METAL MANAGEMENT INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002 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 NO. 0-14836

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METAL MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 94-2835068
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)

500 N. DEARBORN ST., SUITE 405,
CHICAGO, IL 60610
(Address of principal executive offices)

Registrant's telephone number, including area code: (312) 645-0700

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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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes _ No X

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 X No _

As of February 1, 2003, the Registrant had 10,152,022 shares of common stock
outstanding.

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INDEX

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

METAL MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

The accompanying notes are an integral part of these financial statements

1

METAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)

The accompanying notes are an integral part of these financial statements
2

METAL MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

The accompanying notes are an integral part of these financial statements

3

METAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, in thousands)

The accompanying notes are an integral part of these financial statements

4

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Metal
Management, Inc., a Delaware corporation, and its wholly-owned subsidiaries (the
"Company") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain amounts have been
reclassified from the previously reported financial statements in order to
conform to the financial statement presentation of the current period.

The March 31, 2002 balance sheet information has been derived from the
Company's audited financial statements. All significant intercompany accounts,
transactions and profits have been eliminated. Certain information related to
the Company's organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These unaudited consolidated financial statements reflect, in the opinion of
management, all material adjustments (which include only normal recurring
adjustments) necessary to fairly state the financial position and the results of
operations for the periods presented. Operating results for interim periods are
not necessarily indicative of the results that can be expected for a full year.
These interim financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended March 31, 2002.

Reorganization Under Chapter 11

On November 20, 2000, the Company filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code (the "Chapter 11
proceedings") with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). The Company's plan of reorganization (the
"Plan") was confirmed by the Bankruptcy Court and became effective on June 29,
2001 (the "Effective Date").

On the Effective Date, the Company reflected the terms of the Plan in its
consolidated financial statements by adopting fresh-start reporting in
accordance with the recommended accounting principles for entities emerging from
Chapter 11 set forth in the American Institute of Certified Public Accountants
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"). Under fresh-start reporting, a
reorganization value for the entity was determined by the Company's financial
advisor based upon the estimated fair value of the enterprise before considering
values allocated to debt to be settled in the reorganization. The reorganization
value was allocated to the fair values of the Company's assets and liabilities.
The portion of the reorganization value which could not be attributed to
specific tangible or identified intangible assets was $15.5 million and was
classified as goodwill in the unaudited consolidated financial statements.

The unaudited consolidated financial statements of the Company for the
periods subsequent to June 30, 2001, following the effective date of the Plan,
are referred to as the "Reorganized Company" and are not comparable to those for
the periods prior to June 30, 2001, which are referred to as the "Predecessor
Company." A black line has been drawn in the unaudited consolidated financial
statements to distinguish, for accounting purposes, the periods associated with
the Reorganized Company and the Predecessor Company. Aside from the effects of
fresh-start reporting and new accounting pronouncements adopted since the
effective date of the Plan, the Reorganized Company follows the same accounting
policies as the Predecessor Company.

The reorganization value for the equity of the Reorganized Company,
aggregating $65 million, was based on the consideration of many factors and
various valuation methods, including a discounted cash flow analysis using
projected financial information, selected publicly traded company market
multiples of certain companies operating businesses viewed to be similar to that
of the Company, and other applicable ratios and valuation techniques believed by
the Company and its financial advisor to be representative of the Company's
business
5

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION -- (CONTINUED)

and industry. The valuation was based upon a number of estimates and
assumptions, which are inherently subject to significant uncertainties and
contingencies beyond the control of the Company.

The unaudited consolidated financial statements of the Predecessor Company
for the three months ended June 30, 2001 reflect fresh-start reporting
adjustments of $0.9 million and an extraordinary gain of $145.7 million related
to the discharge of indebtedness in accordance with the Plan.

NOTE 2 -- RECENT ACCOUNTING PRONOUNCEMENTS

Effective April 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144, which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," provides a single accounting model for long-lived assets to be
disposed of. SFAS No. 144 significantly changes the criteria that would have to
be met to classify an asset as held-for-sale, although it retains many of the
fundamental recognition and measurement provisions of SFAS No. 121. The adoption
of this statement did not have a material effect on the Company's consolidated
financial position, results of operations or cash flows.

In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13,
and Technical Corrections." This Statement addresses, among other items, the
classification of gains and losses from extinguishment of debt. Under the
provisions of SFAS No. 145, gains and losses from extinguishment of debt can
only be classified as extraordinary items if they meet the criteria set forth in
APB Opinion No. 30. This statement is effective for fiscal years beginning after
May 15, 2002. Upon adoption of SFAS No. 145, the extraordinary gains on the debt
extinguishments recognized during the three and nine months ended December 31,
2002 and the extraordinary gain on debt discharge recognized by the Predecessor
Company during the three months ended June 30, 2001 will be reclassified to
other income in the Company's statement of operations.

Effective January 1, 2003, the Company adopted SFAS No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities." SFAS 146 nullifies EITF
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred.
The adoption of this statement did not have a material effect on the Company's
consolidated financial position, results of operations or cash flows.

In November 2002, FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires certain
guarantees be recorded at fair value as opposed to the current practice of
recording a liability only when a loss is probable and reasonably estimable. FIN
45 also requires a guarantor to make significant new guaranty disclosures, even
when the likelihood of making any payments under the guarantee is remote. The
disclosure requirements of FIN 45 are effective for interim and annual periods
ending after December 15, 2002, and the Company has adopted those requirements
for its financial statements included in this Form 10-Q. The initial recognition
and initial measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure," which amends SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative
methods of transition to the fair value method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of

6

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 2 -- RECENT ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)

accounting used for stock-based employee compensation and the effect on reported
net income and earnings per share (see Note 6 -- Stockholders' Equity).

In January 2003, FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51 and applies immediately to any variable
interest entities created after January 31, 2003 and to variable interest
entities in which an interest is obtained after that date. FIN 46 is applicable
to the Company in the second quarter of fiscal 2004, for interests acquired in
variable interest entities prior to February 1, 2003. The Company is currently
assessing the impact of adoption of FIN 46.

NOTE 3 -- GOODWILL AND OTHER INTANGIBLES

In connection with fresh-start reporting, the Company adopted SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires the use of the purchase method of accounting for
business combinations initiated after June 30, 2001 and establishes specific
criteria for the recognition of intangible assets separately from goodwill. SFAS
No. 142 requires, among other things, the discontinuance of amortization related
to goodwill and indefinite lived intangible assets. Under SFAS No. 142, goodwill
is tested annually for impairment and in interim periods if certain events occur
indicating that the carrying value of goodwill may be impaired. The adoption of
SFAS No. 142 resulted in the classification of the reorganization intangible
recognized in fresh-start reporting as goodwill with an indefinite life.

In October 2002, the Company acquired certain assets of a scrap metals
recycling company. The aggregate purchase consideration was $3.3 million
consisting of (i) $3.0 million of cash paid at closing, (ii) contingent
consideration of $0.2 million of cash placed in escrow, and payable in October
2003 after the achievement of certain earnout targets measured by tons of
material purchased from acquired customer accounts, and (iii) $0.1 million of
transaction costs. The Company obtained independent valuations on the tangible
and intangible assets associated with the purchase and allocated the purchase
consideration as follows: (i) $0.9 million to the fair value of equipment, (ii)
$1.3 million to customer lists (which is being amortized over 15 years), and
(iii) $1.1 million to goodwill.

Goodwill and other intangibles consisted of the following (in thousands):

Total amortization expense from customer lists intangibles for both the
three and nine months ended December 31, 2002 was $21,000. Amortization expense
for customer lists intangibles is estimated to be approximately $85,000 per
year. Goodwill has been reduced by the utilization of pre-emergence NOL's (see
Note 5 -- Income Taxes).

7

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 4 -- LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

Credit Agreement

On June 29, 2001, the Company entered into an $150 million revolving loan
and letter of credit facility (the "Credit Agreement") with Deutsche Bank Trust
Company Americas, as agent for the lenders thereunder. On February 14, 2003, the
Credit Agreement was amended to extend the maturity date to January 1, 2004 and
reduce the maximum amount of borrowings available under the credit facility to
$115 million. In consideration for this amendment, the Company paid fees of $0.3
million. As of December 31, 2002, borrowings under the Credit Agreement were
$72.7 million. The Credit Agreement is available to fund working capital needs
and for general corporate purposes.

