<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q


                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                                       OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                    For the Quarter Ended September 29, 1996
                         Commission File Number 0-16852



                               KOMAG, INCORPORATED
                                  (Registrant)



                      Incorporated in the State of Delaware
                I.R.S. Employer Identification Number 94-2914864
              275 South Hillview Drive, Milpitas, California 95035
                            Telephone: (408) 946-2300


     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      
                             -----            -----

     On September 29, 1996, 51,404,229 shares of the Registrant's common stock,
     $0.01 par value, were issued and outstanding.
<PAGE>   2
                                      INDEX

                               KOMAG, INCORPORATED


<TABLE>
<CAPTION>
                                                                                  Page No.
<S>                 <C>                                                              <C>
     PART I.        FINANCIAL INFORMATION

     Item 1.        Consolidated Financial Statements (Unaudited)

                    Consolidated income statements -- Three- and nine-months
                    ended September 29, 1996 and October 1, 1995 . . . . . . . . . . .  3

                    Consolidated balance sheets -- September 29, 1996,
                    and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 4

                    Consolidated statements of cash flows -- Nine months
                    ended September 29, 1996, and October 1, 1995 . . . . . . . . . . . 5

                    Notes to consolidated financial statements --
                    September 29, 1996 . . . . . . . . . . . . .  . . . . . . . . . . 6-7

     Item 2.        Management's Discussion and Analysis of
                    Financial Condition and Results of Operations  . . . . . . . . . 8-14

     PART II.       OTHER INFORMATION

     Item 1.        Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .  15

     Item 2.        Changes in Securities . . . . . . . . . . . . . . . . . . . . . .  15

     Item 3.        Defaults Upon Senior Securities . . . . . . . . . . . . . . . . .  15

     Item 4.        Submission of Matters to a Vote of Security Holders . . . . . . .  15

     Item 5.        Other Information . . . . . . . . . . . . . . . . . . . . . . . .  15

     Item 6.        Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .   15

     SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
</TABLE>

                                      -2-
<PAGE>   3
PART I.   FINANCIAL INFORMATION



                               KOMAG, INCORPORATED
                         CONSOLIDATED INCOME STATEMENTS
                      (In Thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                   Three Months Ended          Nine Months Ended
                                                                                -----------------------     ----------------------
                                                                                 SEPT 29         Oct 1       SEPT 29        Oct 1
                                                                                    1996          1995          1996         1995
                                                                                ---------     ---------     ---------    ---------
<S>                                                                             <C>           <C>           <C>          <C>     
Net sales                                                                       $131,533      $132,835      $436,580     $358,705
Cost of sales                                                                     99,948        79,513       277,550      226,596
                                                                                ---------     ---------     ---------    ---------
          GROSS PROFIT                                                            31,585        53,322       159,030      132,109

Operating expenses:
     Research, development and engineering                                         7,849         5,863        21,508       17,875
     Selling, general and administrative                                           6,789        12,236        28,863       30,274
                                                                                ---------     ---------     ---------    ---------
                                                                                  14,638        18,099        50,371       48,149
                                                                                ---------     ---------     ---------    ---------
          OPERATING INCOME                                                        16,947        35,223       108,659       83,960

Other income (expense):
     Interest income                                                               1,388         1,264         5,526        3,428
     Interest expense                                                               (112)         (528)         (327)      (1,726)
     Other, net                                                                    1,594         1,539         1,511        1,983
                                                                                ---------     ---------     ---------    ---------
                                                                                   2,870         2,275         6,710        3,685
                                                                                ---------     ---------     ---------    ---------
Income before income taxes, minority interest,
   and equity in joint venture income                                             19,817        37,498       115,369       87,645
Provision for income taxes                                                         3,961         9,373        23,074       21,910
                                                                                ---------     ---------     ---------    ---------
Income before minority interest and equity in
   joint venture income                                                           15,856        28,125        92,295       65,735
Minority interest in net income of consolidated subsidiary                           148           488           450        1,359
Equity in net income of unconsolidated joint venture                                 790         2,762         9,717        4,264
                                                                                ---------     ---------     ---------    ---------
          NET INCOME                                                            $ 16,498       $30,399      $101,562      $68,640
                                                                                ========      ========      ========     ========


