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KOMAG REPORTS SECOND QUARTER RESULTS

 KOMAG REPORTS SECOND QUARTER RESULTS
 MILPITAS, Calif., July 20 /PRNewswire/ -- Komag Inc. (NASDAQ: KMAG),


a leading supplier of thin-film components for high-performance Winchester disk drives, today announced second quarter financial results for fiscal 1992.
 For the second quarter ended June 28, 1992, net sales totaled a record $76.5 million, including $64.5 million in thin-film media revenue and $12.0 million in thin-film head revenue. The net sales for the comparable second quarter of 1991 were $72.7 million. Net sales in the second quarter of 1992 were 8 percent higher than the $71.1 million recorded in the first quarter of 1992.
 Income before extraordinary credit for the second quarter of 1992 was $3.3 million or $0.15 per share. Income before extraordinary credit for the second quarter of 1991 including the financial results of Dastek was $5.1 million, or $0.24 per share. Income before extraordinary credit recorded in the first quarter of 1992 was $2.9 million, or $0.14 per share.
 "Our media sales expanded by $5.6 million from first to second quarter as we continued to see strong demand for our high-performance, high-capacity disk products," commented Stephen C. Johnson, Komag's president and chief executive officer. "During the second quarter we operated our U.S. manufacturing facilities at full capacity, successfully commenced production on our tenth sputtering line and, as a result, produced over four million disks. To meet customer demand in excess of our expanded U.S. production capacity, we sold increased quantities of disks produced by our Japanese joint venture, Asahi Komag Co. Ltd. (AKCL), to our U.S. customers," Johnson continued.
 "During the second quarter we also saw an increase in unit sales of 3.5-inch products that we believe will continue into the third quarter. Unit sales of both 5.25-inch and 2.5-inch products during the second quarter remained virtually unchanged from the first quarter," Johnson noted. "Our profitability did not reflect the full benefit of this shift to smaller-diameter disks. The manufacturing efficiencies gained through the production of smaller-diameter disks were offset by various yield-related problems that were resolved, in large measure, by the end of the quarter. Increased sales of AKCL-produced products which carry lower margins than internally produced products also reduced our gross margin percentage," explained Johnson.
 "As expected, AKCL recorded an operating loss during the quarter due to the under-utilization of its manufacturing facilities. Komag's share of this loss reduced reported earnings by $0.03 per share. However, recent increases in demand from Japanese customers, combined with continued shipments to Komag's U.S. customers, should enable AKCL to operate near full capacity and return to profitability during the third quarter," Johnson stated.
 In line with the company's previous announcement, the net loss at Dastek in the second quarter was approximately $1 million higher than the net loss experienced in the first quarter of 1992. A substantial portion of this increased loss was attributable to the establishment of additional inventory reserves for older generation products which Dastek does not expect to sell. Dastek posted a net loss of $6.3 million in the second quarter of 1992 before recognition of Asahi Glass America Inc.'s $2.5 million minority interest in the net loss. Asahi obtained a 40 percent economic interest in Dastek in February 1992.
 "Dastek's R&D staff made significant technical progress during the first half of the year. Prospective customers of Dastek are presently evaluating prototypes of improved microslider and advanced nanoslider products. Qualification and subsequent volume production of these newer and technically improved products are essential for Dastek's return to profitability. We expect to complete such customer qualifications and commence production of these improved products during the fourth quarter of this year. For the third quarter we anticipate that Dastek's sales will remain dependent on its exisiting, lower-priced, older-generation minislider products," explained Johnson.
 "We have also moved forward with two other thin-film head initiatives. On June 19, 1992, Komag and Hewlett-Packard Co. announced that the two firms had entered into an alliance to develop and manufacture next generation magneto-resistive (MR) thin-film read/write heads," Johnson stated. "During the second quarter, Dastek also began building, on a limited basis, prototype head stack assemblies (HSA) for customer evaluation. In addition to these internal efforts, Dastek is continuing to pursue other options, including possible joint venture relationships with third parties, to enhance our capabilities in HSA manufacturing," revealed Johnson. "We believe that these initiatives, in conjunction with our technical and manufacturing improvements, will make Dastek a stronger competitor in the thin-film recording head market," Johnson concluded.
