was spent on additions to our rental tool fleet and    
implementation of new software at the Downhole Products Division.               

  For 2000, we have budgeted capital expenditures of $3.5 million,
including amounts primarily to be used for the purchase of rental tools for the 
Downhole Products Division and manufacturing equipment for the Oilfield         

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Equipment Division. Capital expenditures are expected to be funded with         
available cash and cash flow from operations.                                   

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 our control. 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 (including Russia
and countries of the Asia-Pacific region);  
-        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.                                             

INFLATION                                                                       

        Inflation has not had a material impact on our operating and occupancy
costs.                                                                          

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK             

         This discussion of our exposure to market risks and our risk-management
activities includes forward looking statements. These forward looking statements
involve risks and uncertainties, including economic and competitive factors     
outside our control.                                                            

   Our primary risk exposures come from interest rate risks, foreign
exchange rate risks, and equity price risks. Our exposure to interest rate risks
are minimal with respect to indebtedness. We repaid substantially all our       
outstanding indebtedness in November 1997. However, at December 31, 1999, we had
approximately $35.7 million of cash in interest bearing accounts. The rate of   
return on these accounts will vary with the prevailing interest rates. We do not
engage in any significant interest rate swaps or other derivative activities    
designed to limit our exposure to changes in interest rates.                    

     Our direct exposure to foreign exchange risks is minimal. Except as
discussed above in the "Management Discussion and Analysis of Financial         
Condition and Results of Operations" with respect to our Downhole Products      
Division, all of our sales are denominated in U.S. dollars. However, foreign    
exchange rate fluctuations may affect our revenues indirectly to the extent that
a stronger U.S. dollar affects our ability to compete on the basis of price. We 
do not engage in any significant hedging or currency trading activities to limit
our sensitivity to changes in foreign exchange rates and/or interest rates.     

      At December 31, 1999, we had marketable securities of $14.7 million.
From time to time, we purchase equitable securities for trading purposes.       
Fluctuations in interest rates and equity prices may adversely affect the value 
of our marketable securities.                                                   

    We do not believe there has been any material change in the market
risks faced by us since the end of 1999.                                        

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                            

    See Index to Consolidated Financial Statements and Exhibits, which
appears on Page F-1 hereof.                                                     

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND        
FINANCIAL DISCLOSURE                                                            

None.                                                         

PART III. 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                    

         The directors and executive officers of the Company, and their ages and
positions with the Company as of March 30, 2000, are as follows:                

                                                        [Enlarge/Download Table]

NAME                     AGE                    POSITION                              
----                     ---                    --------                              
                                                                                      
Hushang Ansary            72  Chairman of the Board and Chief Executive Officer       
Daniel G. Moriarty        65  Director                                                
Abdallah A. Andrawos      44  Director and Secretary                                  
Nina Ansary               33  Director                                                
Frank C. Carlucci         69  Director                                                
Dr. Philip David          68  Director                                                
Robert L. Hargrave        58  Director, Vice-Chairman of the Board of Directors, Chief
                              Accounting and Financial Officer                        
Richard D. Higginbotham   62  Director                                                
John D. Macomber          72  Director                                                
Edward L. Palmer          82  Director                                                
Stephen J. Solarz         59  Director                                                
Gary W. Stratulate        43  Director, President and Chief Operating Officer         
Alexander B. Trowbridge   70  Director                                                
J. Robinson West          53  Director                                                

     All executive officers of the Company serve at the pleasure of the Board of
Directors (the "IRI Board"). Directors are elected at the Company's annual      
meeting of stockholders and serve for a one-year term or until their successors 
are elected and qualified or until their earlier resignation or removal in      
accordance with the Company's Restated Certificate of Incorporation and the     
Company's Amended and Restated Bylaws (the "Company Bylaws").                   

 HUSHANG ANSARY has served as Chairman of the Board of the Company since
September 1994 and was elected to the additional position of Chief Executive    
Officer of the Company in March 1997. He has served as Chairman of SunResorts,  
Ltd. N.V., a resort company, since 1986 and of Parman Capital Investments Ltd., 
a private investment company, since 1982.                                       

     DANIEL G. MORIARTY has been a director of the Company since 1994 and served
as President and Chief Executive Officer of the Company from 1994 to April 1997,
when he was elected Vice-Chairman of the Board of Directors. He resigned his    
position as Vice-Chairman of the Board in July 1999. He served as President of  
Cooper Manufacturing, a rig manufacturing division of Allied Production Corp.   
from 1992 to 1994 and of Smith Energy Services, an oil field services division  
of Allied Production Corp., from 1987 to 1992. From 1982 to 1987, Mr. Moriarty  
served as the President and Chief Executive Officer of Leamco Services, Inc.    
From 1960 to 1982, Mr. Moriarty held various positions with Halliburton Company,
rising from engineer to Vice President of the Central Region.                   

 ABDALLAH A. ANDRAWOS has been Secretary of the Company since 1994 and a
director of the Company since April 1997. Since 1989 Mr. Andrawos has served as 
Secretary and Chief Financial Officer of SunResorts, Ltd. N.V.                  

   NINA ANSARY has served as a director of the Company since April 1997. Ms.
Ansary has been a Vice President of Parman Capital Investments Ltd., a private  
investment company, since 1994.  Prior to 1994, Ms. Ansary                      

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was a student.  Ms. Ansary is the daughter of Hushang Ansary and holds a masters
degree in political science from Columbia University.                           

FRANK C. CARLUCCI has been a director of the Company since 1994. Since
1993, Mr. Carlucci has served as Chairman and partner of The Carlyle Group, a   
Washington, D.C. based merchant bank, and from 1989 to 1993 served as           
Vice-Chairman and partner.  Mr. Carlucci serves on the following corporate      
boards: BDM International, Mass Mutual Life Insurance Company, Kaman            
Corporation, Neurogen Corporation, Nortel Networks Corporation, Northern Telecom
Ltd., Quaker Oats Company, SunResorts, Ltd. N.V., Texas Biotechnology           
Corporation, Pharmacia & Upjohn Inc. and Ashland Inc. He is also a Trustee of   
the Rand Corporation.                                                           

   DR. PHILIP DAVID has been a director of the Company since 1994. Dr. David
is a self-employed investor.  He was a consultant to Fairchild Corporation from 
January 1988 to June 1993 and was a Professor of Urban Studies and Planning at  
the Massachusetts Institute of Technology from 1971 until June 1987. Dr. David  
is a director of Fairchild Corporation.                                         

ROBERT L. HARGRAVE has been a director, Vice-Chairman of the Board of 
Directors and Chief Accounting and Financial Officer of the Company since July  
1999. From 1995 until he came to the Company, Mr. Hargrave served as Chief      
Executive Officer of Stewart & Stevenson Services, Inc., a company specializing 
in the manufacture of engine driven power systems. He also served as its Chief  
Financial Officer from 1980 to 1995.                                            

RICHARD D. HIGGINBOTHAM has been a director of the Company since April
1997.  He served as Executive Vice President --President of the Downhole        
Products Group from April 1997 to September 1998.  From 1988 until its          
acquisition by Company, Mr. Higginbotham served as President of Bowen Tools,    
Inc.                                                                            

JOHN D. MACOMBER has been a director of the Company since 1994. Mr.   
Macomber has been a principal of JDM Investment Group, a private investment     
company, since 1992. From 1988 to 1992, he was Chairman and President of the    
Export-Import Bank of the United States, from 1973 to 1986 he was Chairman of   
the Board and Chief Executive Officer of Celanese Corp. and from 1954 to 1973 he
was a managing partner of McKinsey & Co. He is also a director of The Brown     
Group, Lehman Brothers Holdings Inc., Pilkington Ltd., and Textron Inc. He is   
also a director and Vice-Chairman of The Atlantic Council of the United States  
and a director of the French American Foundation and the National Executive     
Services Corp. Mr. Macomber is a trustee of The Folger Library and a member of  
the Council on Foreign Relations and the Bretton Woods Committee. Mr. Macomber  
is Chairman of the Council for Excellence in Government and a trustee of the    
Carnegie Institute of Washington.                                               

  EDWARD L. PALMER has been a director of the Company since June 1997. Mr.
Palmer has been President of the Mill Neck Group Inc., a management consulting  
firm, since 1982, and prior thereto he served as Chairman of the Executive      
Committee and a director of Citicorp and Citibank, N.A. He is also a director of
Commodore Applied Technologies, Inc. and SunResorts, Ltd. N.V.                  

     STEPHEN J. SOLARZ has been a director of the Company since 1994. Mr. Solarz
has been President of Solarz Associates, an international consulting firm, since
1993. From 1975 to 1993, he was a member of the U.S. House of Representatives,  
where he served on the Foreign Affairs, the Merchant Marine and Fisheries, the  
Intelligence and the Joint Economic Committees. He is also a director of        
Samsonite Corp., Santa Fe International Company and First Philippine Fund Inc.  

    GARY W. STRATULATE has been a director of the Company since April 1997. He
has served as President and Chief Operating Officer since July 1999. From       
September 1998 to July 1999, he served as Executive Vice President--President of
the Downhole Products Group, from April 1997 to September 1998, as the President
of the Oilfield Equipment Group and from December 1994 to April 1997 as         
Executive Vice President of the International Division of the Company. From June
1991 to May 1994, Mr. Stratulate was the Chief Operating Officer of Dreco Energy
Services Ltd., a manufacturer of oil field equipment.                           

ALEXANDER B. TROWBRIDGE has been a director of the Company since 1994.
Since 1990, Mr. Trowbridge has been the President of Trowbridge Partners, Inc., 
a management consulting firm. He was President of the National Association of   
Manufacturers from 1980 through 1989. He is also a director of The Gillette     
Company, New England Life Insurance Company, E.M. Warburg-Pincus Counsellors    
Fund, Rouse Company, Sun                                                        

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Company, Harris Corporation, ICOS Corporation Sunoco, Inc. and SunResorts, Ltd. 
N.V. He is a charter trustee of Phillips Academy, Andover.                      

     J. ROBINSON WEST has been a director of the Company since 1994. Mr. West is
Chairman of The Petroleum Finance Company, Ltd., a petroleum industry consulting
firm, and served as its President from 1984 to 1996.                            

