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KOMAG ANNOUNCES PRELIMINARY UNAUDITED EARNINGS FOR ITS 1991 FOURTH QUARTER AND FISCAL YEAR

 KOMAG ANNOUNCES PRELIMINARY UNAUDITED EARNINGS FOR ITS
 1991 FOURTH QUARTER AND FISCAL YEAR
 MILPITAS, Calif., Feb. 27 /PRNewswire/ -- Komag Inc. (NASDAQ: KMAG), a leading supplier of thin-film components for high- performance Winchester disk drives, today announced preliminary unaudited earnings for its 1991 fourth quarter and fiscal year ended Dec. 29, 1991. These preliminary earnings include the operating results of Komag's thin-film media and Dastek's thin-film recording head business, combined for the entire fiscal year on a pooling-of- interests basis. These earnings also include a one-time charge for legal accounting and investment banking fees related to the merger. The company plans to issue detailed final audited financial results in mid-March. As previously announced, Komag completed its merger with Dastek Inc. and signed a definitive agreement to form a joint venture with Asahi Glass to address the thin-film recording head market on Dec. 20, 1991.
 For the fourth quarter ended Dec. 29, 1991, net sales totaled $72.3 million, including $60.9 million in thin-film media revenue and $11.4 million in thin-film head revenue. The combined net sales for the comparable fourth quarter of 1990 were $53.9 million. For the 1991 fiscal year, net sales totaled $279.2 million, including $228.2 million in thin-film media revenue and $51.0 million in thin- film head revenue. The combined net sales for the 1990 fiscal year were $179.9 million.
 Income before extraordinary credit for the fourth quarter of 1991 was $0.9 million, or $0.04 per share based on 21.0 million shares. This preliminary result included income of $6.5 million at Komag, a loss of $3.5 million at Dastek, and a one-time charge of $2.1 million for the costs related to the merger. These fourth quarter results included additional reserves of $0.7 million for thin-film head inventory and $0.9 million for equipment used in a discontinued process development effort in the thin-film media business. Income before extraordinary credit for the fourth quarter of 1990 on a restated basis including the financial results of Dastek was $5.7 million, or $0.32 per share based on 18.1 million shares.
 Income before extraordinary credit for the 1991 fiscal year totaled $15.1 million, or $0.74 per share based on 20.5 million shares. This result included write-offs of $8.4 million at Dastek primarily for the establishment of reserves against inventories and accounts receivable as well as the one-time charge of $2.1 million for the merger costs. Income before extraordinary credit for the 1990 fiscal year on a restated basis including the financial results of Dastek was $12.9 million, or $0.74 per share based on 17.5 million shares.
 Komag's media operations achieved record sales and profits in 1991. Net sales of $228.2 million for 1991 represented a 52 percent increase over net sales of $149.9 million in 1990. Income before extraordinary credit for 1991, excluding the one-time merger costs, totaled $27.3 million and rose 104 percent over 1990. Eliminating the shares associated with the Dastek merger and excluding the one-time merger costs, the pro forma income before extraordinary credit was $1.54 per share on 17.8 million shares.
 "Our record results in our media operations were achieved through careful product positioning and the attainment of significant improvements in manufacturing yields and productivity," noted Stephen C. Johnson, Komag's president and chief executive officer. "Current customer demand for our disk products is strong and we continue to run our disk manufacturing facilities at full capacity. To meet growing demand, we will begin commercial production on our 10th sputtering line in our San Jose facility early in the second quarter of 1992. We also plan to add a pilot production line in this same facility during the second half of 1992. Our offshore capacity expansion in Panang, Malaysia is on schedule and cost effective production from this facility should begin in late 1993. Prior to this period we will incur the normal expenses associated with the start-up of a new manufacturing facility," Johnson continued.
 "The strong fourth quarter financial results in our media business reflected our ability to shift production quickly among the various disk sizes," commented Hunt Payne, Komag's vice president of Marketing and Sales. "During the third quarter we were the largest supplier of 2 1/2-inch media. During the fourth quarter total market demand for 2 1/2-inch media fell off sharply, while demand for 5 1/4-inch media increased significantly. In spite of this abrupt change in product mix, we continued to run our manufacturing facilities 24 hours a day," he continued. "Unfortunately, a larger diameter product mix generates less aggregate revenue from our factories at the same approximate level of fixed costs as incurred when the factory runs a smaller diameter product mix. This larger diameter product mix reduced our profitability in the fourth quarter, and this mix has continued into the first quarter of 1992. However, with our scheduled capacity additions in 1992 and our cumulative experience in 2 1/2-inch media production, we are in excellent position to take advantage of any future upturn in demand for 2 1/2-inch media," Payne concluded.