Net income per share                                                               $0.31         $0.61         $1.91        $1.41
                                                                                ========      ========      ========     ========


Number of shares used in per share computation                                    53,035        50,067        53,165       48,811
                                                                                ========      ========      ========     ========
</TABLE>

                 See notes to consolidated financial statements.

                                      -3-
<PAGE>   4
                               KOMAG, INCORPORATED
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 29           December 31
                                                                                        1996                  1995
                                                                                -------------          ------------
                                                                                 (UNAUDITED)                (note)
<S>                                                                                 <C>                   <C>      
ASSETS
Current Assets
       Cash and cash equivalents                                                     $41,846               $14,879
       Short-term investments                                                         61,100               198,799
       Accounts receivable less allowances of
             $4,058 in 1996 and $4,279 in 1995                                        49,814                61,660
       Accounts receivable from related parties                                        7,221                 5,034
       Inventories:
             Raw materials                                                            28,569                20,213
             Work-in-process                                                          22,863                 7,431
             Finished goods                                                            8,551                 1,377
                                                                                -------------          ------------
                   Total inventories                                                  59,983                29,021
       Prepaid expenses and deposits                                                   4,685                 5,196
       Deferred income taxes                                                           8,569                 8,569
                                                                                -------------          ------------
                   Total current assets                                              233,218               323,158
Investment in Unconsolidated Joint Venture                                            39,016                30,143
Property, Plant and Equipment
       Land                                                                            9,151                 5,268
       Building                                                                       88,881                38,357
       Equipment                                                                     589,252               443,011
       Furniture                                                                       7,424                 6,118
       Leasehold Improvements                                                        103,266                51,088
                                                                                -------------          ------------
                                                                                     797,974               543,842
       Less allowances for depreciation and amortization                            (269,636)             (214,668)
                                                                                -------------          ------------
                   Net property, plant and equipment                                 528,338               329,174
Deposits and Other Assets                                                              3,755                 3,840
                                                                                -------------          ------------
                                                                                    $804,327              $686,315
                                                                                -------------          ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
       Trade accounts payable                                                        $42,684                28,717
       Accounts payable to related parties                                             6,122                 7,761
       Accrued compensation and benefits                                              23,259                31,966
       Other liabilities                                                               2,306                 2,096
       Income taxes payable                                                            7,235                   400
                                                                                -------------          ------------
                   Total current liabilities                                          81,606                70,940
Deferred Income Taxes                                                                 37,643                37,643
Other Long-term Liabilities                                                              419                   474
Minority Interest in Consolidated Subsidiary                                           2,902                 2,694
Stockholders' Equity
       Preferred stock                                                                    --                    --
       Common stock                                                                      514                   507
       Additional paid-in capital                                                    380,875               374,399
       Retained earnings                                                             295,167               193,605
       Accumulated foreign currency translation adjustments                            5,201                 6,053
                                                                                -------------          ------------
                   Total stockholders' equity                                        681,757               574,564
                                                                                -------------          ------------
                                                                                    $804,327              $686,315
                                                                                =============          ============
</TABLE>

Note:  The balance sheet at December 31, 1995 has been derived from the audited
       financial statements at that date.

                 See notes to consolidated financial statements.