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE                         

Based solely upon a review of Forms 3 and 4 and amendments thereto    
furnished to the Company pursuant to Rule 16a-3 under the Exchange Act during   
its most recent fiscal year and Form 5 and amendments thereto furnished to the  
Company with respect to its most recent fiscal year, the Company believes that  
the following forms were not filed in a timely manner under Section 16(a):      

    -   With respect to Munawar Hidayatallah, a former director and officer of
the company, a Form 4 listing two transactions that occurred in July, 1999 was  
filed late. In addition, a Form 4 listing one transaction that occurred in      
August, 1999 was filed late.                                                    

    -   With respect to Robert Hargrave, a Form 3 listing a single transaction
was filed late.                                                                 

    -   With respect to Hushang Ansary, a Form 5 listing four transactions was
filed late.                                                                     

Other than as noted above, the Company believes that during such fiscal year no 
other forms for any director, officer, beneficial owner of more than ten percent
of any class of equity securities of the Company required to be filed by Section
16(a) of the Exchange Act were filed late.                                      

ITEM 11.   EXECUTIVE COMPENSATION                                               

EXECUTIVE COMPENSATION                                                          

  The following table sets forth certain information regarding the
compensation paid by the Company to the Chairman and Chief Executive Officer and
each of the five other most highly compensated executive officers of the Company
for the 12 months ended December 31, 1999 (collectively, the "Named Executive   
Officers"):                                                                     

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------------
                                             SUMMARY COMPENSATION TABLE                                               
                                                 ANNUAL COMPENSATION                                                  
----------------------------------------------------------------------------------------------------------------------
                                                                                   OTHER ANNUAL          ALL OTHER    
NAME AND PRINCIPAL POSITION                    YEAR      SALARY      BONUS       COMPENSATION (1)      COMPENSATION   
---------------------------                    ----      ------      -----       ----------------      ------------   
                                                                                                                      
Hushang Ansary,                                                                                                       
  Chairman and Chief Executive Officer         1999     $913,500     $875,000(2)       ---              $ 12,166(3)   
                                               1998     $900,000       ---             ---                 ---        
                                               1997       ---          ---           $17,000               ---        
----------------------------------------------------------------------------------------------------------------------
Daniel G. Moriarty,                                                                                                   
  Vice-Chairman of the Board(4)                1999      $132,113      ---           $14,500            $ 11,408(3)   
                                               1998      $204,346    $100,000          ---              $ 13,800(3)   
                                               1997      $202,516     $25,000        $17,000            $ 13,908(3)   
----------------------------------------------------------------------------------------------------------------------
Munawar H. Hidayatallah,                                                                                              
  Executive Vice President and Chief                                                                                  
  Financial Officer(5)                         1999      $206,533    $313,300          ---              $113,056(3)(6)

                                               1998      $318,450    $200,000          ---              $ 13,800(3)   
                                               1997      $316,088    $100,000         $7,000            $ 14,164(3)   
----------------------------------------------------------------------------------------------------------------------
Robert L. Hargrave, Vice Chairman of the                                                                              
Board and Chief Accounting and Financial                                                                              
Officer (7)                                    1999      $138,904     ---              ---              $    444(8)   
----------------------------------------------------------------------------------------------------------------------

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                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------------
                                             SUMMARY COMPENSATION TABLE                                               
                                                 ANNUAL COMPENSATION                                                  
----------------------------------------------------------------------------------------------------------------------
                                                                                   OTHER ANNUAL          ALL OTHER    
NAME AND PRINCIPAL POSITION                    YEAR      SALARY      BONUS       COMPENSATION (1)      COMPENSATION   
---------------------------                    ----      ------      -----       ----------------      ------------   
                                                                                                                      
Gary W. Stratulate,                                                                                                   
  President and Chief Operating Officer        1999      $252,169     ---              ---              $ 13,500(3)   
                                               1998      $248,442    $200,000          ---              $ 13,800(3)   
                                               1997      $246,087    $125,000         $8,500            $ 14,104(3)   

----------------------------------------------------------------------------------------------------------------------
Arthur C. Teichgraeber,                                                                                               
  Executive Vice President -- President                                                                               
  of Oilfield Equipment Group(9)               1999      $150,525     ---              ---              $ 12,213(3)   
                                               1998      $272,759    $100,000       $45,750(10)         $  9,074(3)   
                                               1997      $207,564     $50,000        $8,500             $498,110(11)  
----------------------------------------------------------------------------------------------------------------------

----------------------                                                          
(1)     Unless otherwise noted, consists of directors' and participation fees 
         received by the Named Executive Officers prior to the Company's initial
    offering in November 1997 and, in the case of Mr. Moriarty's other
         annual compensation for 1999, directors' fees received since July 1999.

(2)     Includes $200,000, which was paid pursuant to the incentive plan      
     approved by the Compensation Committee of the Board of Directors on
        July 15, 1999 and is subject to adjustment. See "-- Other Compensation
Plans or Programs."                                           

(3)     Includes premiums paid for life insurance and contributions           
under the Company's 401K Plan.                                

(4)     Mr. Moriarty resigned from his position in July 1999.                 

(5)     Mr. Hidayatallah resigned from his position in July 1999.             

(6)     Includes consulting fees paid to Mr. Hidayatallah after he left the   
Company.                                                      

(7)     Mr. Hargrave was appointed Chief Accounting and Financial Officer and 
         Vice-Chairman of the Board on July 15, 1999 and his annual salary for 1
         reflects compensation for the period from July 15, 1999 to December 31,

(8)     Consists of premiums paid for life insurance.                         

(9)     Mr. Teichgraeber left the Company in July 1999.                       

 (10)    Consists of educational assistance in the amount of $18,750 and housing
reimbursement in the amount of $27,500.                       

(11)    Consists of license fees paid by Cardwell (prior to our acquisition of
   Cardwell) to Mr. Teichgraeber and to certain entities directly or
indirectly owned by Mr. Teichgraeber.                         

    Shown below is further information with respect to grants of stock
options pursuant to our Equity Incentive Plan during 1999 to the Named Executive
Officers:                                                                       

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------------------------
                                               OPTION GRANTS IN 1999                                                
--------------------------------------------------------------------------------------------------------------------
                              NUMBER OF    % OF TOTAL                                                               
                             SECURITIES     OPTIONS                                   POTENTIAL REALIZABLE VALUE AT 
                             UNDERLYING    GRANTED TO   EXERCISE                         ASSUMED ANNUAL RATES OF    
                               OPTIONS     EMPLOYEES    PRICE OR                      STOCK PRICE APPRECIATION FOR  
           NAME              GRANTED(1)    IN 1999(2)   BASE PRICE       EXPIRATION            OPTION TERM          
-----------------------      ----------    ----------   ----------    --------------  ------------------------------
                                                                                           5% ($)          10% ($)  
-----------------------      ----------    ----------   ----------    --------------  -----------        -----------
                                                                                                                    
Hushang Ansary                     ---           ---         ---                 ---          ---              ---  
Daniel G. Moriarty              45,000         5.10%      $3.875      March 15, 2009     $109,664         $277,909  

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--------------------------------------------------------------------------------------------------------------------
                                               OPTION GRANTS IN 1999                                                
--------------------------------------------------------------------------------------------------------------------
                              NUMBER OF    % OF TOTAL                                                               
                             SECURITIES     OPTIONS                                   POTENTIAL REALIZABLE VALUE AT 
                             UNDERLYING    GRANTED TO   EXERCISE                         ASSUMED ANNUAL RATES OF    
                               OPTIONS     EMPLOYEES    PRICE OR                      STOCK PRICE APPRECIATION FOR  
           NAME              GRANTED(1)    IN 1999(2)   BASE PRICE       EXPIRATION            OPTION TERM          
-----------------------      ----------    ----------   ----------    --------------  ------------------------------
                                                                                           5% ($)          10% ($)  
-----------------------      ----------    ----------   ----------    --------------  -----------        -----------
                                                                                                                    
Munawar H. Hidayatallah        126,000        14.29%      $3.875      March 15, 2009     $307,058         $778,145  
Robert L. Hargrave              50,000         5.67%      $5.000       July 15, 2009     $157,224         $398,436  
Gary W. Stratulate              45,000         5.10%      $3.875      March 15, 2009     $109,664         $277,909  
Arthur C. Teichgraeber             ---           ---         ---                 ---          ---              ---  

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

(1)      The options of Messrs. Moriarty, Stratulate and Hidayatallah are       
         immediately exercisable. The options of Mr. Hargrave become exercisable
      in three equal annual installments beginning on July 15, 1999 for so
         long as Mr. Hargrave remains in continuous employment with the Company.
         In addition, Mr. Hargrave's options become immediately exercisable upon
       his death or disability. All options granted in 1999 expire ten years
 from the date of grant and are subject to early expiration upon
  termination of employment by the optionee or upon termination of
employment by the Company for cause.                          

(2)      Calculated on the basis of an aggregate grant of 901,000 options to    
 purchase shares of Common Stock to Named Executive Officers and
      employees of the Company. All options granted pursuant to our Equity
         Incentive Plan will vest upon certain changes in control, including the
NOI Merger.                                                   

The following table sets forth information regarding the value of the stock 
options granted on December 14, 1998, March 15, 1999 and July 15, 1999 to the   
Named Executive Officers (no stock options were exercised by any of the Named   
Executive Officers in 1999):                                                    

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------------------------
                                        OPTION VALUES AT DECEMBER 31, 1999                                          
--------------------------------------------------------------------------------------------------------------------
                      NAME                                                               VALUE OF UNEXERCISED       
                      ----                        NUMBER OF SECURITIES UNDERLYING            IN-THE-MONEY           
                                                       UNEXERCISED OPTIONS AT                 OPTIONS AT            
                                                         DECEMBER 31, 1999               DECEMBER 31, 1999(1)       
                                                    (EXERCISABLE/UNEXERCISABLE)       (EXERCISABLE/UNEXERCISABLE)   
                                                  --------------------------------    ---------------------------   
                                                                                                                    

Hushang Ansary                                                     816,667/408,333              $357,292/$178,646   
Daniel G. Moriarty(2)                                                85,000/20,000                 $23,125/$8,750   
Munawar H. Hidayatallah(2)                                          159,333/16,667                 $30,333/$7,292   
Robert L. Hargrave                                                   16,667/33,333                            ---   
Gary W. Stratulate                                                   75,000/15,000                 $18,750/$6,563   
Arthur C. Teichgraeber(3)                                                      ---                            ---   

---------------                                                                 
(1)      Market price has been determined based on the NYSE closing price of the
Common Stock on December 31, 1999.                            

(2)      The forfeiture provisions of Messrs. Hidayatallah's and Moriarty's     
   options were retroactively waived by the Board of Directors as of
January 4, 2000.                                              

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(3)      Mr. Teichgraeber's options were allowed to expire under an agreement   
with the Company after he resigned July 15, 1999.             

OTHER COMPENSATION PLANS OR PROGRAMS                                            

      The Company has a cash bonus plan pursuant to which the Company will
pay to Mr. Ansary a cash bonus equal to 4% of the Company's pretax income at the
end of each fiscal year and will reserve an additional 4% of the Company's      
pretax income at the end of each fiscal year for cash bonuses to be paid to     
employees of the Company upon the recommendation of the Chairman of the Board   
and approval thereof by the Compensation Committee of the Board of Directors.   

        In addition, on July 15, 1999, the Compensation Committee of the Board
of Directors approved an incentive plan for Mr. Ansary on the basis of the      
annualized returns on the Company's investments of its excess cash in marketable
securities.                                                                     

        The Company does not maintain any other compensation plans or programs
that apply to the Named Executive Officers, other than 401(k) plans and the     
Incentive Plan described above.                                                 

DIRECTOR COMPENSATION                                                           

     Directors who are not also officers or employees of the Company are
paid annual fees equal to $30,000 plus $1,000 for each Board of Directors       
meeting (but not committee meeting) attended.                                   

EMPLOYMENT AGREEMENTS, SEVERANCE AGREEMENTS AND CHANGE-IN-CONTROL AGREEMENTS    

   No Named Executive Officer has an employment agreement, severance
agreement or change-in-control agreement with the Company or any affiliate.     