Borrowings under the Credit Agreement are subject to certain borrowing base
limitations based upon a formula equal to 85% of eligible accounts receivable,
the lesser of $65 million or 70% of eligible inventory, and a fixed asset
sublimit of $25.1 million as of December 31, 2002, which amortizes by $2.4
million on a quarterly basis and under certain other conditions. A security
interest in substantially all of the assets and properties of the Company,
including pledges of the capital stock of the Company's subsidiaries, has been
granted to the agent for the lenders as collateral against the obligations of
the Company under the Credit Agreement. The Credit Agreement provides the
Company with the option of borrowing based either on the prime rate (as
specified by Deutsche Bank AG, New York Branch) or at the London Interbank
Offered Rate ("LIBOR") plus a margin. Pursuant to the Credit Agreement, the
Company pays a fee of .375% on the undrawn portion of the facility. Fees and
expenses paid to the lenders by the Company during the nine months ended
December 31, 2002 amounted to $2.5 million.

The Credit Agreement requires the Company to meet certain financial tests,
including an interest coverage ratio and a leverage ratio (each as defined in
the Credit Agreement). The Credit Agreement also contains covenants which, among
other things, limit (i) the amount of capital expenditures; (ii) the incurrence
of additional indebtedness; (iii) the payment of dividends; (iv) transactions
with affiliates; (v) asset sales; (vi) acquisitions; (vii) investments; (viii)
mergers and consolidations; (ix) prepayments of certain other indebtedness; (x)
liens and encumbrances; and (xi) other matters customarily restricted in such
agreements.

The Company's ability to meet financial ratios and tests in the future may
be affected by events beyond its control, including fluctuations in operating
cash flows and working capital. While the Company currently expects to be in
compliance with the covenants and satisfy the financial ratios and tests in the
future, there can be no assurance that the Company will meet such financial
ratios and tests or that it will be able to obtain future amendments or waivers
to the Credit Agreement, if so needed, to avoid a default. In the event of a
default, the lenders could elect to not make loans available to the Company and
declare all amounts borrowed under the Credit Agreement to be due and payable.
8

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 4 -- LONG-TERM DEBT -- (CONTINUED)

Junior Secured Notes

The Junior Secured Notes bear interest at 12 3/4% and are due on June 15,
2004. A second priority lien on substantially all of the Company's real and
personal property and equipment has been pledged as collateral against the
Junior Secured Notes.

Interest on the Junior Secured Notes is payable semi-annually during June
and December of each year. The Junior Secured Notes are redeemable at the
Company's option (in multiples of $10 million) at a redemption price of 100% of
the principal amount thereof, plus accrued and unpaid interest. The Junior
Secured Notes are redeemable at the option of the holders of such notes at a
repurchase price of 101% of the principal amount thereof, plus accrued and
unpaid interest, in the event the Company experiences a change of control (as
such term is defined in the Indenture governing the Junior Secured Notes). The
Company is required to redeem all or a pro-rata portion of the Junior Secured
Notes at a repurchase price of 100% of the principal amount thereof, plus
accrued and unpaid interest, in the event that the Company makes certain asset
sales.

The indenture governing the Junior Secured Notes, as amended, contains
restrictions including limits on, among other things, the Company's ability to:
(i) incur additional indebtedness; (ii) pay dividends or distributions on its
capital stock or repurchase its capital stock; (iii) issue stock of
subsidiaries; (iv) make certain investments; (v) create liens on its assets;
(vi) enter into transactions with affiliates; (vii) merge or consolidate with
another company; and (viii) transfer and sell assets or enter into sale and
leaseback transactions.

During the nine months ended December 31, 2002, the Company repurchased
$2.4 million par amount of Junior Secured Notes and recognized an extraordinary
gain, net of tax, of $0.4 million.

CONVERTIBLE DEBT

The Company issued a $1.6 million, 10% promissory note, due December 31,
2002, to its financial advisor involved in the Chapter 11 proceedings (see Note
9 -- Supplemental Information). The Company repaid $0.8 million of the
promissory note on December 31, 2002 and repaid the remaining balance of $0.8
million on January 31, 2003. The holder of the promissory note had the option of
converting a minimum of $500,000 of the principal amount of the promissory note
into Common Stock at $6.46 per share.

NOTE 5 -- INCOME TAXES

At the Effective Date, the Predecessor Company and its subsidiaries had
available federal net operating loss ("NOL") carryforwards of approximately $112
million, which expire through 2022, and net deferred tax assets (including NOL
carryforwards) of approximately $75 million. The Company has recorded a
valuation allowance against the Predecessor Company's net deferred tax assets,
including NOL carryforwards, due to the uncertainty regarding their ultimate
realization. In addition, a valuation allowance has been recorded against
post-emergence net deferred tax assets, including NOL carryforwards, due to the
uncertainty regarding their ultimate realization.

Under fresh-start reporting, realization of net deferred tax assets that
existed as of the emergence date will first reduce goodwill until exhausted and
thereafter are reported as additional paid-in-capital. In addition, the use of
emergence date net deferred tax assets results in the recognition of income tax
expense without the corresponding payment of cash taxes. The realization of
certain post-emergence NOL carryforwards will reduce income tax expense in the
period they are utilized or when the uncertainty regarding their realization is
sufficiently reduced.

9

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 5 -- INCOME TAXES -- (CONTINUED)

The Company estimates its effective tax rate based on projections of
financial results, statutory restrictions and limitations and expected
tax-filing positions. Changes in assumptions regarding these matters can result
in changes in the effective tax rate from period to period. During the three
months ended December 31, 2002, the Company filed its fiscal 2002 federal tax
return. As a result of the filing, the Company revised its estimates relating to
emergence date tax assets that are available to offset current year taxable
income. This change in estimate resulted in a change in the Company's estimated
effective tax rate for fiscal 2003. As a result, during the three and nine
months ended December 31, 2002, the Company recognized income tax expense of
$2.6 million and $6.8 million, respectively. The resulting realization of
deferred tax assets was recorded as a reduction in goodwill. The effective tax
rate differs from the statutory rate for the nine months ended December 31, 2002
due to temporary differences related to post-emergence deferred tax assets.

The utilization of deferred tax assets, including NOL carryforwards, and
the financial statement accounting for these tax benefits, including the
estimated tax provision and effective rate for the three and nine months ended
December 31, 2002, are dependent upon the amounts and timing of future taxable
income, statutory restrictions and limitations.

NOTE 6 -- STOCKHOLDERS' EQUITY

In accordance with the Plan, the Company was required to distribute
10,000,000 shares of common stock, par value $.01 per share ("Common Stock") and
warrants to purchases 750,000 shares of Common Stock (designated as "Series A
Warrants") as follows:

The Series A Warrants are immediately exercisable at an exercise price of
$21.19 per share and expire on June 29, 2006. As of the date of this report, the
Company has issued all 9,900,000 shares of Common Stock to Class 6 Creditors.
However, not all shares of Common Stock and Series A Warrants have been issued
to the Predecessor Company preferred stockholders and common stockholders as
these stockholders are required to return their Predecessor Company common stock
and preferred stock in order to receive a distribution.

Stock Based Compensation

Pursuant to a Management Equity Incentive Plan that was approved under the
Plan, in fiscal 2002, the Company issued, to certain employees, warrants to
purchase 987,500 shares of Common Stock at an exercise price of $6.50 per share
(designated as "Series B Warrants") and warrants to purchase 500,000 shares of
Common Stock at an exercise price of $12.00 per share (designated as "Series C
Warrants").

In May 2002, the Company issued, to certain employees, warrants to purchase
260,000 shares of Common Stock at an exercise price of $3.75 per share, and also
issued to each non-employee director a warrant to purchase 15,000 shares of
Common Stock at an exercise price of $6.50 per share.