                                       -4-
<PAGE>   5
                               KOMAG, INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Nine Months Ended
                                                                                -----------------------
                                                                                 SEPT 29         Oct 1
                                                                                    1996          1995
                                                                                ---------     ---------
<S>                                                                             <C>            <C>    
OPERATING ACTIVITIES
      Net income                                                                $101,562       $68,640
      Adjustments to reconcile net income to net cash
          provided by operating activities:
            Depreciation and amortization                                         60,920        45,659
            Provision for losses on accounts receivable                               52           554
            Equity in net income of unconsolidated joint venture                  (9,717)       (4,264)
            Loss on disposal of equipment                                             49           524
            Deferred rent                                                            (55)          (55)
            Minority interest in net income of consolidated subsidiary               450         1,359
            Changes in operating assets and liabilities:
                  Accounts receivable                                             11,794       (20,097)
                  Accounts receivable from related parties                        (2,187)       (3,334)
                  Inventories                                                    (30,962)       (4,530)
                  Prepaid expenses and deposits                                     (743)       (2,629)
                  Trade accounts payable                                          13,967         9,014
                  Accounts payable to related parties                             (1,639)        1,402
                  Accrued compensation and benefits                               (8,707)        6,553
                  Other liabilities                                                  210          (159)
                  Income taxes payable                                             8,082        13,528
                                                                                ---------     ---------
                                 Net cash provided by operating activities       143,076       112,165

INVESTING ACTIVITIES
      Acquisition of property, plant and equipment                              (261,199)     (105,199)
      Purchases of short-term investments                                           (163)     (169,126)
      Proceeds from short-term investments at maturity                           137,862        40,144
      Proceeds from disposal of equipment                                          1,607           120
      Deposits and other assets                                                     (420)          222
                                                                                ---------     ---------
                                Net cash used in investing activities           (122,313)     (233,839)

FINANCING ACTIVITIES
      Payments of long-term obligations                                               --       (29,482)
      Sale of Common Stock, net of issuance costs                                  6,483       130,194
      Distribution to minority interest holder                                      (279)         (280)
                                                                                ---------     ---------
                                Net cash provided by financing activities          6,204       100,432
                      Increase (decrease) in cash and cash equivalents            26,967       (21,242)

      Cash and cash equivalents at beginning of year                              14,879        23,183
                                                                                ---------     ---------

                      Cash and cash equivalents at end of period                 $41,846        $1,941
                                                                                =========     =========
</TABLE>

                 See notes to consolidated financial statements.

                                      -5-
<PAGE>   6
                               KOMAG, INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 29, 1996


     NOTE 1 - BASIS OF PRESENTATION

          The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles for
     interim financial information and with the instructions to Form 10-Q and
     Article 10 of Regulation S-X. Accordingly, they do not include all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements. In the opinion of Management,
     all adjustments (consisting of normal recurring accruals) considered
     necessary for a fair presentation have been included. Operating results for
     the three- and nine-month periods ended September 29, 1996 are not
     necessarily indicative of the results that may be expected for the year
     ending December 29, 1996.

          For further information, refer to the consolidated financial
     statements and footnotes thereto included in the Company's Annual Report on
     Form 10-K for the year ended December 31, 1995.

          The Company uses a 52-53 week fiscal year ending on the Sunday closest
     to December 31. The three- and nine-month reporting periods for the
     comparable years included in this report are each comprised of thirteen
     weeks and thirty-nine weeks, respectively.

     NOTE 2 - INVESTMENT IN DEBT SECURITIES

         The Company invests its excess cash in high-quality, short-term debt
     and equity instruments. Short-term investments consist primarily of
     AAA-rated, municipal auction-rate preferred stock. None of the Company's
     investments have maturities greater than one year.

                                       -6-
<PAGE>   7
          The following is a summary of the Company's investments by major
     security type at amortized cost which approximates fair value:

<TABLE>
<CAPTION>
                                                SEPT. 29        Dec. 31
(in thousands)                                      1996           1995
                                                --------        -------
<S>                                             <C>             <C>
Municipal auction rate preferred stock          $61,100         $198,636
Corporate debt securities                         9,306            3,062
Mortgage-backed securities                       18,746           19,462
                                                -------         --------
                                                $89,152         $221,160
                                                =======         ========
Amounts included in cash and cash equivalents   $28,052         $ 22,361
Amounts included in short term investments       61,100          198,799
                                                -------         --------
                                                $89,152         $221,160
                                                =======         ========
</TABLE>


          The Company utilizes zero-balance accounts and other cash management
     tools to invest all available funds including bank balances in excess of
     book balances.