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

None.                                                         

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         

  The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of March 24, 2000 by (i) each person    
that owns beneficially more than 5% of the Common Stock, (ii) each director and 
Named Executive Officer (as defined) and (iii) all directors and executive      
officers of the Company as a group. For purposes of the table, a person or group
of persons is deemed to have "beneficial ownership" of any shares as of a given 
date on which such person has the right to acquire such shares within 60 days   
after such given date.                                                          

                                                        [Enlarge/Download Table]

                                  ADDRESS OF BENEFICIAL OWNER OF    NUMBER OF     PERCENTAGE OF  
DIRECTORS AND EXECUTIVE OFFICERS  GREATER THAN 5%                  SHARES OWNED  SHARES OWNED (1)
--------------------------------  ---------------                  ------------  ----------------
                                                                                                 
Hushang Ansary                    IRI International Corporation   22,664,667(2)       54.41%     
                                  1000 Louisiana, Suite 5900                                     
                                  Houston, Texas 77002                                           

Daniel G. Moriarty                                                  98,700(3)           *        

Abdallah A. Andrawos                                                51,666(4)           *        

Nina Ansary                       IRI International Corporation    3,016,667(5)       7.24%      
                                  1000 Louisiana, Suite 5900                                     
                                  Houston, Texas 77002                                           

Frank C. Carlucci                                                  1,060,667(5)       2.55%      

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                                         ADDRESS OF BENEFICIAL OWNER OF      NUMBER OF       PERCENTAGE OF  
DIRECTORS AND EXECUTIVE OFFICERS         GREATER THAN 5%                    SHARES OWNED    SHARES OWNED (1)
--------------------------------         ---------------                    ------------    ----------------
                                                                                                            
Dr. Philip David                                                          1,821,667(3)(6)        4.37%      

Robert L. Hargrave                                                           38,333(7)             *        

Munawar H. Hidayatallah                                                    159,333(4)(8)           *        

Richard D. Higginbotham                                                      15,333(9)             *        

John D. Macomber                                                             16,667(4)             *        

Edward L. Palmer                                                             16,667(4)             *        

Stephen J. Solarz                                                            16,667(4)             *        

Gary W. Stratulate                                                          113,000(10)            *        

Alexander B. Trowbridge                                                      16,667(4)             *        

Arthur C. Teichgraeber                                                          0(8)               *        

J. Robinson West                                                             16,667(4)             *        

All directors and executive officers as                                                                     
a group (16 persons)                                                     26,106,701(2)(11)       62.68%     

CERTAIN OTHER HOLDERS                                                                                       
---------------------                                                                                       
Nader Ansary                             IRI International Corporation      3,000,000(2)         7.20%      
                                         1000 Louisiana, Suite 5900                                         
                                         Houston, Texas 77002                                               

State of Wisconsin Investment Board      P.O. Box 7842                       2,306,100           5.54%      
                                         121 E. Wilson Street                                               
                                         Madison, WI 53707                                                  

*Less than 1%.                                                                  

(1)      Assumes exercise of vested options.                                    

(2)      Mr. Ansary, The Ansary Family Trust, a trust controlled by Mr. Ansary  
        for the benefit, inter alia, of members of his immediate family, and a
        private charitable foundation controlled by Mr. Ansary directly own in
 the aggregate 15,848,000 shares of Common Stock, and options to
     purchase 800,000 additional shares. This total number also includes
   3,000,000 shares of Common Stock owned by Nina Ansary, as well as
       options to purchase an additional 16,667 shares, and 3,000,000 shares
         owned by Nader Ansary. Mr. Ansary disclaims beneficial ownership of the
       shares held by his son, his daughter, the Ansary Family Trust and the
Ansary Foundation.                                            

(3)      This total number includes options to purchase 85,000 shares.  Mr.     
Moriarty jointly owns 13,700 shares with his spouse.          

(4)      This total amount represents options to purchase shares.               

(5)      This total number includes options to purchase 16,667 shares.          

(6)      This total number includes 500,000 shares of Common Stock owned by Dr. 
     David's spouse, of which he disclaims beneficial ownership. It also
includes options to purchase 16,667 shares.                   

(7)      This total number includes options to purchase 33,333 shares.  Mr.     
Hargrave jointly owns 5,000 shares with his spouse.           

(8)      This individual is no longer employed by the Company.                  

(9)      This total number includes options to purchase 13,333 shares.          

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(10)     This total number includes options to purchase 95,000 shares.          

(11)     This number includes options to purchase 1,370,993 shares of Common    
Stock granted pursuant to the Incentive Plan (as defined).    

CHANGE IN CONTROL                                                               

See the discussion under Item 1 relating to the NOI Merger. The consummation of 
the NOI Merger will trigger a change in control at a future date, though no     
assurances can be given that the NOI Merger will be consummated.                

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         

         Mr. Carlucci, an outside director of the Company, has an oral agreement
with Mr. Ansary regarding a potential contract between the Company and a        
Ukrainian company.  If Mr. Carlucci successfully assists the Company in         
obtaining this contract, he will receive approximately 0.5% of the contract     
amount.                                                                         

     Prior to the closing of the NOI Merger, Mr. Ansary has the right to
assume the lease of our executive offices located at Suite 5900, 1000 Louisiana 
Houston, Texas. In addition, he has the right to purchase certain fixed assets, 
fixtures, furniture and other items located at such offices for their aggregate 
book value, and assume the retail automobile lease contracts for three          
automobiles, for a total amount of approximately $570,000.                      

PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K        

(a)      Consolidated Financial Statements                                      

    See Index to Consolidated Financial Statements and Schedules which
appears on page F-1 hereof.                                   

(b)      Reports on Form 8-K                                                    

None.                                                         

(c)      Exhibits                                                               

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

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SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) 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.                       

 IRI INTERNATIONAL CORPORATION

By: /s/ Robert L. Hargrave  
  ----------------------
                              Robert L. Hargrave, Chief Accounting and Financial
                     Officer and Vice Chairman of the Board of
Directors           

Date: March 30, 2000

      Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the     
registrant and in the capacities and on the dates indicated.                    

SIGNATURES

                                                                [Download Table]
                                                                            
                           *                                                
-----------------------------------------------------                       
Hushang Ansary, Chairman of the Board and              Date:  March 30, 2000
   Chief Executive Officer                                                  

                           *                                                
-----------------------------------------------------                       
Daniel G. Moriarty, Director                           Date:  March 30, 2000

/s/ Robert L. Hargrave                                                      
-----------------------------------------------------                       
Robert L. Hargrave, Vice Chairman of the Board,        Date:  March 30, 2000
and Chief Accounting and Financial Officer                                  

                           *                                                
-----------------------------------------------------                       
Abdallah Andrawos, Secretary and Director              Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
Gary W. Stratulate, President, Chief Operating         Date:  March 30, 2000
   Officer and Director                                                     

                           *                                                
-----------------------------------------------------                       
Richard D. Higginbotham, Director                      Date:  March 30, 2000

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                                                                [Download Table]
                                                                            
                           *                                                
-----------------------------------------------------                       
Nina Ansary, Director                                  Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
Frank C. Carlucci, Director                            Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
Dr. Philip David, Director                             Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
John D. Macomber, Director                             Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
Edward L. Palmer, Director                             Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
Stephen J. Solarz, Director                            Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
Alexander B. Trowbridge, Director                      Date:  March 30, 2000

                           *                                                
-----------------------------------------------------                       
J. Robinson West, Director                             Date:  March 30, 2000

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INDEX TO EXHIBITS 

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                                          
NO.               DESCRIPTION                                                                                    
--------------------------------------------------------------------------------------------------------         
                                                                                                                 
*3.1              Form of Restated Certificate of Incorporation of IRI International Corporation.                

*3.2              Certificate of Ownership and Merger of ESI with the Company filed on October 14, 1997.         

*3.3              Amended and Restated By-Laws of the Company.                                                   

*4.2              Form of Registration Rights Agreement between the Company and its current stockholders.        

*10.1             Form of Indemnification Agreement among the Company and its officers and directors.            

*10.2             Employment Agreement, dated as of April 17, 1997, between Cardwell and A.C. Teichgraeber and   
                  joined by the Company.                                                                         

10.3              Credit Agreement, dated as of December 29, 1999, among the Company and Bank One, Texas, N.A.   

*10.5             Asset Purchase Agreement, dated as of January 20, 1997, by and among Bowen Tools,              
                  Inc.-Delaware, Bowen, Air Liquide and the Company.                                             

*10.6             Acquisition Agreement, dated as of March 20, 1997, by and among A.C. Teichgraeber,             
                  Teichgraeber Family Limited Partnership, L.P., Arthur C. Teichgraeber Charitable Remainder     
                  Trust, Greenwood Pipe and Threading Company, EDCO Drilling Company Inc. and the Company.       

*10.7             Equity Incentive Plan of the Company.                                                          

*10.8             Form of Nonqualified Stock Option Agreement.                                                   

*10.9             Collective Bargaining Agreement dated as of July 8, 1997 between Bowen and General Drivers,    
                  Warehousemen, Helpers, Production Maintenance and Service Employees, Local Union No. 968.      

*21               List of Subsidiaries of the Company.                                                           

23.1              Consent of KPMG LLP.                                                                           

24                Excerpts from Minutes of Board Meeting held on March 14, 2000 relating to Power of Attorney    
                  for Robert L. Hargrave.                                                                        

27.1              Financial Data Schedule of the Company.                                                        

*                 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.                              

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        [Enlarge/Download Table]

                                                                                                              Page
                                                                                                              ----
                                                                                                                  
Independent Auditors' Report...................................................................................F-2

Consolidated Balance Sheets -- December 31, 1999 and 1998......................................................F-3

Consolidated Statements of Operations -- Years ended December 31, 1999, 1998 and 1997..........................F-4

Consolidated Statements of Shareholders' Equity and Comprehensive Income -- Years ended December 31, 1999,        
1998, and 1997.................................................................................................F-5

Consolidated Statements of Cash Flows -- Years ended December 31, 1999, 1998 and 1997..........................F-6

Notes to Consolidated Financial Statements.....................................................................F-7

        All schedules are omitted as the required information is applicable or
presented in the consolidated financial statements or related notes.            

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INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors                                      
of IRI International Corporation:                                     

We have audited the accompanying consolidated balance sheets of IRI             
International Corporation and Subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, shareholders' equity and     
comprehensive income, and cash flows for each of the years in the three-year    
period ended December 31, 1999. These consolidated financial statements are the 
responsibility of the Company's management. Our responsibility is to express an 
opinion on these consolidated 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 consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of IRI International   
Corporation and Subsidiaries as of December 31, 1999 and 1998, and the results  
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.                                                                     

KPMG LLP                                                                        

Houston, Texas                                                                  
March 8, 2000                                                                   

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

(In thousands, except share and per share amounts)

                                                        [Enlarge/Download Table]

                                  ASSETS                                                 December 31,         
                                                                              ------------------------------- 
                                                                                 1999                  1998   
                                                                              ----------            --------- 
                                                                                                              
Current assets:                                                                                               
 Cash and cash equivalents                                                    $  35,688             $  37,475 
 Marketable securities, at fair value (cost of $13,437 at                                                     
  December 31, 1999 and $3,743 at December 31, 1998)                             14,686                 3,000 
 Accounts receivable, less allowance for doubtful accounts of $1,740 at                                       
  December 31, 1999 and $960 at December 31, 1998                                14,476                29,147 
 Income tax receivable                                                            2,717                     - 
 Inventories                                                                     92,572               109,151 
 Costs and estimated earnings in excess of billings on uncompleted                                            
  contracts                                                                       1,400                 4,429 
 Deferred income tax assets                                                       1,388                     - 
 Other current assets                                                             1,242                 2,381 
                                                                               ---------             -------- 
     Total current assets                                                       164,169               185,583 

 Property, plant and equipment, net                                              45,697                49,192 
 Deferred income tax assets                                                       3,945                     - 
 Other assets                                                                     3,282                 4,391 
                                                                               ---------             -------- 
                                                                              $ 217,093             $ 239,166 
                                                                               =========             ======== 

                      LIABILITIES AND SHAREHOLDERS' EQUITY                                                    

Current liabilities:                                                                                          
 Notes payable                                                                $       1             $      16 
 Accounts payable                                                                 5,256                 8,094 
 Accrued liabilities                                                              4,332                 6,018 
 Customer advances                                                                1,938                 3,303 
 Foreign income tax payable                                                         996                     - 
 Other liabilities                                                                1,498                 3,644 
 Current installments of obligation under capital lease                             299                   262 
                                                                               ---------             -------- 
     Total current liabilities                                                   14,320                21,337 

Negative goodwill, less accumulated amortization                                      -                 4,026 
Obligation under capital lease, less current installments                             -                   319 
Accrued postretirement benefits other than pensions                               1,427                 1,562 
Pension liability                                                                     -                 1,586 
Other long-term liabilities                                                          46                    77 
                                                                               ---------             -------- 
     Total liabilities                                                           15,793                28,907 
                                                                               ---------             -------- 
Shareholders' equity                                                                                          
 Preferred stock, $1.00 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 in 1999 and 1998                                    399                   399 
 Additional paid-in capital                                                     168,884               168,514 
 Retained earnings                                                               32,403                43,308 
 Accumulated other comprehensive loss                                              (386)               (1,962)
                                                                               ---------             -------- 
     Total shareholders' equity                                                 201,300               210,259 

     Commitments and contingencies                                                                            
                                                                               ---------             -------- 
                                                                              $ 217,093             $ 239,166 
                                                                               =========             ======== 

See accompanying notes to consolidated financial statements.