On September 18, 2002, the shareholders of the Company approved the Metal
Management, Inc. 2002 Incentive Stock Plan (the "2002 Incentive Stock Plan").
The 2002 Incentive Stock Plan provides for the issuance of up to 2,000,000
shares of Common Stock of the Company. The Compensation Committee of the

10

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 6 -- STOCKHOLDERS' EQUITY -- (CONTINUED)

Board of Directors has the authority to issue stock awards under the 2002
Incentive Stock Plan to the Company's employees, consultants and directors over
a period of up to ten years. The stock awards can be in the form of stock
options, stock appreciation rights or stock grants. As of December 31, 2002, the
Company has issued to each non-employee director an option to purchase 15,000
shares of Common Stock, at an exercise price of $3.75 per share, under the 2002
Incentive Stock Plan.

The Company accounts for stock based compensation under the recognition and
measurement principles of APB No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. The only stock based compensation cost
reflected in net income is the fair value of warrants issued to a consultant of
the Company. There was no compensation cost for options and warrants issued to
employees and directors, as the exercise price was greater than the market price
on the date of issuance.

The following table illustrates the pro forma effects on net income and net
earnings per common share if the Company had applied the fair value recognition
provisions of SFAS No. 123 (in thousands, except for earnings per share):

The fair value of each option and warrant grant is estimated on the date of
grant using the Black-Scholes option-pricing model. The Black-Scholes option
valuation model was originally developed for use in estimating the fair value of
traded options, which have different characteristics than the Company's employee
stock options and warrants. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. As a result, it is management's opinion that the

11

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 6 -- STOCKHOLDERS' EQUITY -- (CONTINUED)

Black-Scholes model may not necessarily provide a reliable single measure of the
fair value of employee stock options and warrants.

NOTE 7 -- EARNINGS PER SHARE

As indicated in Note 6 -- Stockholders' Equity, the Company has not yet
issued all 10,000,000 shares of Common Stock required to be distributed in
accordance with the Plan. However, for purposes of the earnings per share
calculation, all 10,000,000 shares are deemed to be issued and outstanding.

The following is a reconciliation of the numerators and denominators used
in computing basic and diluted earnings per share from continuing operations (in
thousands, except per share amounts):

Warrants and options to purchase approximately 2.3 million shares of Common
Stock were outstanding during the nine months ended December 31, 2002, but were
not included in the computation of diluted earnings per share because the
exercise price was greater than the average market price of the Common Stock

12

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 7 -- EARNINGS PER SHARE -- (CONTINUED)

during the period. Due to the loss from continuing operations for the other
periods presented, the effect of convertible debt and dilutive stock options and
warrants were not included as their effect would have been anti-dilutive.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain of its facilities and equipment under
noncancelable operating leases, with terms expiring at various dates. Future
minimum lease payments for the remainder of fiscal 2003 and for each of the
subsequent four fiscal years through 2007 are $2.0 million, $7.8 million, $6.3
million, $4.9 million and $3.8 million, respectively, and $26.9 million
thereafter.

Letters of Credit

As of December 31, 2002, the Company has outstanding letters of credit of
$2.5 million. The letters of credit typically secure the rights to payment to
certain third parities in accordance with specified terms and conditions.

Environmental matters

The Company is subject to comprehensive local, state, federal and
international regulatory and statutory requirements relating to the acceptance,
storage, handing and disposal of solid waste and waste water, air emissions,
soil contamination and employee health, among others. The Company believes that
it and its subsidiaries are in material compliance with currently applicable
environmental and other applicable laws and regulations. However, environmental
legislation may in the future be enacted and create liability for past actions
and the Company or its subsidiaries may be fined or held liable for damages.

Purchase of real property

In November 2001, the Company amended its lease agreement for real property
on which it operates a scrap metals recycling facility in Houston, Texas. The
lease agreement expires on October 31, 2006 and provides for, among other
things, an option for the lessor to sell the real property to the Company
beginning on the 22nd month of the lease at an amount that approximates fair
value. The Company also has an option to purchase the real property beginning on
the 22nd month of the lease. The purchase price for the real property is based
on the month in which the option is exercised as follows:

Indemnifications

In connection with a prior acquisition, the Company has agreed to indemnify
the selling shareholders in that acquisition (the "Selling Shareholders") for,
among other things, breaches of representations, warranties and covenants and
for guaranties provided by certain shareholders of commercial agreements. The
Selling Shareholders' ability to assert indemnification claims expires in
November 2003. No indemnification claims have been asserted against the Company.
The amount that the Company could be required to pay under its

13

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 8 -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

indemnification obligations could range from $0 to a maximum amount of
approximately $2 million, excluding interest and collection costs.

NOTE 9 -- SUPPLEMENTAL INFORMATION

Derivatives

On April 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivatives and Hedges." The cumulative effect of adopting SFAS No. 133 resulted
in an after-tax decrease in net earnings of $0.4 million at April 1, 2001. SFAS
No. 133 requires that all derivative instruments be recorded on the balance
sheet at fair value.

The Company uses various strategies to mitigate the risk of fluctuations in
the price of non-ferrous metals. None of the instruments employed by the Company
to hedge these risks are entered into for trading purposes or speculation, but
instead are effected as hedges of underlying physical transactions and
commitments. All hedges are recorded at fair value with adjustments to the fair
values recorded in the statement of operations.

Inventory

Inventories are stated at the lower of cost or market. Cost is determined
principally on the average cost method. Inventories consisted of the following
categories (in thousands):

Other accrued liabilities

Other accrued liabilities consisted of the following (in thousands):

14

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 9 -- SUPPLEMENTAL INFORMATION -- (CONTINUED)

Non-cash and non-recurring expense

During the three months ended December 31, 2001, the Company recognized a
$3.1 million asset impairment charge related to its decision to exit its
operations in California. The asset impairment charge was based on an evaluation
made by the Company of the proceeds that would be generated from liquidating the
assets as compared to the carrying value of the Company's investment.

During December 2002, the Company completed its exit from its California
operations and generated $0.7 million more proceeds from the sale of assets than
originally anticipated. As a result, during the three months ended December 31,
2002, the Company recognized a non-cash and non-recurring credit of $0.7
million.

During the three months ended June 30, 2001, the Company recognized a $1.9
million asset impairment charge related to excess equipment to be disposed of or
otherwise abandoned.

Interest and other income (expense)

Significant components of interest and other income (expense) are as
follows (in thousands):

During the current fiscal year, the Company sold two parcels of excess real
property, which were classified as "held for sale." These sales resulted in
gains of approximately $0.7 million and $3.3 million, respectively, recognized
during the three and nine months ended December 31, 2002.

15

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 9 -- SUPPLEMENTAL INFORMATION -- (CONTINUED)

Reorganization costs

Reorganization costs directly associated with the Chapter 11 proceedings
were as follows (in thousands):

During the Chapter 11 proceedings, the Company and the Official Committee
of Unsecured Creditors each engaged financial advisors. As a result of the
consummation of the Plan, both financial advisors were entitled to restructuring
success fees. The restructuring success fees paid to the Company's financial
advisor aggregated $2.6 million.

The financial advisor for the Official Committee of Unsecured Creditors was
CIBC World Markets Corp. ("CIBC"), a company in which Daniel W. Dienst, now a
director of the Company, is a managing director. Professional fees paid to CIBC
during the three months ended June 30, 2001 were approximately $2.6 million.
Fees paid to CIBC during the three months ended June 30, 2001 include
restructuring success fees of $2.1 million, paid as follows: i) $1.05 million in
cash and ii) $1.05 million paid through the issuance of 161,538 shares of Common
Stock (at $6.50 per share).

16

This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this Form 10-Q which address
activities, events or developments that Metal Management, Inc. (herein, "Metal
Management," the "Company," "we," "us" or other similar terms) expects or
anticipates will or may occur in the future, including such things as future
acquisitions (including the amount and nature thereof), business strategy,
expansion and growth of our business and operations, general economic and market
conditions and other such matters are forward-looking statements. Although we
believe the expectations expressed in such forward-looking statements are based
on reasonable assumptions within the bounds of our knowledge of our business, a
number of factors could cause actual results to differ materially from those
expressed in any forward-looking statements. These and other risks,
uncertainties and other factors are discussed under "Risk Factors" appearing in
our Annual Report on Form 10-K for the year ended March 31, 2002, as the same
may be amended from time to time.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included under Item 1 of
this Report. In addition, reference should be made to the audited consolidated
financial statements and notes thereto and related Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended March 31, 2002 ("Annual Report").