 "According to Santa Clara Consulting Group, a firm that tracks the media industry, Asahi Komag Co. Ltd. (AKCL), our joint venture in Japan with Asahi Glass, became the leading producer of thin-film media in Japan during the second half of 1991," noted Johnson. "As American disk drive companies continue to dominate the worldwide disk drive market, demand for media by Japanese drive manufacturers has not increased in line with the aggressive capacity additions of the Japanese media manufacturers. As a direct result, competition in the Japanese market is quite intense, thus endangering the near-term operating results of Japanese media manufacturers including AKCL," he continued. "Due to the close cooperative manufacturing and marketing efforts between AKCL and Komag, we have thus far limited AKCL's vulnerability to changes in the Japanese market by selling AKCL- produced media outside of Japan to Komag's customers. AKCL contributed nearly $2.1 million of equity income to Komag in 1991 as well as royalty income based on the sales of AKCL-manufactured products. Assuming Japanese market conditions remain unchanged, these contributions to Komag will be lower in 1992 and minimal during the upcoming quarters," commented Johnson.
 "In the first quarter of 1992 we combined Komag's existing thin- film head research and development program with Dastek, forming our platform for entrance into the rapidly growing market for thin-film recording heads," stated Johnson who was recently appointed CEO of Dastek. "We are in the midst of a challenging transition period at Dastek. While Dastek's older minislider products continue to be well received by customers, market demand is shifting towards smaller sized sliders. Dastek's newer microslider products require further improvement to meet the high performance standards necessary to gain broader customer acceptance. To address these issues we plan to improve Dastek's technology and manufacturing processes through aggressive R&D programs and application of our previously acquired Siemens technology. Our goals are to make significant improvements in our product offerings during the first half of the year and to exit 1992 with technically advanced products and processes that provide a solid foundation for significant growth in sales and profitability in 1993," he continued.
 "During the first half of 1992 we will use a significant portion of Dastek's wafer manufacturing capability to develop improved wafer designs, thus underutilizing production capacity. Given this operating approach, we expect little, if any, improvement in the net loss of our combined thin-film head operation over the next several quarters. As a result, this operation will continue to have a material dilutive effect on Komag's 1992 consolidated earnings," commented Johnson.
 "In regard to our previously announced thin-film head joint venture with Asahi Glass, we recently received U.S. governmental approval of the joint venture and expect to close this arrangement within one week. Under this agreement Asahi will contribute nearly $60 million in equity for a 40 percent economic interest in the joint venture. Upon consummation of the joint venture, Komag will record 60 percent of Dastek's future net income or loss in its consolidated financial statements," Johnson stated.
 "Our long-term goal is to be the leading manufacturer of both thin-film media and thin-film heads for high-performance, high- capacity Winchester disk drives. With glide heights approaching two millionths of an inch, the interaction between the disk media and the recording head is pivotal to the performance of today's, and more importantly, tomorrow's disk drives. As the only company currently supplying both of these critical components to the merchant market, we are uniquely positioned to use our advanced knowledge in materials science and our manufacturing capabilities to deliver value-added products to our customers. We have mapped out our plans to reach this goal, and although there are significant challenges along the path to this objective, we believe that our long-term strategy is sound," Johnson concluded."
 Founded in 1983, Komag and its two consolidated subsidiaries (Komag Material Technology Inc. and Dastek Inc.) maintain 610,000 square feet of manufacturing and administrative space in California and Malaysia. Komag also operates a technical support facility in Singapore. The company and its consolidated subsidiaries employ approximately 2,500 people. Komag also manufactures and sells thin- film disk products through its unconsolidated joint venture, Asahi Komag Co. Ltd., which is among the top three media producers in Japan. The company is traded on the NASDAQ over-the-counter market under the symbol KMAG.
 -0- 2/27/92
 /CONTACT: David H. Allen, William L. Potts Jr. or T. Hunt Payne, 408-946-2300, all of Komag Inc.; or John Trifari of John Trifari Public Relations, 415-349-9812, for Komag Inc./
 (KMAG) CO: Komag Inc. ST: California IN: CPR SU: ERN


DG -- SJ003 -- 3404 02/27/92 16:06 EST
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