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                                                  Years ended December 31,               
                                             ----------------------------------------------------------- 
                                                1999                     1998                     1997   
                                             ---------               -----------              -----------
                                                                                                         
Revenues                                     $ 92,190                 $ 175,045                $ 185,366 
Cost of goods sold                             83,156                   126,626                  139,204 
                                             ---------               -----------              -----------
   Gross profit                                 9,034                    48,419                   46,162 

Selling and administrative expense             27,831                    30,526                   23,543 
Restructuring charge                            1,779                       590                        - 
                                             ---------               -----------              -----------
   Operating income (loss)                    (20,576)                   17,303                   22,619 
                                             ---------               -----------              -----------
Other income (expense):                                                                                  
 Interest income                                1,539                     2,213                      746 
 Interest expense                                (363)                     (360)                  (8,762)
 Other, net                                        23                    (3,491)                     718 
                                             ---------               -----------              -----------
                                                1,199                    (1,638)                  (7,298)
                                             ---------               -----------              -----------
   Income (loss) before income taxes                                                                     
      and extraordinary item                  (19,377)                   15,665                   15,321 

Income tax (expense) benefit                    8,472                    (3,283)                  (2,786)
                                             ---------               -----------              -----------
   Income (loss) before extraordinary item    (10,905)                   12,382                   12,535 

Extraordinary item - extinguishment of debt                                                              
 (net of tax benefit of $841)                       -                         -                   (1,512)
                                             ---------               -----------              -----------
   Net income (loss)                         $(10,905)                $  12,382                $  11,023 
                                             =========               ===========              ===========
Income (loss) per common share - basic                                                                   
 and diluted:                                                                                            
  Income (loss) before extraordinary item       (0.27)                $    0.31                $    0.40 
  Extraordinary item                                -                         -                    (0.05)
                                             ---------               -----------              -----------
   Net income (loss) per common share -                                                                  
       basic and diluted                     $  (0.27)                $    0.31                $    0.35 
                                             =========               ===========              ===========
Weighted-average shares outstanding -                                                                    
 basic and diluted                             39,900                    39,900                   31,275 
                                             =========               ===========              ===========

See accompanying notes to consolidated financial statements.

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

(In thousands)

                                                        [Enlarge/Download Table]

                                                               Common                              Accumulated                
                                                                stock     Additional                  other          Total    
                                           Preferred  Common  $0.01 par    paid-in     Retained   comprehensive  shareholders'
                                             shares   shares    value      capital     earnings   income (loss)     equity    
                                           ---------  ------  ---------  -----------  ---------   -------------  -------------
                                                                                                                              
Balances at December 31, 1996                      -  30,000     $ 300   $   4,700    $  19,903       $      -     $  24,903  
 Initial public offering, net of costs             -   9,900        99     163,838            -              -       163,937  
 Comprehensive income:                                                                                                        
  Net income                                       -       -         -           -       11,023              -        11,023  
  Change in minimum pension liability                                                                                         
   adjustment                                      -       -         -           -            -         (1,457)       (1,457) 
                                           ---------  ------  ---------  -----------  ---------   -------------  -------------
 Total comprehensive income                                                                                            9,566  
                                           ---------  ------  ---------  ----------   ---------   -------------  ------------ 
Balances at December 31, 1997                      -  39,900       399     168,538       30,926         (1,457)      198,406  
 Other                                             -       -         -         (24)           -              -           (24) 
 Comprehensive income:                                                                                                        
  Net income                                       -       -         -           -       12,382              -        12,382  
  Change in minimum pension liability                                                                                         
   adjustment                                      -       -         -           -            -           (531)         (531) 
  Foreign currency translation adjustment          -       -         -           -            -             26            26  
                                           ---------  ------  ---------  -----------  ---------   -------------  -------------
 Total comprehensive income                                                                                           11,877  
                                           ---------  ------  ---------  ----------   ---------   -------------  ------------ 
Balance at December 31, 1998                       -  39,900       399     168,514       43,308         (1,962)      210,259  
 Other                                             -       -         -         370            -              -           370  
 Comprehensive loss:                                                                                                          
  Net loss                                         -       -         -           -      (10,905)             -       (10,905) 
  Change in minimum pension liability                                                                                         
   adjustment                                      -       -         -           -            -          1,988         1,988  
  Foreign currency translation adjustment          -       -         -           -            -           (412)         (412) 
                                           ---------  ------  ---------  -----------  ---------   -------------  -------------
 Total comprehensive loss                                                                                             (9,329) 
                                           ---------  ------  ---------  ----------   ---------   -------------  ------------ 
Balance at December 31, 1999                       -  39,900     $ 399   $ 168,884    $  32,403       $   (386)    $ 201,300  
                                           =========  ======  =========  ==========   =========   =============  ============ 

See accompanying notes to consolidated financial statements.

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands)

                                                        [Enlarge/Download Table]

                                                                              Years ended December 31,          
                                                                       ---------------------------------------- 
                                                                          1999             1998          1997   
                                                                       -----------      ---------     --------- 
                                                                                                                
Cash flows from operating activities:                                                                           
 Net income (loss)                                                     $  (10,905)      $ 12,382      $ 11,023  
 Adjustments to reconcile net income to net cash                                                                
   provided by operations:                                                                                      
   Extraordinary item - extinguishment of debt                                  -             -          1,512  
   Depreciation and amortization                                            5,069          4,032         4,871  
   Amortization of goodwill                                                 1,254          1,255           880  
   Amortization of negative goodwill                                       (4,026)        (5,367)       (5,367) 
   Change in employee benefit accounts                                     (1,942)           728           129  
   Stock option compensation expense                                          370            499            -   
   Deferred income tax                                                     (5,333)            -             -   
   Gain on sale of assets                                                      (2)            -          (372)  
   Changes in assets and liabilities, net of effects of acquisitions:                                           
          Marketable securities                                           (11,686)         5,218        (8,218) 
          Accounts receivable                                              14,671          3,983       (14,772) 
          Income tax receivable                                            (2,717)            -             -   
          Inventories                                                      16,579         (8,250)      (21,058) 
          Other current assets                                              4,168          3,487        (6,918) 
          Other noncurrent assets                                              76            190          (113) 
          Accounts payable and accrued liabilities                         (4,524)       (13,685)       17,682  
          Foreign income tax payable                                          996             -             -   
          Customer advances and other liabilities                          (1,981)        (5,631)          593  
                                                                       -----------      ---------     --------- 
          Net cash flows provided by (used in) operations                      67         (1,159)      (20,128) 
                                                                       -----------      ---------     --------- 
Cash flows from investing activities:                                                                           
 Capital expenditures                                                      (2,178)       (10,005)       (5,755) 
 Proceeds from sale of assets                                                 606              -           523  
 Acquisition of Bowen net assets, net of cash acquired                          -              -       (77,693) 
 Acquisition of Cardwell net assets, net of cash acquired                       -              -       (12,574) 
                                                                       -----------      ---------     --------- 
         Net cash flows provided by (used in) investing activities          (1,572)       (10,005)      (95,499)
                                                                       -----------      ---------     --------- 
Cash flows from financing activities:                                                                           
 Payments on capital lease obligation                                         (282)          (226)         (312)
 Proceeds from notes payable                                                    -              -        113,482 
 Debt issuance costs                                                            -              -         (3,971)
 Payments on notes payable                                                      -             (85)      116,671)
 Issuance of common stock                                                       -              -        163,937 
 Other                                                                          -            (523)           -  
                                                                       -----------      ---------     --------- 
         Net cash flows provided by (used in) financing activities            (282)          (834)      156,465 
                                                                       -----------      ---------     --------- 
Increase (decrease) in cash and cash equivalents                            (1,787)       (11,998)       40,838 

Cash and cash equivalents at beginning of year                              37,475         49,473         8,635 
                                                                       -----------      ---------     --------- 
         Cash and cash equivalents at end of year                      $    35,688      $  37,475     $  49,473 
                                                                       -----------      ---------     --------- 
Supplemental cash flow information:                                                                             
 Interest paid                                                         $       363      $     360     $   8,762 
                                                                       ===========      =========     ========= 
 Income tax paid (refunded)                                            $   (1,656)      $   5,219     $     158 
                                                                       ===========      =========     ========= 

See accompanying notes to consolidated financial statements.

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      GENERAL                                                                

         IRI International Corporation (IRI or Company), a Delaware corporation,
       was formed on July 30, 1985, through the combination of Ingersol-Rand
        Oilfield Products Company, a wholly-owned subsidiary of Ingersoll-Rand
        Company, established August 1, 1980, and the Ideco Division of Dresser
     Industries, Inc. On November 19, 1997, the Company sold 9.9 million
      shares of its common stock through an initial public offering (IPO).
 Net proceeds totaled approximately $163.9 million and were used
      partially to repay debt incurred in connection with the acquisitions
(see notes 3 and 6).                                          

      The Company manufactures and sells a full line of oil and gas mobile
 well servicing and drilling rigs, deep oil and gas skid-mounted
        drilling rigs, associated drilling equipment (Oilfield Equipment), and
specialty steel products (Specialty Steel). The Company also  
manufactures and markets fishing and drilling tools, power and
         wireline/pressure control equipment used in the drilling and completion
   of oil and gas wells. Raw materials are readily available and the
Company is not dependent upon a single or a few suppliers.    

    On September 20, 1994, all of the outstanding common and preferred
      stock of IRI was acquired by Energy Services International (ESI) for
 cash of $5 million. The acquisition has been recorded using the
         purchase method of accounting and the purchase price has been allocated
 to the assets acquired and liabilities assumed based upon their
         estimated fair values at the date of the acquisition. The excess of the
       fair value of net assets acquired over consideration paid was applied
      against nonmonentary assets (property, plant and equipment) reducing
       the balances at the acquisition date to zero. The remaining excess of
        the fair value of net assets acquired over consideration paid of $26.8
         million was recorded as negative goodwill and was being amortized using
       the straight-line method over 5 years. Negative goodwill amortization
       of $4.0 million for the year ended December 31, 1999 and $5.4 million
        for each of the years ended December 31, 1998 and 1997, is included in
   cost of goods sold in the accompanying consolidated statements of
operations.                                                   

   IRI was subsequently merged into ESI in October 1997. ESI was the
 surviving corporation and changed its name to IRI International
Corporation.                                                  

(2)      SIGNIFICANT ACCOUNTING POLICIES                                        

(a)      PRINCIPLES OF CONSOLIDATION                          

                 The consolidated financial statements include the accounts of
                  the Company and its subsidiaries. All significant intercompany
     balances and transactions have been eliminated in
consolidation.                              