BUSINESS

We are one of the largest full-service metals recyclers in the United
States, with recycling facilities located in 13 states. We enjoy leadership
positions in many major metropolitan markets, including Birmingham, Chicago,
Cleveland, Denver, Hartford, Houston, Memphis, Newark, Phoenix, Salt Lake City,
Toledo and Tucson. We have a 28.5% equity ownership position in Southern
Recycling, L.L.C., one of the largest scrap metals recyclers in the Gulf Coast
region. Our operations consist primarily of the collection and processing of
ferrous and non-ferrous metals. We collect industrial scrap metal and obsolete
scrap metal, process it into reusable forms and supply the recycled metals to
our customers, including electric arc furnace mills, integrated steel mills,
foundries, secondary smelters and metal brokers. We believe that we provide one
of the most comprehensive offerings of both ferrous and non-ferrous scrap
metals. Our ferrous products primarily include shredded, sheared, cold
briquetted and bundled scrap metal, and other purchased scrap metal, such as
turnings, cast and broken furnace iron. We also process non-ferrous metals,
including aluminum, copper, stainless steel, brass, titanium and high
temperature alloys, using similar techniques and through application of our
proprietary technologies.

We have achieved a leading position in the metals recycling industry
primarily by implementing a national strategy of completing and integrating
regional acquisitions. In making acquisitions, we have focused on major
metropolitan markets where prime industrial and obsolete scrap metals
(automobiles, appliances and industrial equipment) are readily available and
from where we believe we can better serve our customer base. In pursuing this
strategy, we acquired regional platform companies to serve as platforms into
which subsequent acquisitions would be integrated. We believe that through the
integration of our acquired businesses, we have enhanced our competitive
position and profitability of the operations because of broader distribution
channels, improved managerial and financial resources, greater purchasing power
and increased economies of scale.

At certain of our locations adjacent to commercial waterways, we provide
stevedoring services. By providing these services, we increase the utilization
of our equipment and diversify our customer base. While traditionally most of
our stevedoring efforts have been focused at our Port Newark facility in the
Northeast, we have begun to expand these services at our Midwest locations.

17

PLAN OF REORGANIZATION

On November 20, 2000, we filed voluntary petitions under Chapter 11 of the
U.S. Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). During the course
of the bankruptcy proceedings, which we refer to as the "Chapter 11 proceedings"
herein, we operated our business as a debtor-in-possession.

On May 4, 2001, we filed a plan of reorganization (the "Plan") pursuant to
Chapter 11 of the Bankruptcy Code. The Plan was confirmed by the Bankruptcy
Court and became effective on June 29, 2001 (the "Effective Date"). On September
17, 2002, a Final Decree Motion was approved by the Bankruptcy Court, which
officially closed our Chapter 11 proceedings. In the Chapter 11 proceedings,
virtually all suppliers of scrap metals were paid their pre-petition claims as
critical vendors. Additionally, the Plan provided for the conversion of
approximately $211.9 million of unsecured debt and other liabilities into common
stock, which strengthened our capitalization.

In connection with our emergence from bankruptcy, we reflected the terms of
the Plan in our unaudited consolidated financial statements by adopting
fresh-start reporting in accordance with AICPA Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code."
Under fresh-start reporting, a new reporting entity is deemed to be created and
the recorded amounts of assets and liabilities are adjusted to reflect their
estimated fair values. For accounting purposes, the fresh-start adjustments were
recorded in our unaudited consolidated financial statements as of June 30, 2001.
As used in this Report, the term "Predecessor Company" refers to our operations
for periods prior to the Effective Date, while the term "Reorganized Company"
refers to our operations for periods after the Effective Date.

RECENT DEVELOPMENTS

In March 2002, the United States federal government determined that it
would impose tariffs on imports of steel in response to surging steel imports
that caused many U.S. steel mills to file for bankruptcy protection. The tariffs
apply to steel imports from many countries and the tariffs range from 8% to 30%.
The tariffs vary by product category based on the extent of the damage caused by
import surges to different segments of the steel industry. Generally, the
tariffs decline over the three-year term of the new trade laws. The tariffs are
expected to provide temporary relief to U.S. steel producers and encourage both
additional production of steel in the U.S. in the short run and restructuring of
the steel industry from a global supply perspective in the long run. In response
to the U.S. tariffs, the European Union imposed similar tariffs on imported
steel products.

We believe that many of our domestic customers may benefit during the term
of the tariffs and produce more steel domestically. As a result, we believe that
the tariffs will result in increased demand for scrap metals in order to produce
more steel in the U.S. It is uncertain however, if domestic production of steel
is increased as a consequence of the tariffs, whether U.S. steel producers will
seek to purchase the incremental raw material requirements from domestic
processors of scrap metals or international processors of scrap metals.
Additionally, domestic steel producers may choose to increase their consumption
of scrap metal substitutes such as pig iron to satisfy their incremental raw
material requirements.

In October 2002, we acquired certain assets of a scrap metals recycling
company for $3.3 million in cash (including transaction costs). This represented
the first acquisition made by us in over three years and, consistent with our
strategy, the acquisition was a "tuck-in" into one of our existing operations.
Although we have no other pending acquisitions, we may choose to pursue other
acquisitions in the future. We believe that as a result of our improved
financial results and liquidity, we are well positioned to take advantage of
future "tuck-in" acquisition opportunities, if they become available.

On January 30, 2003, we announced that we received a subpoena requesting
that we provide documents to a grand jury that is investigating scrap metal
purchasing practices in the four state region of Ohio, Illinois, Indiana and
Michigan. We have advised the government that we intend to cooperate fully with
the subpoena and the grand jury's investigation. We are not able at this
preliminary stage to determine the costs to be incurred by us in responding to
such subpoena or other impact to us of such investigation.

18

CRITICAL ACCOUNTING POLICIES

We believe the following critical accounting policies, among others, affect
the more significant judgments and estimates used in the preparation of our
consolidated financial statements.

Revenue recognition

Revenues for processed product sales are recognized when title passes to
the customer. Revenue relating to brokered sales are recognized upon receipt of
the materials by the customer. Revenues from services, including stevedoring and
tolling, are recognized as they are performed. Sales adjustments related to
price and weight differences and allowances for uncollectible receivables are
accrued against revenues as incurred.

Accounts receivable and allowance for uncollectible accounts receivable

Accounts receivable consist primarily of amounts due from customers from
product and brokered sales. The allowance for uncollectible accounts receivable
totaled $0.9 million and $2.4 million at December 31, 2002 and March 31, 2002,
respectively. Our determination of the allowance for uncollectible accounts
receivable includes a number of factors, including the age of the accounts, past
experience with accounts, financial condition of customers when information is
publicly available, changes in collection patterns and general industry
conditions.

As indicated in our Annual Report under the section titled "Risk
Factors -- The loss of any significant customers could adversely affect our
results of operations or financial condition," general weakness in the steel and
metals sectors over the last few years has led to bankruptcy filings by many of
our customers which have caused us to recognize allowances for uncollectible
accounts receivable. While we believe our allowance for uncollectible accounts
receivable is adequate, changes in economic conditions or any significant
decline in the steel and metals industry could adversely impact our future
operating results and liquidity.

Inventory

Our inventories primarily consist of ferrous and non-ferrous scrap metals
and are valued at the lower of average purchased cost or market. Quantities of
inventories are determined based on our inventory systems and are subject to
periodic physical verification using estimation techniques including
observation, weighing and other methods utilized in our industry. As indicated
in our Annual Report under the section titled "Risk Factors -- Prices of
commodities we own may be volatile," we are exposed to risks associated with
fluctuations in the market price for both ferrous and non-ferrous metals, which
are at times volatile. We attempt to mitigate this risk by quickly turning our
inventories as market conditions permit.