     NOTE 3 - INCOME TAXES

         The estimated annual effective income tax rate for 1996 of 20% is lower
     than the 1996 combined federal and state statutory rate of 41% and the
     effective income tax rate for 1995 of 25%. The difference between the
     effective tax rate and the combined statutory rate is primarily due to a
     five-year tax holiday (commencing in July 1993) for the Company's
     wholly-owned thin-film media operation, Komag USA (Malaysia) Sdn. Assuming
     the Company fulfills certain commitments under its license to operate
     within Malaysia, this tax holiday may be extended for an additional
     five-year period by the Malaysian government. The effective income tax rate
     for 1996 is lower than the rate in effect for 1995 primarily due to
     anticipated growth in the percentage of consolidated income to be derived
     from the Company's Malaysian operations in 1996.

                                       -7-
<PAGE>   8
                               KOMAG, INCORPORATED

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


     RESULTS OF OPERATIONS:

         The following discussion contains predictions, estimates and other
     forward-looking statements that involve a number of risks and
     uncertainties. While this outlook represents the Company's current judgment
     on the future direction of the business, such risks and uncertainties could
     cause actual results to differ materially from any future performance
     suggested herein. Factors that could cause actual results to differ include
     the following: product transitions to next-generation products; the rate of
     improvement in manufacturing efficiencies on newly-introduced products;
     utilization of existing and soon-to-be-completed manufacturing facilities;
     industry supply-demand relationship and related pricing for high- end
     desktop and enterprise disk products; availability of certain sole-sourced
     raw material supplies; vertical integration and company consolidation
     within the Company's limited customer base, including the ability of Komag
     and/or AKCL to maintain and expand business with Matsushita-Kotobuki
     Electronics Industries Ltd. (MKE); execution of planned capacity additions;
     and the risk factors listed in the Company's Annual Report on Form 10-K
     filed in March 1996. The Company undertakes no obligation to publicly
     release the result of any revisions to these forward-looking statements
     which may be made to reflect events or circumstances after the date hereof
     or to reflect the occurrence of unanticipated events.

     Revenue
         Net sales of thin-film media decreased slightly in the third quarter of
     1996 relative to the third quarter of 1995. Net sales for the current
     quarter included $1.5 million of substrate disk sales; no such substrate
     sales occurred in 1995. The Company may periodically sell substrate
     products but does not currently anticipate that such sales will become a
     significant portion of its revenue. Excluding the substrate disk sales, net
     sales decreased 2% in the third quarter of 1996 compared to the third
     quarter of 1995. The decrease resulted from the net effect of a 9% increase
     in unit sales volume and an 11% decrease in the overall average unit
     selling price. Price reductions are typical for individual product
     offerings in the thin-film media industry. The overall average selling
     price typically only strengthens as the result of product mix shifts to
     higher-priced, more technologically advanced product offerings. The Company
     rapidly transitioned to 1800 Oe products throughout 1995. Sales of these
     products accounted for 78% of net unit sales in the third quarter of 1995
     and exceeded 90% of net unit sales from the fourth quarter of 1995 through
     the second quarter of 1996. The Company is beginning a transition to
     next-generation advanced proximity inductive disks and high-performance
     magnetoresistive

                                       -8-
<PAGE>   9
     (MR) disks. Sales of these newer products reached 27% of net unit sales in
     the third quarter of 1996. The effects of declining prices for 1800 Oe
     products were only partially offset by the product mix shift to these
     higher-priced, next generation products. The Company anticipates that sales
     of these new products will exceed 50% of net unit sales in the fourth
     quarter of 1996. This rapid shift to new products will most likely cause
     the overall average selling price to increase modestly in the fourth
     quarter of 1996. The continuation of this product shift will likely
     moderate the rate of decline in the overall average selling price both
     sequentially and year over year.