(b)      STATEMENTS OF CASH FLOWS                             

               Cash equivalents of $35,700,000 and $37,500,000 at December
                  31, 1999 and 1998, respectively, consisted of interest-bearing
               cash deposits. For purposes of the statement of cash flows,
               the Company considers all cash and short-term highly liquid
                debt instruments with original maturities of three months or
less to be cash equivalents.                

                During the years ended December 31, 1999, 1998 and 1997, the
                Company entered into capital lease obligations of $-0-, $-0-
and $309,000, respectively.                 

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(c)      MARKETABLE SECURITIES                                

                  Marketable securities at December 31, 1999 and 1998 consist of
                  corporate equity securities. The Company classifies its equity
            securities as trading securities. Trading securities are
                  bought and held principally for the purpose of selling them in
            the near term and are recorded at fair value. Unrealized
           holding gains (losses) of $1,249,000 and $(743,000) are
                  included in other income for the years ended December 31, 1999
and 1998, respectively.                     

(d)      INVENTORIES                                          

                  Inventories are stated at the lower of cost or market. Cost is
                 determined using standard costs which approximate actual cost
                on a first-in, first-out basis for all inventories excluding
                oilfield equipment work-in-process, parts and raw materials,
              which are recorded at actual cost on a first-in, first-out
             basis. Work-in-process inventories related to fixed price
             contracts are stated at the accumulated cost of material,
                 labor and manufacturing overhead, less the estimated costs of
units delivered.                            

(e)      PROPERTY, PLANT AND EQUIPMENT                        

                  Depreciation of property, plant and equipment is provided over
               the estimated service lives of assets principally using the
        straight-line method. Maintenance, repairs and minor
             replacements are charged to operations as incurred; major
          repairs, replacements or improvements are capitalized.

                Long-lived assets and certain identifiable intangible assets
             are reviewed for impairment whenever events or changes in
               circumstances indicate that the carrying amount of an asset
               may not be recoverable. Recoverability of assets to be held
                  and used is measured by a comparison of the carrying amount of
                 an asset to future net cash flows expected to be generated by
                the asset. If such assets are considered to be impaired, the
                  impairment to be recognized is measured by the amount by which
             the carrying amount exceeds the fair value of the assets.
             Assets to be disposed of are reported at the lower of the
     carrying amount or fair value less costs to sell.

(f)      INCOME TAXES                                         

                Income taxes are accounted for under the asset and liability
                  method. Deferred tax assets and liabilities are recognized for
           the future tax consequences attributable to differences
                between the financial statement carrying amounts of existing
             assets and liabilities and their respective tax bases and
             operating loss and tax credit carryforwards. Deferred tax
               assets and liabilities are measured using enacted tax rates
             expected to apply to taxable income in the years in which
               those temporary differences are expected to be recovered or
                 settled. The effect on deferred tax assets and liabilities of
               a change in tax rates is recognized in income in the period
that includes the enactment date.           

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(g)      REVENUE RECOGNITION                                  

                  The Company recognizes construction contract revenues for rigs
                 and significant components using the percentage-of-completion
               method. Under the percentage-of-completion method, revenues
         and profits are recognized based on the percentage of
                 completion throughout the performance period of the contract.
                 The percentage-of-completion is calculated based on the ratio
                  of contract costs incurred to date to total estimated contract
             costs after providing for all known or anticipated costs.
            Costs include material, direct labor and engineering and
            manufacturing overhead. Selling expenses and general and
                  administrative expenses are charged to operations as incurred.
           The effect of changes in estimates of contract costs is
         recorded currently. If estimates of costs to complete
                  contracts indicate a loss, provision is made currently for the
              total loss anticipated. All remaining revenue is generally
recorded when the equipment is shipped.     

        Costs and estimated earnings in excess of billing on
             uncompleted contracts represent revenues earned under the
                  percentage-of-completion method but not yet billable under the
               terms of the contract. Amounts are billable under contracts
                generally upon shipment of the products or completion of the
                  contracts. Included in revenues and cost of goods sold for the
               year ended December 31, 1999 are $4,812,000 and $3,412,000,
               respectively, related to uncompleted contracts ($1,400,000,
               net) at December 31, 1999. Included in revenues and cost of
       goods sold for the year ended December 31, 1998 are
         $14,218,000 and $9,789,0000, respectively, related to
                uncompleted contracts ($4,429,000 net) at December 31, 1998.

(h)      INCOME (LOSS) PER COMMON SHARE                       

                Basic income (loss) per common share is computed by dividing
             net income (loss) available to common shareholders by the
                weighted average number of common shares outstanding for the
                  period. Diluted income per common share reflects the potential
                 dilution that could occur if securities or other contracts to
              issue common stock were exercised or converted into common
               stock or resulted in the issuance of common stock that then
           shared in the earnings of the entity. For the years and
                  quarters presented herein, basic and diluted income (loss) per
                  common share are the same. Options outstanding at December 31,
           1998 and 1997 are antidilutive as the exercise price is
               greater than the average market price during 1998 and 1997,
              respectively. Options outstanding at December 31, 1999 are
              antidilutive due to the net loss incurred during the year.

                  Securities excluded from the computation of diluted income per
               common share for 1999 that could be potentially dilutive in
                 the future consist of options to purchase 2,426,000 shares of
common stock at December 31, 1999.          

(i)      FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS 

                 The Company invests its excess cash in financial instruments,
                  primarily overnight investments and money market mutual funds.
             These financial instruments could potentially subject the
          Company to concentrations of credit risk; however, the
              Company's management considers the financial stability and
                creditworthiness of a financial institution before investing
              the Company's funds. The carrying amounts of the financial
               instruments in the accompanying financial statements (cash,
            accounts receivable and payables) approximate fair value
             because of the short maturities of these instruments. The
         capital lease obligation bears interest at rates that
      approximate market rates, thus the carrying amount
approximates estimated fair value.          

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IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                A substantial portion of the Company's customers are engaged
               in the energy industry. This concentration of customers may
                impact the Company's overall exposure to credit risk, either
                positively or negatively, in that customers may be similarly
                affected by changes in economic and industry conditions. The
                 Company performs ongoing credit evaluations of its customers.
               The Company maintains reserves for potential credit losses,
                 and actual losses have historically been within the Company's
           expectations. Foreign sales also present various risks,
               including risks of war, civil disturbances and governmental
              activities that may limit or disrupt markets, restrict the
              movement of funds or result in the deprivation of contract
                rights or the taking of property without fair consideration.
              Most of the Company's foreign sales, however, are to large
                  international companies or are secured by letters of credit or
similar arrangements.                       

(j)      USE OF ESTIMATES                                     

              The preparation of financial statements in conformity with
                generally accepted accounting principles requires management
              to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities and disclosure of contingent
                  assets and liabilities at the date of the financial statements
                and the reported amounts of revenues and expenses during the
            reporting period. Actual results could differ from those
estimates.                                  

(k)      COMPREHENSIVE INCOME                                 

         On January 1, 1998, the Company adopted SFAS No. 130,
            Reporting Comprehensive Income. SFAS No. 130 establishes
             standards for reporting and presentation of comprehensive
        income and its components in a full set of financial
               statements. Comprehensive income consists of net income and
                net unrealized gains (losses) on securities and is presented
              in the consolidated statements of stockholder's equity and
                comprehensive income. The statement requires only additional
                 disclosures in the consolidated financial statements; it does
             not affect the Company's financial position or results of
              operations. Prior year financial statement information has
                been reclassified to conform to the requirements of SFAS No.
130.                                        

(l)      RECENT ACCOUNTING PRONOUNCEMENTS                     

        Statement of Financial Accounting Standards No. 133,
                 Accounting for Derivative Instruments and Hedging Activities,
                  was issued by the Financial Accounting Standards Board in June
             1998. SFAS 133 standardizes the accounting for derivative
             instruments, including derivative instruments embedded in
                 other contracts. Under the standard, entities are required to
                  carry all derivative instruments in the statement of financial
                  position at fair value. The accounting for changes in the fair
            value (i.e., gains or losses) of a derivative instrument
              depends on whether it has been designated and qualifies as
                part of a hedging relationship and, if so, on the reason for
             holding it. If specified conditions are met, entities may
            elect to designate a derivative instrument as a hedge of
               exposures to changes in fair values, cash flows, or foreign
                currencies. If the hedged exposure is a fair value exposure,
                  the gain or loss on the derivative instrument is recognized in
                 earnings in the period of change together with the offsetting
                  loss or gain on the hedged item attributable to the risk being
               hedged. If the hedged exposure is a cash flow exposure, the
           effective portion of the gain or loss on the derivative
            instrument is reported initially as a component of other
            comprehensive income (outside earnings) and subsequently

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              reclassified into earnings when the forecasted transaction
                 affects earnings. Any amounts excluded from the assessment of
                  hedge effectiveness, as well as the ineffective portion of the
                 gain or loss, is reported in earnings immediately. Accounting
                for foreign currency hedges is similar to the accounting for
                 fair value and cash flow hedges. If the derivative instrument
                is not designated as a hedge, the gain or loss is recognized
in earnings in the period of change.        

                  The Company will adopt SFAS 133 beginning January 1, 2001. The
                Company has not yet determined the impact that SFAS 133 will
                  have on the financial statements. Management believes that the
                 determination will not be meaningful until closer to the date
of initial adoption.                        

(m)      RECLASSIFICATIONS                                    

                Certain prior year amounts were reclassified to conform with
current year presentation.                  

(3)      ACQUISITIONS                                                           

    On March 31, 1997, the Company acquired certain assets and assumed
        liabilities of Bowen Tools, Inc. (Bowen), a wholly-owned subsidiary of
         the French chemical concern L'Air Liquide, for a total 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
      acquisitions were financed through a $65 million senior secured term
         loan facility and $31 million of interim senior subordinated increasing
        rate notes. The notes outstanding under the term loan facility and the
         senior subordinated increasing rate notes were repaid with the proceeds
from the Company's equity offering (see note 1).              

   Bowen, headquartered in Houston, Texas, designs, manufactures and
         markets fishing and drilling tools, power and wireline/pressure control
     equipment used in the drilling and completion of oil and gas wells.
      Cardwell, headquartered in El Dorado, Kansas, manufactures and sells
         drilling rigs, related oilfield equipment and supplies predominantly to
foreign countries.                                            

  The acquisitions have been recorded using the purchase method of
     accounting and results of operations of the acquired companies have
       been included in the consolidated statement of operations of IRI from
     the dates of the respective acquisitions. The cost of the Bowen and
      Cardwell acquisitions have been allocated to the assets acquired and
      liabilities assumed based on their respective fair values as follows
(in thousands):                                               

                                                                [Download Table]
                                                               
Current assets                              $        57,389    
Property, plant and equipment                        37,647    
Excess of cost over fair value of net                          
    tangible assets of businesses                              
    acquired                                          6,096    
Other assets                                            812    
Current liabilities                                 (11,677)   
                                              -----------------
          Total                             $        90,267    
                                              =================

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  The excess of consideration given over the fair value of the net
     tangible assets acquired of $6,096,000 is being amortized over five
years using the straight-line method.                         