Property and equipment held for sale

We periodically review our scrap metals operations to evaluate the
long-term economic viability of certain of our investments. These reviews result
in the identification of redundant property and equipment which we hold for
sale. We have classified these assets as held for sale and have recorded them as
a component of current assets as we expect to sell the property and equipment
within one year. These assets held for sale have been taken out of production
and are recorded at their estimated fair value less costs to dispose, if any.
Fair value estimates are based on independent brokers, published used equipment
lists and recent experience with similar property and equipment.

Valuation of long-lived assets and goodwill

We periodically review the carrying value of certain long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be realizable. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset are compared
to the carrying amount of the asset to determine if an impairment of such asset
is necessary. The effect of any impairment would be to record an expense equal
to the difference between the fair value of such asset and its carrying value.

19

Effective June 30, 2001, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which
requires that goodwill be reviewed at least annually for impairment based on the
fair value method.

Income taxes

At the Effective Date, we had available federal net operating loss ("NOL")
carryforwards of approximately $112 million, which expire through 2022, and net
deferred tax assets (including NOL carryforwards) of approximately $75 million
for financial statement purposes. We have not recognized the benefit of pre-
emergence net deferred tax assets due to the uncertainty regarding their
ultimate realization. The net benefit of our deferred tax asset has been reduced
by a valuation allowance. We have also not recognized the benefit of our
post-emergence deferred tax assets due to the uncertainty regarding their
ultimate utilization.

The use of deferred tax assets that arose prior to our emergence from
bankruptcy will reduce income taxes paid, however, their use will also result in
the recognition of income tax expense. Realization of these benefits first
reduces goodwill until exhausted and thereafter is reported as additional
paid-in-capital. The realization of certain post-emergence deferred tax assets
will reduce income tax expense in the period they are utilized or when the
uncertainty regarding their realization is sufficiently reduced.

The utilization of deferred tax assets, including NOL carryforwards, and
the financial statement accounting for these tax benefits, including the
estimated tax provision and effective rate, are dependent upon the amounts and
timing of future taxable income and statutory restrictions and limitations.

Self-insured reserves

We are self-insured for health insurance plans offered to many of our
employees. Our exposure to health insurance claims is protected at a maximum by
a stop-loss insurance policy. We record a reserve for the estimated cost of
incurred but not reported ("IBNR") claims. Our estimate is based on a lag
estimate calculated by our insurance plan administrator and our historical
claims experience. The lag accrual that we establish is based on recent actual
claims paid.

Contingencies

We accrue reserves for estimated liabilities, which include environmental
remediation and potential legal claims. A loss contingency is accrued when our
assessment indicates that it is probable that a liability has been incurred and
the amount of the liability can be reasonably estimated. Our estimates are based
upon currently available facts and presently enacted laws and regulations. These
estimated liabilities are subject to revision in future periods based on actual
costs or new information.

The above listing is not intended to be a comprehensive list of all of our
accounting policies. Please refer to our Annual Report, which contains
accounting policies and other disclosures required by generally accepted
accounting principles.

RESULTS OF OPERATIONS

For purposes of this discussion, the Reorganized Company's results for the
six months ended December 31, 2001 have been combined with the Predecessor
Company's results for the three months ended June 30, 2001 and are compared to
the Reorganized Company's results for the nine months ended December 31, 2002.
Differences between periods due to fresh-start reporting are explained when
necessary.

Our profitability during the nine months ended December 31, 2002 is largely
attributable to our ferrous operations. Our ferrous operations benefited from
improving economic conditions in the U.S., slowing of imports of steel into the
U.S. and firming of export markets for the sale of ferrous scrap. Our ferrous
operations during the nine months ended December 31, 2001 were impacted by the
weakening economy in the U.S. Consequently, during 2001 there was a general
decline in both the demand for ferrous scrap and supply of ferrous scrap.

20

During calendar 2002, our ferrous operations have benefited from increasing
selling prices and higher demand for our products. Selling prices for ferrous
scrap are significantly higher as compared to the prior year. For example,
according to data published by the American Metal Market, the average composite
price for #1 Heavy Melting Steel Scrap (which is a common indicator for ferrous
scrap) was approximately $94 per ton in 2002 compared to $76 per ton in 2001.
Demand for our ferrous scrap is strong both domestically and internationally.
Steel production has increased in the U.S., which has increased the demand for
ferrous scrap. According to data published by the American Iron and Steel
Institute, weekly raw steel production increased from approximately 1.76 million
tons a week in January 2002 to approximately 1.97 million tons a week in
November 2002. International demand for our ferrous scrap is also strong. This
is evident in data released by the U.S. Commerce Department, which shows that
U.S. exports of ferrous scrap (on a year-to-date basis through November 30,
2002) were approximately 8.8 million tons, an increase of 20% from the
comparable prior year period.

Our non-ferrous operations continue to be impacted in both the supply and
demand for non-ferrous metals due to weakness in the aerospace and
telecommunications industries. The conditions of non-ferrous markets, including
our three major products -- aluminum, copper and stainless steel (nickel based
metal), are generally weak. Although prices for certain non-ferrous metals have
begun to stabilize, demand still remains low. Stainless steel markets continue
to be impacted by lower consumption by stainless steel mills. Copper markets
continue to be impacted by a surplus of copper, resulting in lower demand.
Aluminum and nickel markets continue to be impacted by the weakness in the
aerospace industry, which was adversely affected by the events of September 11,
2001.

Net sales

Consolidated net sales for the three months ended December 31, 2002 and
2001 in broad product categories were as follows ($ in thousands):

Consolidated net sales for the nine months ended December 31, 2002 and 2001
in broad product categories were as follows ($ in thousands):

Consolidated net sales increased by $28.2 million (20.0%) and $91.4 million
(19.7%) to $169.5 million and $555.9 million during the three and nine months
ended December 31, 2002, respectively, compared to consolidated net sales of
$141.3 million and $464.5 million during the three and nine months ended
December 31, 2001, respectively.

21

Ferrous sales increased by $22.9 million (26.2%) and $87.3 million (32.4%)
to $110.2 million and $356.6 million during the three and nine months ended
December 31, 2002, respectively, compared to ferrous sales of $87.3 million and
$269.3 million during the three and nine months ended December 31, 2001,
respectively. The increase in ferrous sales was attributable to increased demand
and higher selling prices for ferrous products. During the three months ended
December 31, 2002, ferrous sales volumes increased by 60,000 tons and average
selling price for ferrous products increased by over $17 per ton as compared to
the three months ended December 31, 2001. During the nine months ended December
31, 2002, ferrous sales volumes increased by 272,000 tons and average selling
price for ferrous products increased by over $19 per ton as compared to the nine
months ended December 31, 2001.

Non-ferrous sales increased by $5.5 million (12.7%) to $49.0 million during
the three months ended December 31, 2002 compared to non-ferrous sales of $43.5
million during the three months ended December 31, 2001. The increase was mainly
attributable to an increase in volume of 10.5 million pounds. However, sales and
volumes were still below those of the first and second quarters of the current
fiscal year. Non-ferrous sales decreased by $2.6 million (1.7%) to $151.9
million during the nine months ended December 31, 2002 compared to non-ferrous
sales of $154.5 million during the nine months ended December 31, 2001. The
decrease was mainly attributable to a decrease in volume of 1.9 million pounds.
In addition, the prior year periods included the sales and volumes of our former
MacLeod operations in California, which were discontinued in fiscal 2002 and
completely ceased operations during the three months ended June 30, 2002.

Brokerage related ferrous sales decreased by $0.1 million (1.7%) and
increased by $9.5 million (37.1%) to $6.2 million and $35.1 million during the
three and nine months ended December 31, 2002, respectively, compared to
brokerage ferrous sales of $6.3 million and $25.6 million during the three and
nine months ended December 31, 2001, respectively. The increase during the nine
months ended December 31, 2002 was primarily a result of a $17 per ton increase
in average selling prices and a 43,000 ton increase in brokered tons. The
average selling price for brokered metals is significantly affected by the
product mix, such as prompt industrial grades versus obsolete grades, which can
vary significantly between periods. Prompt industrial grades of scrap metal are
generally associated with higher unit prices.