         In addition to sales of internally produced disk products, the Company
     resells products manufactured by its Japanese joint venture, Asahi Komag
     Co., Ltd. (AKCL). Distribution sales of thin-film media manufactured by
     AKCL were $1.7 million in the third quarter of 1996 compared to $0.2
     million in the third quarter of 1995. The Company expects that distribution
     sales of AKCL product will remain at this relatively low level throughout
     the remainder of 1996.

         Net sales increased 22% in the first nine months of 1996 relative to
     the first nine months of 1995. Excluding substrate sales, net sales
     increased 20% between the comparable nine-month periods. The increase was
     due to the net effect of a 28% increase in unit sales volume and a 6%
     decrease in the overall average selling price. The decrease in the overall
     average selling price was primarily due to price reductions for 1800 Oe
     products as discussed above. Distribution sales of AKCL manufactured
     thin-film media were $3.8 million in the first nine months of 1996 compared
     to $0.6 million in the first nine months of 1995.

         During the third quarter of 1996 two customers individually accounted
     for at least ten percent of consolidated net sales: Seagate Technology,
     Inc. (58%), and Western Digital Corporation (25%). Seagate completed its
     merger with Conner Peripherals, Inc. in the first quarter of 1996. The
     percentage of consolidated net sales included sales to Seagate and Conner
     on a combined basis. The Company expects that it will continue to derive a
     substantial portion of its sales from relatively few customers. The
     distribution of sales among customers may vary from quarter to quarter
     based on the match of the Company's product capabilities with specific disk
     drive programs of the customers.

         Unit production volume increased approximately 2% in the third quarter
     of 1996 relative to the third quarter of 1995. Increased production volume
     typically occurs due to increased physical capacity (additional sputtering
     lines) and/or improvements in manufacturing efficiencies (improved
     production throughput from higher yields, better equipment utilization, and
     shorter process cycle times). The combination of substantially lower
     start-up yields for

                                       -9-
<PAGE>   10
     new products and a reduction in equipment utilization mostly offset the
     effects of a 16% increase in physical capacity and a nominal improvement in
     process cycle times in the third quarter of 1996 relative to the third
     quarter of 1995. Start-up yields for the new proximity inductive and MR
     disk product families were substantially lower than the yield achieved on
     the mature 1800 Oe products in the third quarter of 1995. The Company
     typically experiences lower manufacturing yields on new products as it
     ramps production of these products. The Company anticipates that
     manufacturing yields will improve as additional production experience is
     gained in these new products. The rate of improvement in yields, however,
     remains difficult to predict. In addition to the lower start-up yields,
     production output in the third quarter of 1996 was restricted by product
     development time on production machines, retooling for new products,
     equipment maintenance activities, and power outages in both the U.S. and
     Malaysia. The Company had a total of sixteen sputtering lines in production
     during the third quarter of 1996, nine of which are in the U.S. and seven
     in Malaysia. Three new sputtering lines, added in September 1995, January
     1996 and May 1996 increased physical capacity in the third quarter of 1996
     relative to the third quarter of 1995.

         Over one-third of the increase in unit production volume required to
     support the unit sales and finished goods inventory growth for the first
     nine months of 1996 compared to the first nine months of 1995 was achieved
     through reductions in process cycle times. Physical capacity additions
     accounted for the remainder of the increase. Manufacturing yields and
     equipment utilization between the comparable nine-month periods decreased
     slightly.

         Net sales for the third quarter of 1996 decreased 14% relative to the
     record $152 million level achieved in both the first and second quarters of
     1996 due in large measure to the low manufacturing yields on new products.
     The Company successfully achieved high-volume production of advanced
     proximity inductive disks, shipping over 2.5 million units of this product
     family into the high-end desktop market. To meet the needs of the
     enterprise computer market, the Company began shipments of high-performance
     MR disks to multiple customers at the end of the third quarter. Orders for
     these new products are currently strong, but low manufacturing yields
     continue to limit production output.