(4)      INVENTORIES                                                            

A summary of inventories follows (in thousands):              

                                                                [Download Table]

                              DECEMBER 31,       DECEMBER 31,    
                                  1999               1998        
                            -----------------  ------------------
                                                                 

Raw materials and supplies  $          35,524   $          46,743
Work in process                        13,929              21,241
Finished goods                         43,119              41,167
                            -----------------  ------------------

      Total                 $          92,572   $         109,151
                            =================  ==================

(5)      PROPERTY, PLANT AND EQUIPMENT                                          

    A summary of property, plant and equipment follows (in thousands):

                                                                [Download Table]

                                            DECEMBER 31,      DECEMBER 31,     
                                                1999              1998         
                                          ----------------- ------------------ 
                                                                               

Land and land improvements                $           2,823  $           2,910 
Buildings                                             8,169              7,731 
Machinery and equipment                              48,041             46,965 
                                          ----------------- ------------------ 
                                                     59,033             57,606 
Less accumulated depreciation                       (13,336)            (8,414)
                                          ----------------- ------------------ 

      Property, plant and equipment, net  $          45,697  $          49,192 
                                          ================= ================== 

         Machinery and equipment includes capitalized lease assets of $1,119,000
at December 31, 1999 and 1998.                                                  

(6)      NOTES PAYABLE                                                          

      In connection with the acquisitions described in note 3, the Company
       entered into a $65.0 million senior secured term loan facility due in
       quarterly installments beginning June 30, 1997 through March 31, 2002
      and a $31.0 million interim senior subordinated increasing rate note
       due March 31, 1998. Amounts outstanding under these notes were repaid
      with proceeds from the Company's initial public offering in November
    1997. The extinguishment of this debt resulted in an extraordinary
   charge of $1,512,000 consisting of unamortized financing costs of
$2,353,000 and income tax benefit of $841,000.                

 The Company had a $9.7 million revolving credit facility with a
maturity date of March 31, 2000. Amounts outstanding under the
    revolving credit facility were secured by substantially all of the
         assets of the Company and accrued interest at a rate per annum equal to
   the one, two, three or six-month LIBOR plus 2-3/4%. The revolving
    credit facility agreement contained provisions, among others, that
      restricted incurrence of indebtedness, guarantees, acquisitions, and
 distributions to shareholders, and required the Company to meet
specified financial maintenance tests.                        

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         On December 29, 1999, the revolving credit facility was replaced with a
        new $10.0 million revolving credit facility, which matures on December
      28, 2000 and provides exclusively for bank guarantees and commercial
  and standby letters of credit. The new revolving credit facility
  agreement contains provisions, among others, that limit liens on
     accounts receivables, inventory and related general intangibles and
         that require the Company to meet specified financial maintenance tests.
         At December 31, 1999, approximately $5.9 million was available for bank
 guarantees and letters of credit under the new revolving credit
       facility. The Company had no outstanding indebtedness at December 31,
1999.                                                         

(7)      SHAREHOLDERS' EQUITY                                                   

         On October 14, 1997, the Company merged into ESI. ESI was the surviving
       corporation and changed its name to IRI International Corporation. At
the time of the merger, ESI had 100 common shares issued and  
      outstanding, no liabilities and its sole asset was its investment in
       the Company. As a result of the merger, each share of common stock of
     ESI was converted into 300,000 shares of the surviving corporation,
    each treasury share of common stock was canceled and each share of
        preferred stock of the Company, including accrued and unpaid dividends
        thereon, was canceled. The authorized capital stock of the Company was
         increased to 100,000,000 common shares and 25,000,000 preferred shares.
        The consolidated financial statements, including all references to the
  number of shares of common and preferred stock and all per share
     information, have been adjusted to reflect the merger and the other
changes in capital structure on a retroactive basis.          

(8)      COMPREHENSIVE INCOME (LOSS)                                            

   The accumulated balances for each classification of comprehensive
income (loss) are as follows (in thousands):                  

                                                        [Enlarge/Download Table]

                                                                    ACCUMULATED       
                              FOREIGN           MINIMUM                OTHER          
                             CURRENCY           PENSION            COMPREHENSIVE      
                               ITEMS           LIABILITY           INCOME (LOSS)      
                         ------------------ -----------------  -----------------------
                                                                                      

Beginning balance      $             26     $       (1,988)    $        (1,962)       
Current period change              (412)             1,988               1,576        
                         ------------------ ----------------   -----------------------

Ending balance         $           (386)    $            -     $          (386)       
                         ================== =================  =======================

(9)      STOCK OPTIONS                                                          

     Prior to its initial public stock offering, the Company granted its
     Directors and certain of its officers and employees an aggregate of
     1,933,000 options to purchase shares of common stock. Directors not
      employed by the Company received options to purchase an aggregate of
      160,000 shares of common stock having an exercise price equal to the
     initial public offering price. The options granted to Directors not
         employed by the Company vest as to one-half of the option shares on the
       effective date of the Offering and as to a further one-quarter of the
      option shares on the first and second anniversaries of the effective
date of the Offering. Certain executive officers and employees

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     received options to purchase an aggregate of 1,773,000 shares of common
       stock having an exercise price equal to the greater of the initial public
       offering price and the fair market value of the option shares on the date
      such options vest. The options granted to certain executive officers and
    employees generally vest as to one-third of the option shares upon the
 effective date of the Offering and as to a further one-third of the
       option shares on the first and second anniversaries of the effective date
       of the Offering. During 1998, the Company cancelled 1,931,000 outstanding
    stock options and granted 1,645,000 new options with an exercise price
      equal to the fair market value of the common stock at grant date. During
1999, the Company granted an aggregate of 901,000 options with an 
  exercise price equal to the fair market value of the common stock at
  grant date to certain executive officers and employees. In addition,
70,000 options were forfeited by employees that terminated their  
employment with the Company.                                      

    A summary of the status of the Company's fixed stock option plan as of
   December 31, 1999 and 1998 and changes during the years then ended is
presented below:                                                  

                                                        [Enlarge/Download Table]

                                                                           WEIGHTED       
                                                       SHARES               AVERAGE       
                  FIXED OPTIONS                        (000)            EXERCISE PRICE    
--------------------------------------------------  --------------   ---------------------
                                                                                          
Outstanding at December 31, 1996                                -   $            -        
Granted                                                     1,933            18.00        
Forfeited                                                      (2)           18.00        
                                                    --------------   ---------------------

Outstanding at December 31, 1997                            1,931            18.00        

Granted                                                     1,645             3.56        
Cancelled                                                  (1,931)          (18.00)       
                                                    --------------   ---------------------

Outstanding at December 31, 1998                            1,645             3.56        

Granted                                                       901             3.97        
Forfeited                                                     (70)           (3.56)       
                                                    ==============   =====================

Outstanding at December 31, 1999                            2,476   $         3.71        
                                                    ==============   =====================

Options exercisable at December 31, 1999                    1,526   $         3.66        
                                                    ==============   =====================

Weighted average fair value of                                                            
     options granted during 1999                                    $         3.97        
                                                                     =====================

    The weighted average remaining contracted life of stock options at
December 31, 1999 was approximately nine years.               

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       The Company applies APB Opinion 25 in accounting for its stock option
       plan. Accordingly, no compensation cost has been recognized for stock
    options granted to employees. Compensation expense is recorded for
      options granted to nonemployee directors based on the estimated fair
       value of the options on the date of grant. The compensation cost that
  has been charged against income for nonemployee director options
         granted was $370,000 and $499,000 for the years ended December 31, 1999
       and 1998, respectively. Had compensation cost for the Company's stock
         option plans been determined based on the fair value at the grant dates
      for awards to employees under the Plan consistent with the method of
     SFAS No. 123, the Company's net income (loss) and income (loss) per
         common share for the years ended December 31, 1999, 1998 and 1997 would
have been reduced to the pro forma amounts indicated below (in
thousands except per share amounts):                          

                                                        [Enlarge/Download Table]


                                         1999                 1998                 1997        
                                   -----------------    -----------------    ------------------
                                                                                               
Net income (loss):                                                                             

    As reported                  $        (10,905)    $         12,382     $          11,023   
                                   =================    =================    ==================

    Pro forma                    $        (12,627)    $         11,199     $           7,216   
                                   =================    =================    ==================

Basic and diluted income (loss)                                                                
  per common share:                                                                            
      As reported                $         (0.27)     $           0.31     $           0.35    
                                   =================    =================    ==================

      Pro forma                  $         (0.32)     $           0.28     $           0.23    
                                   =================    =================    ==================

      The fair value of each option grant is estimated on the date granted
 using the Black-Scholes option-pricing model with the following
weighted-average assumptions:                                 

                                                                [Download Table]

                               1999               1998              1997        
                         -----------------  ----------------- ------------------
                                                                                
Expected life (years)           5                  5                 3.3        
Risk-free interest rate         6.34%              4.42%             6.20%      
Volatility                     70.00%             70.00%            30.00%      
Dividend yield                  0.00%              0.00%             0.00%      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(10)     INCOME TAXES                                                           

   Income tax expense (benefit) attributable to income (loss) before
extraordinary item consists of the following (in thousands):  

                                                        [Enlarge/Download Table]

                                                    YEARS ENDED DECEMBER 31,                
                                     -------------------------------------------------------
                                           1999                1998               1997      
                                     -----------------    ----------------    --------------
                                                                                            
Current:                                                                                    

    U. S. Federal                 $         (3,539)    $           2,609   $         1,965  
    State                                        -                   425               312  
    Foreign                                    400                   249               509  
                                     -----------------    ----------------    --------------

                                            (3,139)                3,283             2,786  
                                     -----------------    ----------------    --------------
Deferred:                                                                                   

    U. S. Federal                           (5,333)                    -                 -  
    State                                        -                     -                 -  
    Foreign                                      -                     -                 -  
                                     -----------------    ----------------    --------------

                                            (5,333)                    -                 -  
                                     -----------------    ----------------    --------------

        Total income tax expense                                                            
          (benefit)               $         (8,472)    $           3,283   $         2,786  
                                     -----------------    ----------------    --------------

  Income tax expense (benefit) differs from the amount computed by
         applying the statutory rate of 35% to income (loss) before income taxes
as follows (in thousands):                                    

                                                        [Enlarge/Download Table]


                                                 YEARS ENDED DECEMBER 31,                   
                               -------------------------------------------------------------
                                    1999                1998                   1997         
                               ----------------    ----------------    ---------------------
                                                                                            

Computed "expected" tax                                                                     
     expense (benefit)      $        (6,782)    $        5,483      $            5,362      
Change in the valuation                                                                     
     allowance                       (1,029)              (998)                 (1,291)     
Amortization of negative                                                                    
     goodwill                        (1,409)            (1,879)                 (1,879)     
Amortization of goodwill                439                442                     308      
State income taxes, net of                                                                  
    federal benefit                       -                276                     203      
Foreign taxes and other                 309                (41)                     83      
                               ----------------    ----------------    ---------------------

                            $        (8,472)    $        3,283      $            2,786      
                               ----------------    ----------------    ---------------------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

        The tax effects of temporary differences that give rise to significant
       portions of the deferred federal income tax assets and liabilities as
of December 31, 1999 and 1998, are as follows (in thousands): 

                                                        [Enlarge/Download Table]

                                                                         DECEMBER 31,                  
                                                        -----------------------------------------------
                                                                 1999                    1998          
                                                        ---------------------   -----------------------
                                                                                                       
Deferred income tax assets:                                                                            
    Capital loss carryforward                        $               841         $          690        
    Basis in inventories                                           3,758                  4,201        
    Unrealized loss on marketable equity securities                    -                    260        
    Employee benefits                                              1,002                  1,102        
    Net operating loss carryforwards                               8,145                  1,050        
    Other, principally accrued liabilities                           249                    378        
                                                        ---------------------    --------------------- 

          Total gross deferred income tax assets                  13,995                  7,681        

    Less valuation allowance                                       2,351                  3,380        
                                                        ---------------------    --------------------- 

          Net deferred income tax assets                          11,644                  4,301        
                                                        ---------------------    --------------------- 

Deferred income tax liabilities:                                                                       
    Costs and estimated earnings in excess of                                                          
      billings on uncompleted contracts                            1,270                  1,917        
    Basis in and depreciation of property,                                                             
      plant and equipment                                          4,604                  2,384        
    Unrealized gain on marketable equity                                                               
      securities                                                     437                      -        
                                                        ---------------------    --------------------- 

          Total gross deferred income tax                                                              
              liabilities                                          6,311                  4,301        
                                                        ---------------------    --------------------- 

          Net deferred income tax assets             $             5,333         $            -        
                                                        =====================    ===================== 

        The Company has provided a valuation allowance for deferred tax assets
    of $2,351,000 and $3,380,000 at December 31, 1999 and December 31,
         1998, respectively. The valuation allowance decreased $1,029,000 during
     the year ended December 31, 1999 and $998,000 during the year ended
   December 31, 1998. In assessing the realizability of deferred tax
      assets, management considers whether it is more likely than not that
      some portion or all of the deferred tax assets will not be realized.
       The ultimate realization of deferred tax assets is dependent upon the
       generation of future taxable income during the periods in which those
   temporary differences become deductible. Management considers the
  scheduled reversal of deferred tax liabilities, projected future
        taxable income, and tax planning strategies in making this assessment.