Brokerage related non-ferrous sales increased by $0.3 million (35.3%) and
decreased by $1.8 million (35.4%) to $1.2 million and $3.2 million during the
three and nine months ended December 31, 2002, respectively, compared to
brokerage non-ferrous sales of $0.9 million and $5.0 million during the three
and nine months ended December 31, 2001, respectively. The increase during the
three months ended December 31, 2002 was a result of higher average selling
prices, offset by lower volumes. The decrease during the nine months ended
December 31, 2002 was a result of lower volume offset by higher average selling
prices. Average selling prices for non-ferrous brokered metals are impacted by
the type of metals brokered. Margins associated with brokered non-ferrous metals
are narrow, so variations in this product category are not as significant to us
as variations in other product categories.

Other revenue is primarily derived from our stevedoring and bus dismantling
operations. The decrease in other revenue for both periods is primarily due to
the exit from our former MacLeod operations, which generated other revenue from
the operation of aluminum can redemption centers.

Gross profit

Gross profit was $19.1 million (11.3% of sales) and $72.2 million (13.0% of
sales) during the three and nine months ended December 31, 2002, respectively,
compared to gross profit of $15.3 million (10.9% of sales) and $50.0 million
(10.8% of sales) during the three and nine months ended December 31, 2001,
respectively. Gross profit was higher during the three months ended December 31,
2002 mainly as a result of increased material margins on products sold.
Processing expenses on a per unit basis remained consistent during the three
months periods. Gross profit was higher during the nine months ended December
31, 2002 as a result of increased material margins and more efficient plant
utilization, which resulted in lower processing expenses per unit.

22

General and administrative expenses

General and administrative expenses were $11.1 million (6.6% of sales) and
$34.7 million (6.2% of sales) during the three and nine months ended December
31, 2002, respectively, compared to general and administrative expenses of $10.9
million (7.7% of sales) and $34.0 million (7.3% of sales) during the three and
nine months ended December 31, 2001, respectively. The increase in general and
administrative expenses results from accruals recorded in connection with an
employee incentive compensation plan. The compensation plan is measured by
return on net assets. As a consequence of strong performance from our ferrous
businesses, we accrued $0.6 million during the three months ended December 31,
2002 and $3.2 million during the nine months ended December 31, 2002 in
connection with the employee incentive compensation plan. Payments under the
plan are subject to performance for the full fiscal year and approval by the
Compensation Committee of the Board of Directors. Except for the accruals
relating to our employee incentive compensation plan, our general and
administrative expenses have remained consistent between periods as we carefully
monitor our spending. This is evident as our general and administrative expenses
as a percent of sales are lower than the prior year periods.

Depreciation and amortization

Depreciation and amortization expense was $4.4 million (2.6% of sales) and
$13.0 million (2.3% of sales) during the three and nine months ended December
31, 2002, respectively, compared to depreciation and amortization expense of
$4.5 million (3.2% of sales) and $13.8 million (3.0% of sales) during the three
and nine months ended December 31, 2001, respectively. Except for the
elimination of depreciation expense associated with the exit from our MacLeod
operations, depreciation expense has remained relatively constant as we
carefully monitor our spending on capital equipment. In addition, we have chosen
to replace some of our existing equipment by entering into operating leases,
which contain favorable terms (see Liquidity and Capital Resources for further
discussion).

Non-cash and non-recurring expenses

During the three months ended June 30, 2001, we recognized a $1.9 million
asset impairment charge related to excess equipment to be disposed of or
otherwise abandoned. During the three months ended December 31, 2001, we
recognized a $3.1 million asset impairment charge related to our decision to
exit our MacLeod operations in California. The asset impairment charge was based
on an evaluation of the proceeds that we expected to generate from the
liquidation of the assets of MacLeod compared to our investment in MacLeod. We
completed our exit from MacLeod during December 2002 and generated $0.7 million
of more proceeds than we expected. As a result, we recognized a non-cash and
non-recurring credit of $0.7 million during the three months ended December 31,
2002.

Interest expense

Interest expense was $2.8 million (1.6% of sales) and $8.7 million (1.6% of
sales) during the three and nine months ended December 31, 2002, respectively,
compared to interest expense of $3.0 million (2.1% of sales) and $11.6 million
(2.5% of sales) during the three and nine months ended December 31, 2001,
respectively. The decrease in interest expense was a result of lower borrowings
and interest rates under our credit facilities. Our average borrowings under our
credit facilities during the three and nine month periods ended December 31,
2002 were approximately $29 million and $24 million, respectively, less than our
average borrowings under our credit facilities during the three and nine month
periods ended December 31, 2001.

Our average interest rate on borrowings under credit facilities during the
three and nine month periods ended December 31, 2002 was approximately 108 basis
points and 242 basis points, respectively, lower than our average interest rate
on borrowings under credit facilities during the three and nine month periods
ended December 31, 2001. Interest expense during the nine months ended December
31, 2001 included three months of interest under our debtor-in-possession credit
agreement, which was at higher base interest rates than the Credit Agreement
governing our post-emergence bank borrowings.

23

Interest and other income (expense)

The major components of this category are interest income, gains and losses
from sale of property and equipment and loss from joint ventures. During the
three and nine months ended December 31, 2002, we recognized interest and other
income of $0.6 million and $3.4 million, respectively. The majority of this
income was generated as a result of the sale of excess real estate, which
resulted in gains of $0.7 million and $3.3 million during the three and nine
months ended December 31, 2002, respectively (see Note 9 to the unaudited
consolidated financial statements included in Item 1 of this Report).

Reorganization costs

During the three and nine months ended December 31, 2001, we incurred
reorganization costs of $0.2 million and $10.8 million, respectively, which
mainly represented professional fees, liabilities for rejected contracts and
settlements, fresh-start adjustments and other expenses associated with the
Chapter 11 proceedings (see Note 9 to the unaudited consolidated financial
statements included in Item 1 of this Report).

Income taxes

During the three months ended December 31, 2002, we recognized income tax
expense of $2.6 million to reflect our election to apply certain provisions of
the Internal Revenue Code upon the filing of our U.S. federal income tax return
during the third quarter. Based on the filing of our federal tax return, we
revised our estimates relating to our effective income tax rate to that
estimated for this fiscal year.

The effective tax rate differs from the statutory rate due to the use of
certain post-emergence deferred tax assets, which does not result in the
recognition of income tax expense.

Change in accounting policy

On April 1, 2001, we adopted SFAS No. 133, "Accounting for Derivatives and
Hedges" (as amended). The cumulative effect of adopting SFAS No. 133 resulted in
an after-tax decrease in net earnings of $0.4 million during the nine months
ended December 31, 2001.

Extraordinary gain

During the three and nine months ended December 31, 2002, we recognized an
extraordinary gain, net of tax, of $0.1 million and $0.4 million, respectively,
associated with the repurchase of Junior Secured Notes. During the three months
ended June 30, 2001, we recognized an extraordinary gain of $145.7 million
related to the cancellation of our subordinated notes and other unsecured claims
in the Chapter 11 proceedings (see Notes 1 and 4 to the unaudited consolidated
financial statements included in Item 1 of this Report).

Net income (loss)

Net loss was $0.3 million and net income was $13.4 million during the three
and nine months ended December 31, 2002, respectively, compared to a net loss of
$6.4 million and net income of $120.2 million during the three and nine months
ended December 31, 2001, respectively. The net loss for the three months ended
December 31, 2002 was primarily attributable to the recognition of additional
income tax expense. Net income during the nine months ended December 31, 2002
reflects significant improvement in our operations as a result of higher volumes
of ferrous scrap metals sold, greater metal margins, lower interest expense and
gains on sale of fixed assets. Net income during the nine months ended December
31, 2001 was primarily a result of a $145.7 million extraordinary gain
associated with cancellation of indebtedness in the Chapter 11 proceedings.

24

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

During the nine months ended December 31, 2002, we generated $28.9 million
of cash from operating activities, comprised of net income and non-cash items of
$31.3 million offset by investments in working capital of $2.4 million. The
strong performance by our ferrous business allowed us to generate net income but
also required working capital investments, primarily in inventories which
increased by $6.2 million. The increase in inventories was offset by a decrease
in accounts receivable of $5.1 million. Due to the utilization of NOL
carryforwards, we do not expect to make significant cash payments for federal or
state income taxes during the current fiscal year.