         The Company expects to increase production output in the fourth quarter
     of 1996 relative to the third quarter of 1996 through on-going efforts to
     improve these new product yields and commencement of production on two
     additional sputtering lines. The Company anticipates that net sales for the
     fourth quarter of 1996 will exceed the sales levels achieved in the first
     and second quarters of 1996. The fourth quarter 1996 financial performance
     will depend, in large measure, on the rate of improvement in manufacturing
     yields for the Company's new proximity inductive and MR disk product
     families. Although the Company is expending considerable effort to improve
     yields on these new products, there can be no assurance that the Company
     will reach acceptable yield levels in a timely manner.

                                      -10-
<PAGE>   11
     Gross Margin
         The gross margin percentage for the third quarter of 1996 was 24.0%,
     down significantly from the 40.1% gross margin percentage achieved for the
     third quarter of 1995. The combination of a decrease in the overall average
     selling price, low start-up yields for new products and a reduced equipment
     utilization rate in the third quarter of 1996 relative to the third quarter
     of 1995 resulted in the lower gross margin percentage in the current year
     period. The gross margin percentage for the first nine months of 1996 was
     36.4%, down slightly from 36.8% for the first nine months of 1995.
     Reduction in the overall average unit selling price marginally outpaced
     improvement in the overall average unit production cost and resulted in the
     slightly lower gross margin percentage for the first nine months of 1996
     relative to the comparable period of 1995.

         Assuming manufacturing efficiencies improve as expected, the gross
     margin percentage for the fourth quarter of 1996 is expected to increase
     sequentially over the third quarter of 1996 and should move towards the
     lower end of the Company's targeted gross margin percentage range of
     33-38%. The Company anticipates that fourth quarter 1996 earnings will
     exceed the results of the third quarter of 1996, but will be below the
     earnings level reported for the fourth quarter of 1995. While financial
     performance for the second half of 1996 will be below the record high level
     achieved for the first half of 1996, the Company expects that fiscal 1996
     results will compare favorably to those for fiscal 1995.

     Operating Expenses
         Research and development ("R&D") expenses increased 34% ($2.0 million)
     and 20% ($3.6 million) in the three- and nine-month periods of 1996,
     respectively, compared to the comparable periods of 1995. The increase
     between these periods was mainly due to development costs for
     next-generation proximity inductive and MR thin-film media products.

         Selling, general and administrative ("SG&A") expenses decreased 45%
     ($5.4 million) and 5% ($1.4 million) in the three- and nine-month periods
     of 1996, respectively, compared to the three- and nine-month periods of
     1995. The Company's provisions for bonus and profit sharing programs
     decreased $5.1 million and $3.6 million for the three- and nine-month
     periods of 1996, respectively, compared to the three- and nine-month
     periods of 1995. Provisions for bad debt decreased $1.0 million and $0.6
     million between the comparable three- and nine-month periods, respectively.
     Excluding provisions for bad debts and bonus and profit sharing, SG&A
     expenses increased approximately $0.7 million between the three-month
     periods and $2.8 million between the nine-month periods. Higher
     administrative costs required to support the growth in the business,
     including spending at the Company's front end manufacturing facility in
     Sarawak, Malaysia and higher worldwide recruiting and hiring costs,
     accounted for the majority of the increase.