       Under the Internal Revenue Code of 1986, in general, a change of more
     than 50% in the composition of a company's equity owners during any
  three years results in a limitation on such company's ability to
     utilize its loss carryforwards in subsequent years. The Company has
         undergone such an ownership change as a result of the sale described in
     note 1; accordingly, the amount of the Company's preacquisition net
       operating loss carryforwards that may be utilized per year is limited
       to approximately $300,000 (aggregate $3,000,000 available at December
31, 1999) expiring from 2003 through 2009. To the extent such 
   carryforwards are not utilized in a year, they may be utilized in
subsequent years.                                             

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In addition, at December 31, 1999, after carryback, the Company has a 
net operating loss carryforward of $20,300,000 which will expire in   
2020, if unused.                                                      

(11) LEASES                                                                     

At December 31, 1999, minimum future annual payments required under a 
capital lease together with the present value of the net minimum lease
payments and noncancelable operating leases, primarily for repair     
facilities and offices and office equipment, were as follows (in      
thousands):                                                           

                                                                [Download Table]

                                            OPERATING           CAPITAL          
                                              LEASES            LEASES           
                                         ----------------- ------------------    
                                                                                 
                       2000           $           1,071      $         316       
                       2001                         580                  -       
                       2002                         133                  -       
                       2003                          40                  -       
                       2004                           1                  -       
                                         -----------------     ------------------

        Total minimum lease payments  $           1,825                316       
                                         -----------------                       
Less amount representing interest                                       17       
                                                               ------------------

            Present value of minimum                                             
                lease payments                               $         299       
                                                               ------------------

Total rental expense was $2,555,000, $2,751,000 and $2,142,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.           

(12) PENSION AND OTHER POSTRETIREMENT PLANS                                     

The Company has a noncontributory defined pension benefit plan, which 
covers substantially all employees. Employees with 10 or more years of
 service are entitled to pension benefits beginning at normal retirement
age (65) based on years of service and the employees' compensation for
the 60 consecutive month period in which his compensation is the      
highest. The plan incorporates provisions for early retirement, the   
privilege to elect a life annuity, surviving spouse benefits, and     
disability benefits.                                                  

Employees of the Company who were employees of Ingersoll-Rand Oilfield
Products Company or the Ideco Division of Dresser Industries, Inc.,   
immediately prior to becoming employees of IRI, are entitled to       
uninterrupted service tenure for purposes of retirement benefit       
 calculations. Benefits payable under the IRI retirement plan are offset
by benefits payable under the retirement plans of Dresser and         
Ingersoll-Rand Oilfield Products Company.                             

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        The Company uses the accrued benefit cost method to compute the annual
   contributions to the plan, with minimum and maximum contributions
         determined on a cumulative basis and the Company having the flexibility
         to choose which contribution to make and which can vary from one period
to the next.                                                  

      The accrued benefit cost includes a normal cost which is computed as
   the present value of the pro rata portion for the benefit accrual
   during the year being valued and a past service cost which is the
       present value of that portion of the projected benefit which has been
         accrued up to the valuation date. The unfunded past-service cost may be
liquidated over a period of between 10 and 30 years.          

        In addition to the Company's defined benefit pension plan, the Company
sponsors a defined benefit health care plan that provides     
        postretirement medical benefits to retirees or full-time employees who
 retire attaining age 55 with at least 10 years of service as of
     September 1, 1996. Current retirees receive benefits for life while
       full time employees (future retirees) only receive benefits until age
        65. This plan is a contributory, with retirees contributing 20% of the
        health care costs. The Company's contribution is capped at a 5% annual
        increase in health care costs, with the remaining increases to be paid
      by the employee. The Company's policy is to fund the cost of medical
 benefits in amounts determined at the discretion of management.

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       The funded status and the amounts recognized in the balance sheets as
     of December 31, 1999, 1998 and 1997, the date of the last actuarial
valuation are as follows (in thousands):                      

                                                        [Enlarge/Download Table]

                                                        PENSION BENEFITS                      OTHER BENEFITS            
                                               -----------------------------------  ------------------------------------
                                                 1999        1998         1997        1999         1998         1997    
                                               ---------   ----------   ----------  ----------   ----------   ----------
                                                                                                                        
CHANGE IN BENEFIT OBLIGATION:                                                                                           
    Benefit obligation at beginning of year   $ 8,435     $ 8,061        $ 7,289     $ 1,829      $ 1,841      $ 1,821  
    Service cost                                  107         106            108           -            -            -  
    Interest cost                                 536         520            571         134          134          144  
    Plan participants' contributions                -           -              -          26           27           30  
    Actuarial (gain) loss                      (1,361)        322            691         157          (28)          44  
    Benefits paid                                (771)       (574)          (598)       (263)        (145)        (198) 
                                               ---------   ----------   ----------  ----------   ----------   ----------

          Benefit obligation at end of year     6,946       8,435          8,061       1,883        1,829        1,841  
                                               ---------   ----------   ----------  ----------   ----------   ----------
CHANGE IN PLAN ASSETS:                                                                                                  
    Fair value of plan  assets at  beginning                                                                            
      of year                                   6,849       7,122          7,321           -            -            -  
    Actual return on plan assets                1,625         301            399           -            -            -  
    Employer contribution                           -           -              -         231          118          168  
    Plan participants' contributions                -           -              -          26           27           30  
    Benefits paid                                (771)       (574)          (598)       (257)        (145)        (198) 
                                               ---------   ----------   ----------  ----------   ----------   ----------

          Fair  value of plan  assets at end                                                                            
             of year                            7,703       6,849          7,122           -            -            -  
                                               ---------   ----------   ----------  ----------   ----------   ----------

    Funded status                                 757      (1,586)          (939)     (1,883)      (1,829)      (1,841) 
    Unrecognized actuarial loss                  (536)      1,988          1,457         456          323          360  
                                               ---------   ----------   ----------  ----------   ----------   ----------

          Net amount recognized               $   221     $   402        $   518     $(1,427)     $(1,506)     $(1,481) 
                                               ---------   ----------   ----------  ----------   ----------   ----------

    Amounts recognized in the statement of                                                                              
      financial position consist of:                                                                                    
        Prepaid benefit cost                  $   221     $     -        $     -     $     -      $     -      $     -  
        Accrued benefit liability                   -      (1,586)          (939)     (1,427)      (1,506)      (1,481) 
        Accumulated other comprehensive loss        -       1,988          1,457           -            -            -  
                                               ---------   ----------   ----------  ----------   ----------   ----------

          Net amount recognized               $   221     $   402        $   518     $(1,427)     $(1,506)     $(1,481) 
                                               ---------   ----------   ----------  ----------   ----------   ----------

WEIGHTED-AVERAGE  ASSUMPTIONS AS OF DECEMBER 31:                                                                        
    Discount rate                                7.75%       6.75%          7.30%        7.75%        6.75%       7.30% 
    Expected return on plan assets               8.00%       8.00%          8.00%         N/A          N/A        N/A   
    Rate of compensation increase                  N/A         N/A            N/A         N/A          N/A        N/A   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

        The assumed health care cost trend rate was 10% in 1995 graded down to
        5% after 12 years. Because health care cost increases over 5% annually
         are borne by the employees, the amounts reported (in thousands) are not
   affected by increases in the assumed health care cost trend rate.

                                                        [Enlarge/Download Table]

                                               PENSION BENEFITS                      OTHER BENEFITS            
                                       ----------------------------------  ------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT                                                                             
    COST:                                1999        1998         1997        1999         1998         1997   
                                       --------   ----------   ----------  ----------   ----------   ----------
                                                                                                               
    Service cost                    $     107          106          108           -           -            -   
    Interest cost                         536          520          571         134         134          144   
    Expected return on plan assets       (534)        (557)        (570)          -           -            -   
    Amortization of prior service                                                                              
      cost                                  -            -            -           -           -            -   
    Amortization of transition                                                                                 
      asset                                 -            -            -           -           -            -   
    Recognized net actuarial loss          72            9            7          19          45            -   

       The projected benefit obligation, accumulated benefit obligation, and
         fair value of plan assets for the pension plan with accumulated benefit
       obligations in excess of plan assets were $6,946,000, $6,946,000, and
   $7,703,000, respectively, as of December 31, 1999 and $8,435,000,
   $8,435,000 and $6,849,000, respectively, as of December 31, 1998.

        As of September 1, 1995, the pension plan was frozen insofar as future
       accrual of pension benefits. Because the plan amendment to freeze the
       plan was planned in conjunction with the ESI acquisition discussed in
        note 1, the resulting curtailment gain was taken into consideration in
        remeasuring the Company's projected benefit obligation and the date of
the acquisition.                                              

The Pension Guaranty Corporation provides protection to plan  
     participants by assuring employees that the fixed commitment of the
         Company for funding vested accrued benefits of the plan will be paid up
       to specified maximum amounts should the Company be unable to fund the
fixed commitment.                                             

    The pension plan is administered by the Pension Committee which is
appointed by IRI's Board of Directors.                        

         On August 11, 1995, the defined benefit health care plan was amended to
       terminate all employees from the plan except those eligible to retire
  on June 30, 1995 and all current retirees. In addition under the
       amended plan, active employees eligible to retire will, after the age
        of 65, receive through the retirement plan, 80% of the cost of medical
    insurance with a 5% cap over a base year premium of calendar 1996.
Because it was expected that the plan would be terminated in  
       conjunction with the ESI acquisition discussed in note 1, the effects
        were considered in measuring the Company's accumulated post retirement
benefit obligation as of the acquisition date.                

       The Company also has a defined contribution plan which covers most of
       its employees. The plan provides mandatory minimum contributions from
        the Company to eligible employees in the plan equal to 7-1/2% of their
         annual pay. Plan participants become fully vested in contributions made
       by the Company following three years of credited service. The Company
        recognized expense associated with the plan of approximately $892,000,
       $1,289,000 and $1,076,000 for the years ended December 31, 1999, 1998
and 1997, respectively.                                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(13)     RESTRUCTURING CHARGE                                                   

      On October 8, 1998, the Company announced a restructuring program in
     which the workforce would be reduced by up to 315 employees. During
         1999, the Company continued its restructuring program. Accordingly, the
        Company consolidated manufacturing operations, closing two plants, and
       further reduced its workforce by 122 employees in addition to the 315
      employees originally estimated. Expenses incurred in connection with
        the restructuring program have been reported as a restructuring charge
       of $1,779,000 in 1999 and $590,000 in 1998. Substantially all amounts
were paid as of December 31, 1999.                            