During the nine months ended December 31, 2002, we generated $2.0 million
of cash from investing activities. Purchases of property and equipment were $5.0
million, while we generated $10.4 million of cash from the sale of real estate
and redundant fixed assets. We also used $3.3 million of cash to acquire certain
assets of a scrap metals recycling company.

During the nine months ended December 31, 2002, we used $30.1 million of
cash for financing activities. Cash generated from operating and investing
activities were used primarily to repay borrowings under our Credit Agreement.
We paid $2.5 million of fees and expenses associated with our Credit Agreement.
In addition, we repurchased $2.4 million par amount of Junior Secured Notes for
approximately $1.8 million in cash.

Indebtedness

On the Effective Date, we entered into a $150 million revolving credit and
letter of credit facility (the "Credit Agreement") with Deutsche Bank Trust
Company Americas. On February 14, 2003, the Credit Agreement was amended to
extend the maturity date to January 1, 2004 and reduce the maximum amount of
borrowings available under the credit facility to $115 million. As of December
31, 2002, we had borrowed approximately $73 million under the Credit Agreement.
In consideration for this amendment, we paid fees of $0.3 million. The Credit
Agreement is available to fund working capital needs and for general corporate
purposes.

Borrowings under the Credit Agreement are subject to certain borrowing base
limitations based upon a formula equal to 85% of eligible accounts receivable,
the lesser of $65 million or 70% of eligible inventory, and a fixed asset
sublimit of $25.1 million as of December 31, 2002, which amortizes by $2.4
million on a quarterly basis and under certain other conditions. A security
interest in substantially all of our assets and properties, including pledges of
the capital stock of our subsidiaries, has been granted to the agent for lenders
under the Credit Agreement to secure our obligations under the Credit Agreement.
The Credit Agreement provides us with the option of borrowing based either on
the prime rate (as specified by Deutsche Bank AG, New York Branch) or the London
Interbank Offered Rate ("LIBOR") plus a margin. Pursuant to the Credit
Agreement, we pay a fee of .375% on the undrawn portion of the credit facility.

The Credit Agreement requires us to meet certain financial tests, including
an interest coverage ratio and leverage ratio (as defined in the Credit
Agreement) as follows:

The Credit Agreement limits our capital expenditures to $16 million each
fiscal year. The Credit Agreement also contains restrictions which, among other
things, limit our ability to (i) incur additional indebtedness; (ii) pay
dividends; (iii) enter into transactions with affiliates; (iv) enter into
certain asset sales;

25

(v) engage in certain acquisitions, investments, mergers and consolidations;
(vi) prepay certain other indebtedness; (vii) create liens and encumbrances on
our assets and (viii) other matters customarily restricted in such agreements.
We were in compliance with all financial covenants as of December 31, 2002. As
of January 29, 2003, we had outstanding borrowings of approximately $80 million
under the Credit Agreement and undrawn availability of approximately $20
million.

Our ability to meet financial ratios and tests in the future may be
affected by events beyond our control, including fluctuations in operating cash
flows and working capital. While we currently expect to be in compliance with
the covenants and satisfy the financial ratios and tests in the future, there
can be no assurance that we will meet such financial ratios and tests or that we
will be able to obtain future amendments or waivers to the Credit Agreement, if
so needed, to avoid a default. In the event of default, the lenders could elect
to not make loans to us and declare all amounts borrowed under the Credit
Agreement to be due and payable.

Our Junior Secured Notes mature on June 15, 2004 and bear interest at the
rate of 12 3/4% per annum. Interest on the Junior Secured Notes is payable
semi-annually during June and December of each year. The Junior Secured Notes
are our senior obligations and rank equally in right of payment to all of our
unsubordinated debt, including our indebtedness under the Credit Agreement, and
senior in right of payment to all of our subordinated debt. A second priority
lien on substantially all of our real and personal property and equipment has
been pledged as collateral against the Junior Secured Notes.

During the nine months ended December 31, 2002, we repurchased $2.4 million
par amount of Junior Secured Notes for approximately $1.8 million. We used
borrowings under our Credit Agreement to repurchase these Junior Secured Notes.
As of December 31, 2002, we have $31.5 million par amount of Junior Secured
Notes outstanding. Subject to lender approvals required under our Credit
Agreement and prevailing market prices for our Junior Secured Notes, we may
choose to repurchase additional amounts of Junior Secured Notes in the future.

The Junior Secured Notes are redeemable at our option (in multiples of $10
million) at a redemption price of 100% of the principal amount thereof, plus
accrued and unpaid interest. The Junior Secured Notes are redeemable at the
option of the holders of such notes at a repurchase price of 101% of the
principal amount thereof, plus accrued and unpaid interest, in the event we
experience a change of control (as defined in the indenture governing the Junior
Secured Notes). We are required to redeem all or a portion of the Junior Secured
Notes at a repurchase price of 100% of the principal amount thereof, plus
accrued and unpaid interest, in the event we make certain asset sales.

The indenture governing the Junior Secured Notes, as amended, contains
restrictions including limits on, among other things, our ability to: (i) incur
additional indebtedness; (ii) pay dividends or distributions on our capital
stock or repurchase our capital stock; (iii) issue stock of subsidiaries; (iv)
make certain investments; (v) create liens on our assets; (vi) enter into
transactions with affiliates; (vii) merge or consolidate with another company;
and (viii) transfer and sell assets or enter into sale and leaseback
transactions.

Future Capital Requirements

We expect to fund our working capital needs, interest payments and capital
expenditures with cash generated from operations, supplemented by undrawn
borrowing availability under the Credit Agreement. Our future cash needs will be
driven by working capital requirements (including interest payments on the
Junior Secured Notes), planned capital expenditures and acquisition objectives,
should attractive acquisition opportunities present themselves. We continue to
explore financing alternatives that would permit us to refinance our Junior
Secured Notes.

Capital expenditures were approximately $5.0 million during the nine months
ended December 31, 2002. Capital expenditures are planned to be approximately $8
to $9 million in the current fiscal year, which includes costs to install a
"Mega" Shredder, that we currently own, at our facility in Phoenix, Arizona. We
expect the "Mega" Shredder to be operational by June 2003. In addition, due to
favorable financing terms made available by equipment manufacturing vendors, we
have entered into operating leases for new equipment. Since the beginning of the
fiscal year, we have entered into 18 operating leases for equipment

26

which would have cost approximately $5 million to purchase. These operating
leases are attractive to us since the implied interest rates are lower than
interest rates under our credit facilities. We expect to selectively use
operating leases for new equipment required by our operations. In October 2002,
we purchased certain assets of a scrap metals recycling company for $3.3 million
in cash (including transaction costs). In February 2003, we purchased for $1.3
million the land that we previously leased in Tucson, Arizona. While we have no
significant pending acquisitions, we may choose to consider selective
opportunities for "tuck-in" acquisitions in the future.

The Predecessor Company historically financed a part of its operations
through the issuance of common stock or convertible preferred stock. Since we
recently emerged from bankruptcy and a market for our Common Stock has
developed, we may issue equity in the future to finance our operations. The
issuance of equity would dilute the ownership of existing shareholders.

Commitments

In July 2003, we expect to issue Common Stock to one of our employees with
an aggregate value of $0.2 million, pursuant to an employment contract with this
employee. The issuance of the Common Stock is contingent on this individual
being employed by us on July 7, 2003. We have fully accrued for this liability.

We lease certain of our facilities and equipment under noncancelable
operating leases, with terms expiring at various dates. Future minimum lease
payments for the remainder of fiscal 2003 and for each of the subsequent four
fiscal years through 2007 are $2.0 million, $7.8 million, $6.3 million, $4.9
million and $3.8 million, respectively, and $26.9 million thereafter.

In connection with a prior acquisition, we agreed to indemnify the selling
shareholders in that acquisition (the "Selling Shareholders") for, among other
things, breaches of representations, warranties and covenants and for guaranties
provided by certain shareholders of commercial agreements. The Selling
Shareholders' ability to assert indemnification claims expires in November 2003.
No indemnification claims have been asserted against us. The amount that we
could be required to pay under the indemnification obligations could range from
$0 to a maximum amount of approximately $2 million, excluding interest and
collection costs.