                                      -11-
<PAGE>   12
     Interest and Other Income/Expense
         Interest income increased $0.1 million in the third quarter of 1996
     relative to the third quarter of 1995 and $2.1 million in the first nine
     months of 1996 relative to the first nine months of 1995. The increases
     were due to higher average cash and short-term investment balances
     resulting from the $122 million of proceeds provided by a follow-on public
     stock offering completed in September 1995. Interest expense decreased $0.4
     million in the third quarter of 1996 relative to the third quarter of 1995
     and $1.4 million in the first nine months of 1996 relative to the first
     nine months of 1995. The Company used a portion of the proceeds from the
     public offering to repay all the existing bank debt in September 1995.
     Interest expense for the three- and nine-month periods of 1996 primarily
     represented non- utilization fees for the Company's credit facilities.
     Other income increased $0.1 million in the third quarter of 1996 compared
     to the third quarter of 1995 and decreased $0.5 million for the first nine
     months of 1996 relative to the first nine months of 1995. Other income in
     the third quarter of 1996 included $0.6 million of royalty income from AKCL
     for sales made outside of Japan. Other income in the third quarter of 1995
     included an insurance recovery related to an electrical power disruption at
     the Company's Malaysian manufacturing facility.

     Income Taxes
         The estimated annual effective income tax rate for 1996 of 20% is lower
     than the 1996 combined federal and state statutory rate of 41% and the
     effective income tax rate for 1995 of 25%. The difference between the
     effective tax rate and the combined statutory rate is primarily due to a
     five-year tax holiday (commencing in July 1993) for the Company's
     wholly-owned thin-film media operation, Komag USA (Malaysia) Sdn. Assuming
     the Company fulfills certain commitments under its license to operate
     within Malaysia, this tax holiday may be extended for an additional
     five-year period by the Malaysian government. The effective income tax rate
     for 1996 is lower than the rate in effect for 1995 primarily due to
     anticipated growth in the percentage of consolidated income to be derived
     from the Company's Malaysian operations in 1996.

     Minority Interest in KMT/Equity in Net Income of AKCL
         The minority interest in the net income of consolidated subsidiary
     represented Kobe Steel USA Holdings Inc.'s (Kobe USA's) share of Komag
     Material Technology, Inc.'s (KMT's) net income. KMT was owned 55% by the
     Company and 45% by Kobe USA from November 1988 to December 1995. On
     December 28, 1995 the Company increased its ownership of KMT to 80% through
     the purchase of KMT Common Stock directly from Kobe USA. Kobe retained a
     20% minority interest investment in KMT. KMT recorded net income of $0.7
     million and $2.3 million in the first three- and nine-month periods of
     1996, respectively, compared to $1.1 million and $3.0 million in the three-
     and nine-month periods of 1995, respectively.

                                      -12-
<PAGE>   13
         The Company records 50% of AKCL's net income as equity in net income of
     unconsolidated joint venture. AKCL reported net income of $1.6 million in
     the third quarter of 1996, down from $5.5 million in the third quarter of
     1995. AKCL's results for the third quarter of 1996 included a writedown of
     its remaining investment in Headway Technologies, Inc. (Headway) of $4.5
     million (net of tax). There was no such writedown in the third quarter of
     1995. During the third quarter of 1996 Headway's major customer, Hewlett-
     Packard Company (HP), announced the closure of its disk drive manufacturing
     operations. The anticipated future operating losses at Headway arising from
     the loss of HP's business formed the basis of AKCL's decision to write-off
     its remaining Headway investment.

         AKCL reported net income of $19.4 million for the first nine months of
     1996 compared to $8.5 million for the first nine months of 1995. AKCL's
     improved operating performance in 1996 was primarily due to the combination
     of an increase in the overall average selling price of its products and a
     reduction in the overall average unit production cost on a substantially
     higher unit sales volume. AKCL recorded writedowns of its investment in
     Headway of $4.5 million (net of tax) and $2.2 million (net of tax) in the
     first nine months of 1996 and 1995, respectively.

         AKCL's functional currency is the Japanese yen and the Company
     translates AKCL's yen-based income statements to U.S. dollars at the
     average exchange rate for the period. The yen weakened approximately 16%
     and 17% between the comparable three- and nine-month periods, respectively.
     AKCL's net income would have been approximately $3.4 million and $23.2
     million in the third quarter and first nine months of 1996, respectively,
     had the yen- based income statements been translated at the average rates
     in effect for the comparable 1995 periods.