 Komag is a leading supplier of thin-film components for high- performance Winchester disk drives, and is the only volume supplier of both thin-film heads and thin-film disks to the merchant market. The company's thin-film products address the fast growing high-capacity, high-performance segment of the Winchester disk drive market. Winchester disk drives are widely used in a broad range of computer applications from mainframes to portable computers. Komag is the leading supplier of media to this market segment and manufactures the highest density disks commercially available for 5.25-inch and smaller form factors. In addition to thin-film disks, Komag manufactures precision disk substrates and thin-film heads through its two consolidated joint venture subsidiaries, Komag Material Technology and Dastek, respectively. Dastek is one of the three largest suppliers of thin-film heads to the merchant market. Komag also operates a technical support facility in Singapore.
 Komag and its consolidated subsidiaries maintain 668,000 square feet of manufacturing and administrative space in California and Malaysia, and employ approximately 2,600 people. The company also manufactures and sells thin-film disk products through an unconsolidated joint venture, Asahi Komag Co. Ltd., which is among the top three media producers in Japan. The company was founded in 1983.
 KOMAG INC.
 Consolidated Income Statements
 (in thousands, except per share data)
 (unaudited)
 Three Months Ended Six Months Ended
 June 28, June 30, June 28, June 30
 1992 1991 1992 1991
 Net Sales $76,479 $72,684 $147,597 $136,854
 Cost of Sales 62,065 55,489 117,434 100,263
 Gross Profit 14,414 17,195 30,163 36,591
 Research &
 Development
 Expense 6,027 3,850 12,427 7,365
 Selling,
 General and
 Administrative 4,985 4,988 10,451 10,316
 Operating
 Profit 3,402 8,357 7,285 18,910
 Other Income 704 98 1,516 69
 Income before
 Income Taxes,
 Minority Interest,
 Equity Income and
 Extraordinary
 Credit 4,106 8,455 8,801 18,979
 Provision for
 Income Taxes 2,486 3,490 4,847 7,199
 Minority Interest
 in Net Income
 (Loss) of
 Consolidated
 Subsidiaries (2,256) 344 (2,781) 435
 Equity in Net
 Income (Loss)
 of Unconsolidated
 Joint Venture (623) 506 (549) 761
 Income before
 Extraordinary
 Credit 3,253 5,127 6,186 12,106
 Extraordinary Credit
 Resulting from
 Utilization of
 Net Operating
 Loss Carryforward 116 146 197 185
 Net Income $3,369 $5,273 $6,383 $12,291
 Income per Share:
 Income before
 Extraordinary
 Credit $0.15 $0.24 $0.29 $0.61
 Extraordinary Credit 0.01 0.01 0.01 0.01
 Net Income $0.16 $0.25 $0.30 $0.62
 Shares Used
 in Calculating
 per Share Amounts 21,301 21,155 21,471 19,772
 KOMAG INC.
 Consolidated Balance Sheets
 (in thousands)
 June 28, 1992 Dec. 29, 1991
 (Unaudited) (A)
 Assets
 Cash and Short-Term Investments $93,863 $91,014
 Net Accounts Receivable Trade 37,259 27,779
 Inventories 16,850 21,991
 Deposits and Other Current Assets 8,064 8,676
 Total Current Assets 156,036 149,460
 Investment in Unconsolidated
 Joint Venture 4,615 4,665
 Net Property, Plant & Equipment 146,658 120,904
 Deposits and Other Assets 2,369 1,950
 Total Assets 309,678 276,979
 Liabilities and Stockholders' Equity
 Accounts Payable Trade $22,444 $25,190
 Accrued Liabilities 13,670 16,060
 Long-Term Obligations -- Current Portion 9,725 10,402
 Total Current Liabilities 45,839 51,652
 Long-Term Obligations 11,937 16,516
 Other Liabilities 5,751 4,565
 Minority Interest in
 Consolidated Subsidiaries 18,625 2,169
 Common Stock 220,481 179,316
 Retained Earnings 27,659 21,276
 Notes Receivable from Stockholder (22,581) --
 Foreign Currency Translation Adjustments 1,967 1,485
 Total Stockholders' Equity 227,526 202,077
 Total Liabilities & Stockholders' Equity $309,678 $276,979
 (A) The balance sheet at Dec. 29, 1991, has been derived from the audited financial statement at that date.
 -0- 7/20/92
 /CONTACT: David H. Allen, T. Hunt Payne or William L. Potts, Jr.


of Komag, 408-946-2300; or John Trifari of John Trifari Public Relations, 415-349-9812, for Komag/
 (KMAG) CO: Komag Inc. ST: California IN: CPR SU: ERN


MM-MC -- SJ002 -- 0529 07/20/92 07:03 EDT
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Date:Jul 20, 1992
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