(14)     BUSINESS SEGMENTS                                                      

  In the fourth quarter of 1998, the Company adopted SFAS No. 131,
      Disclosures about Segments of an Enterprise and Related Information.
     The Company's reportable segments are strategic business units that
    offer different products and services. They are managed separately
   because each business requires different technology and marketing
         strategies. Financial data for periods reported prior to the year ended
     1998 have been restated to conform to the presentation according to
SFAS No. 131.                                                 

    The Company operates through three business segments consisting of
 Oilfield Equipment, Downhole Products, and Specialty Steel. The
     Oilfield Equipment segment is principally engaged in the design and
        manufacture of drilling and well servicing rigs and components for use
     on land and offshore drilling platforms. The Company specializes in
     providing small truck-mounted rigs to stationary land deep drilling
   rigs to meet the functional requirements of customers drilling in
       remote and harsh environments. The Downhole Products segment designs,
         manufactures, sells and rents fishing and drilling tools. The Company's
Specialty Steel segment manufactures premium carbon, alloy and
        specialty steel for use in commercial and military products as well as
 for the manufacture of oilfield equipment products. IRI's steel
        products are also used in the petroleum, aircraft and power generation
industries.                                                   

         The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company
       evaluates performance based on operating income or loss before income
    taxes excluding nonrecurring gains and losses and foreign exchange
gains and losses.                                             

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   Financial information by industry segment is summarized below (in
thousands):                                                                     

                                                        [Enlarge/Download Table]

                                  OILFIELD      DOWNHOLE    SPECIALTY  CORPORATE                             
                                  EQUIPMENT     PRODUCTS     STEEL     AND OTHER   ELIMINATIONS     TOTAL    
                               --------------  -----------  ---------  ----------  -------------  ---------- 
                                                                                                             
YEAR ENDED DECEMBER 31, 1999                                                                                 
   Sales to unaffiliated                                                                                     
     customers                 $    44,365      $   42,892    $ 4,933  $       -      $    -      $   92,190 
   Operating income (loss)          (5,850)          2,543        722    (17,991)          -         (20,576)
   Identifiable assets              48,659          95,201      7,165     66,068           -         217,093 
   Depreciation and                                                                                          
     amortization                      562           3,248         42      1,217           -           5,069 
   Amortization of goodwill              -               -          -      1,254           -           1,254 
   Amortization of negative                                                                                  
     goodwill                            -               -          -      4,026           -           4,026 
   Capital expenditures                 13           2,165          -          -           -           2,178 

YEAR ENDED DECEMBER 31, 1998:                                                                                
   Sales to unaffiliated                                                                                     
   customers                   $    88,395      $   76,249    $10,401  $       -      $    -      $  175,045 
   Operating income (loss)          13,533          17,186      1,668    (15,084)          -          17,303 
   Identifiable assets              72,237         108,277      8,047     50,605           -         239,166 
   Depreciation and                                                                                          
     amortization                      379           3,283         69        301           -           4,032 
   Amortization of goodwill              -               -          -      1,255           -           1,255 
   Amortization of negative                                                                                  
     goodwill                            -               -          -      5,367           -           5,367 
   Capital expenditures                745           8,836        214        210           -          10,005 

YEAR ENDED DECEMBER 31, 1997:                                                                                
   Sales to unaffiliated                                                                                     
   customers                   $   106,529      $   65,336    $13,501  $       -      $    -      $  185,366 
   Operating income (loss)          15,617          11,869      4,503     (9,370)          -          22,619 
   Identifiable assets              94,011          86,030      9,457     61,576           -         251,074 
   Depreciation and                                                                                          
     amortization                      248           3,493         30      1,100           -           4,871 
   Amortization of goodwill              -               -          -        880           -             880 
   Amortization of negative                                                                                  
     goodwill                            -               -          -      5,367           -           5,367 
   Capital expenditures              2,216           1,649        314      1,885           -           6,064 

       Export sales by geographic region based upon the ultimate destination
      in which equipment or services were sold, shipped or provided to the
customer by the Company were as follows (in thousands):       

                                                        [Enlarge/Download Table]

                                                 YEARS ENDED DECEMBER 31,                    
                              ---------------------------------------------------------------
                                    1999                   1998                  1997        
                              ------------------    -------------------    ------------------
                                                                                             

Russia                     $           4,522     $            22,137    $           47,375   
Europe (excluding Russia)              6,937                  12,649                12,783   
Asia (excluding Russia)                7,928                  17,831                11,113   
South America                          1,014                  15,829                 9,166   
Africa                                25,732                  17,469                14,432   
Other                                  3,545                   1,869                 6,665   
                              ------------------    -------------------    ------------------

     Total export sales               49,678                  87,784               101,534   

Domestic sales                        42,512                  87,261                83,832   
                              ------------------    -------------------    ------------------

     Total sales           $          92,190     $           175,045    $          185,366   
                              ------------------    -------------------    ------------------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

     In 1999, one customer accounted for 16.9% of revenues. For the year
         ended December 31, 1998, no one customer accounted for more than 10% of
revenues.                                                     

(15)     COMMITMENTS AND CONTINGENCIES                                          

   The Company has contract commitments aggregating $41.0 million at
    December 31, 1999 for the manufacture and delivery of drilling and
workover rigs during fiscal year 2000.                        

At December 31, 1999, the Company was contingently liable for 
     approximately $4.1 million in letters of credit which guarantee the
       Company's performance for payment to third parties in accordance with
         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.                         

   Various federal, state and local laws, regulations and ordinances
         govern the removal, encapsulation or disturbance of asbestos containing
      materials (ACMs). Such laws and regulations may impose liability for
        the release of ACMs and may provide for third parties to seek recovery
  from owners or operators of facilities at which ACMs were or are
   located for personal injury associated with exposure to ACMs. The
    Company is aware of the presence of ACMs at its facilities, but it
        believes that such materials are in acceptable condition at this time.
      The Company believes that any future costs related to remediation of
        ACMs at these sites will not be material, either on an annual basis or
   in the aggregate, although there can be no assurance with respect
thereto.                                                      

      The Company has sought to reduce the impact of costs arising from or
      related to actual or potential environmental conditions at the Bowen
Tools Division facilities caused or created by Bowen or its   
      predecessors in title through the Company's contractual arrangements
      with Air Liquide America Corporation (Air Liquide). Pursuant to such
         arrangements, Air Liquide and Bowen agreed to indemnify the Company for
         such costs. Air Liquide provided the Company with certain environmental
      assessments with respect to most of the Bowen properties conveyed to
       the Company. In some cases, these initial assessments recommended the
      performance of further investigation to evaluate the need for and to
 determine the extent of the removal or remediation of hazardous
    substances required to address historical operations of Bowen. Air
         Liquide is conducting a further environmental review of the Bowen Tools
        Division facilities to determine the potential scope of remeditaion to
       be conducted at such facilities by Air Liquide or Bowen. There can be
        no assurance that Air Liquide or Bowen will meet its obligations under
   the indemnification arrangements or that there will not be future
        contamination for which the Company might be fully liable and that may
  require the Company to incur significant costs that could have a
   material adverse effect on the Company's financial conditions and
results of operations.                                        

         Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that 
      substantial costs for compliance will not be incurred in the future.
    Moreover, it is possible that other developments, such as stricter
      environmental laws, regulations and enforcement policies thereunder,
could result in additional, presently unquantifiable, costs or
liabilities to the Company.                                   

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   The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of 
       management, the ultimate disposition of these matters will not have a
 material adverse effect on the Company's consolidated financial
disposition, results of operations or liquidity.              

(16)     QUARTERLY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)       
(UNAUDITED)                                                                   

                                                        [Enlarge/Download Table]

                                      QUARTER ENDED     QUARTER ENDED      QUARTER ENDED     QUARTER ENDED   
               1999                     MARCH 31,          JUNE 30,        SEPTEMBER 30,      DECEMBER 31,   
-----------------------------------  ----------------  -----------------  ----------------  -----------------
                                                                                                             
Revenues                             $    22,543       $   19,877         $    26,102       $    23,668      
Gross profit                               6,715           (4,128)(a)           7,220              (773)(b)  
Net income (loss)                         (1,502)(d)       (9,590)(c)(d)        2,346(d)         (2,159)     
Basic and diluted income (loss)                                                                              
 per common share                          (0.04)           (0.24)               0.06             (0.05)     

               1998                                                                                          
-----------------------------------                                                                          
Revenues                             $    47,232       $   51,399         $    40,650       $    35,764      
Gross profit                              12,849           15,468              11,064             9,038      
Net income (loss)                          4,372            5,525               2,799(d)           (314)(d)  
Basic and diluted income (loss)                                                                              
 per common share                           0.11             0.14                0.07             (0.01)     

               1997                                                                                          
-----------------------------------                                                                          
Revenues                             $    16,594       $   41,191         $    54,345       $    73,236      
Gross profit                               4,142            8,519              12,653            20,848      
Net income (loss)                          1,657           (1,236)              2,530             8,072      
Basic and diluted income (loss)                                                                              
 per common share                           0.06            (0.04)               0.08              0.23      

     The Company acquired the business and operations of the Bowen Tools
      Division on March 31, 1997 and Cardwell International, Ltd. on April
17, 1997 (see note 3).                                        

         (a)      Includes pre-tax charges of $6.8 million, consisting of a $2.0
                million increase in the inventory obsolescence reserve, $2.1
                  million write-off of pre-contract engineering and design costs
            incurred for a contract that did not materialize, a $2.2
              million charge for contract adjustments and other charges.

        (b)      Includes pre-tax inventory valuation charges of $5.9 million.

         (c)      Includes pre-tax charges of $1.3 million relating to provision
for bad debt and software implementation.   

   (d)      Includes restructuring charges of $805,000, $653,000 and
                 $321,000 incurred during the first three quarters of 1999 and
                $429,000 and $161,000 during the third and fourth quarter of
1998, respectively (see note 13).           

F-25

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		7/15/09		22
		3/15/09		21		22
		3/31/02		40
		1/1/01		15		39
		12/28/00		16		41
		3/31/00		16		40			10-Q
Filed on:		3/30/00		18		27
		3/24/00		1		23
		3/16/00		2					425
		3/14/00		28
		3/8/00		30
		1/4/00		22
		1/1/00		16
For Period End:		12/31/99		1		52
		12/29/99		16		41
		9/30/99		10					10-Q
		9/19/99		12
		7/15/99		21		23
		3/15/99		22
		12/31/98		3		52			10-K,  10-K/A
		12/14/98		22
		10/8/98		50
		4/28/98		15
		3/31/98		40					10-Q
		1/1/98		38
		12/31/97		10		51			10-K/A,  10-K405
		11/19/97		35					S-8
		11/14/97		9					424B1
		10/14/97		28		41
		9/8/97		28					S-1
		7/8/97		28
		6/30/97		40
		4/17/97		2		53
		3/31/97		2		53
		3/20/97		28
		1/20/97		28
		12/31/96		10		42
		9/1/96		47
		3/31/96		10		12
		12/31/95		10
		9/1/95		49
		8/11/95		49
		6/30/95		49
		9/20/94		11		35
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