         AKCL's operating performance for the fourth quarter of 1996 is expected
     to be substantially below the operating performance achieved for the third
     quarter of 1996. Order reductions and yield issues associated with AKCL's
     transition to next-generation products are expected to cause the lower
     operating performance. The Company expects that AKCL may report a loss for
     the fourth quarter if orders and yields do not improve beyond current
     expectations.

                                      -13-
<PAGE>   14
     LIQUIDITY AND CAPITAL RESOURCES:

         Cash and short-term investments of $102.9 million at the end of the
     third quarter of 1996 decreased $110.7 million from the end of the prior
     fiscal year. Operating activities generated $143.1 million in cash during
     the first nine months of 1996 and partially funded the Company's $261.2
     million of capital spending during the nine-month period. Sales of Common
     Stock under the Company's stock option and stock purchase programs during
     this period generated $6.5 million.

         Total capital expenditures for 1996 are currently estimated at
     approximately $390 million. Construction and fit up of three new
     manufacturing facilities are the major components of the capital plan. The
     Company has completed construction of a 275,000 square foot facility for
     the front end stages of its manufacturing process in Sarawak, Malaysia and
     a 225,000 square foot facility for the back end stages of its manufacturing
     process in San Jose, California. An additional 275,000 square foot back end
     factory is currently under construction in Penang, Malaysia. The Sarawak
     factory began volume production in April 1996 and the San Jose factory
     plans to commence production in early November 1996. The Company plans to
     begin production of finished disk products at the new Penang facility in
     early 1997. Additionally, the Company is currently constructing a 178,000
     square foot research and development facility and a 90,000 square foot
     administration building in San Jose, California for occupancy in the first
     half of 1997.

         Current noncancellable commitments total approximately $206 million.
     The Company believes that, in order to achieve its long-term expansion
     objectives and maintain and enhance its competitive position, it will need
     additional financing for capital expenditures, working capital, and
     research and development. During the two-year period of 1996 and 1997, the
     Company expects to spend approximately $750 million to construct new
     facilities and add production equipment at its new and existing facilities.
     The Company expects to fund its 1996 and the majority of its 1997 capital
     expenditures through a combination of cash flow from operations, its cash
     balances, and funds available from its unutilized $140 million credit
     facilities. However, new debt and/or equity financing will likely be
     required to fund a portion of the 1997 capital expenditures. If the Company
     is unable to obtain sufficient capital it could be required to reduce its
     capital equipment and research and development expenditures which could
     have a material adverse effect on the Company's results of operations.

                                      -14-
<PAGE>   15
     PART II. OTHER INFORMATION

          ITEM 1. Legal Proceedings -- Not Applicable.
          ITEM 2. Changes in Securities -- Not Applicable.
          ITEM 3. Defaults Upon Senior Securities -- Not Applicable.
          ITEM 4. Submission of Matters to a Vote of Security Holders -- Not 
                  Applicable.
          ITEM 5. Other Information -- Not Applicable.
          ITEM 6. Exhibits and Reports on Form 8-K
                (a)    Exhibits -- None.
                (b)    Not Applicable

                                      -15-
<PAGE>   16
                                   SIGNATURES



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




                               KOMAG, INCORPORATED
                                  (Registrant)








     DATE:   November 8, 1996          BY:      /s/ William L. Potts, Jr.
           --------------------           -------------------------------

                                              William L. Potts, Jr.
                                               Senior Vice President and
                                               Chief Financial Officer

     DATE:   November 8, 1996          BY:     /s/ Stephen C. Johnson
          ---------------------           ---------------------------

                                              Stephen C. Johnson
                                               President and
                                               Chief Executive Officer

                                      -16-
<PAGE>   17
                                 EXHIBIT INDEX


Exhibit                             Description

  27                          Financial Data Schedule