As of December 31, 2002, we had outstanding letters of credit of $2.5
million. The letters of credit typically secure the rights to payment to certain
third parities in accordance with specified terms and conditions.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
SFAS No. 144, which supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," significantly
changes the criteria that would have to be met to classify an asset as
held-for-sale, although it retains many of the fundamental recognition and
measurement provisions of SFAS No. 121. We adopted SFAS No. 144 as of April 1,
2002 and the adoption did not have a material impact on our consolidated
financial position or results of operations.

In April 2002, FASB issued SFAS No. 145, "Rescission of SFAS Nos. 4, 44,
and 64, Amendment of SFAS No. 13, and Technical Corrections." This statement
addresses, among other items, the classification of gains and losses from
extinguishment of debt. Under the provisions of SFAS No. 145, gains and losses
from extinguishment of debt can only be classified as extraordinary items if
they meet the criteria set forth in APB Opinion No. 30. This statement is
effective for fiscal years beginning after May 15, 2002. Upon adoption of SFAS
No. 145, the extraordinary gains on the debt extinguishments recognized during
the three and nine months ended December 31, 2002 and the extraordinary gain on
debt discharge recognized by the Predecessor Company during the three months
ended June 30, 2001, will be reclassified to other income in the our statement
of operations.

In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which requires that a liability for a cost
associated with an exit or disposal activity be recognized
27

when the liability is incurred and nullifies EITF 94-3. SFAS No. 146 is to be
applied to exit or disposal activities initiated after December 31, 2002. We
adopted SFAS No. 146 as of January 1, 2003 and the adoption did not have a
material impact on our consolidated financial position or results of operations.

In November 2002, FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," ("FIN 45") which requires certain
guarantees to be recorded at fair value as opposed to the current practice of
recording a liability only when a loss is probable and reasonably estimable. FIN
45 also requires a guarantor to make significant new guaranty disclosures, even
when the likelihood of making any payments under the guarantee is remote. The
disclosure requirements of FIN 45 are effective for interim and annual periods
ending after December 15, 2002, and we adopted those requirements for our
financial statements included in this Form 10-Q. The initial recognition and
initial measurement provisions of FIN 45 are applicable on a prospective basis
to guarantees issued or modified after December 31, 2002.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure," which amends SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative
methods of transition to the fair value method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting used for stock-based
employee compensation and the effect on reported net income and earnings per
share.

In January 2003, FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51 and applies immediately to any variable
interest entities created after January 31, 2003 and to variable interest
entities in which an interest is obtained after that date. FIN 46 is applicable
to us in the second quarter of fiscal 2004, for interests acquired in variable
interest entities prior to February 1, 2003. We are currently assessing the
impact of adoption of FIN 46.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial risk resulting from fluctuations in interest
rates and commodity prices. We seek to minimize these risks through regular
operating and financing activities and, where appropriate, through use of
derivative financial instruments. Our use of derivative financial instruments is
limited and related solely to hedges of certain non-ferrous inventory positions
and purchase and sales commitments. Under the provisions of SFAS No. 133, we
have classified these contracts as speculative and as a result, these contracts
are marked to market in our unaudited consolidated financial statements.

Reference is made to the quantitative disclosures about market risk
included under Item 7A of our most recent Annual Report on Form 10-K.

ITEM 4: CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Under the
supervision and with the participation of our management, including Albert A.
Cozzi, our Chairman of the Board and Chief Executive Officer (CEO), and Robert
C. Larry, our Executive Vice-President, Finance and Chief Financial Officer
(CFO), we have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures within 90 days of the filing date of this
quarterly report, and, based on their evaluation, our CEO and CFO have concluded
that, as of that date, these controls and procedures were adequate and effective
to ensure that material information relating to our company and our consolidated
subsidiaries would be made known to them by others within those entities.

(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect our
disclosure controls and procedures subsequent to the date of their evaluation,
nor were there any significant deficiencies or material weaknesses in our
internal controls. As a result, no corrective actions were required or
undertaken.

28

Disclosure Controls and Internal Controls. Disclosure controls and
procedures are our controls and other procedures that are designed with the
objective of ensuring that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in
the reports that we file under the Exchange Act is accumulated and communicated
to our management, including our CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure. Internal controls are procedures which
are designed with the objective of providing reasonable assurance that:

- our transactions are properly authorized;

- our assets are safeguarded against unauthorized or improper use; and

- our transactions are properly recorded and reported,

all to permit the preparation of our financial statements in conformity with
generally accepted accounting principles.

Limitations on the Effectiveness of Controls. Our management, including
our CEO and CFO, does not expect that our disclosure controls or our internal
controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

29

PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

Our subsidiary, Metal Management Midwest, Inc. ("MTLM-Midwest"), operates
seven facilities in the Chicago area (the "MMMI Facilities") which were the
subject of a series of inspections and document requests in the mid-1990s by,
among other agencies, the United States Environmental Protection Agency
("USEPA") pursuant to the so-called Greater Chicagoland Initiative to perform
multimedia and multi-agency inspections of scrap yards in the Chicago Area (the
"USEPA Initiative"). As a result of the USEPA Initiative, USEPA alleged that
certain of the MMMI Facilities had violated certain provisions of the Resource
Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Oil
Pollution Standards and the Toxic Substances Control Act (collectively, the
"Alleged Violations"). In the summer of 2001, USEPA filed proofs of claim in our
Chapter 11 proceedings and a cause of action in the Northern District of
Illinois (the "Northern District Action") seeking unspecified damages with
respect to the Alleged Violations. We moved to dismiss the Northern District
Action on, among other grounds, that it was duplicative of the claims filed in
the Chapter 11 proceedings. We also challenged the claims filed in the Chapter
11 proceedings with respect to the Alleged Violations on both substantive and
procedural grounds.

In January 2003, we entered into a Consent Decree with USEPA, pursuant to
which, without admitting liability with respect to the Alleged Violations, we
agreed (i) to distribute to the USEPA an allowed class 6 unsecured claim in our
Chapter 11 proceedings which will be satisfied through the issuance of shares of
our common stock out of a litigation reserve established for that purpose in
accordance with our plan of reorganization, and (ii) to perform environmental
compliance audits at several of our facilities in the Midwest. The Consent
Decree with respect to this matter remains subject to a thirty (30 days) public
notice and comment before it becomes final.

From time to time, we are involved in various litigation matters involving
ordinary and routine claims incidental to our business. A significant portion of
these matters result from environmental compliance issues and workers
compensation related claims applicable to our operations. There are presently no
other legal proceedings pending against us, which, in the opinion of our
management, are likely to have a material adverse effect on our business,
financial condition or results of operations. Please refer to Item 3 of our most
recent Annual Report on Form 10-K for a description of the litigation in which
we are currently involved.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

See Exhibit Index

(B) REPORTS ON FORM 8-K

No reports were filed on Form 8-K during the quarter ended December 31,
2002.

30

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.

METAL MANAGEMENT, INC.

By: /s/ ALBERT A. COZZI
------------------------------------
Albert A. Cozzi
Chairman of the
Board, and Chief
Executive Officer
(Principal Executive Officer)

By: /s/ MICHAEL W. TRYON
------------------------------------
Michael W. Tryon
President and Chief
Operating Officer

By: /s/ ROBERT C. LARRY
------------------------------------
Robert C. Larry
Executive Vice President,
Finance and Chief
Financial Officer
(Principal Financial Officer)

By: /s/ AMIT N. PATEL
------------------------------------
Amit N. Patel
Vice President, Finance and
Controller
(Principal Accounting Officer)

Date: February 14, 2003

31

CERTIFICATIONS

I, Albert A. Cozzi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Metal Management,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ ALBERT A. COZZI
--------------------------------------
Albert A. Cozzi
Chairman of the Board and
Chief Executive Officer

Date: February 14, 2003

32

I, Robert C. Larry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Metal Management,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ ROBERT C. LARRY
--------------------------------------
Robert C. Larry
Executive Vice President, Finance and
Chief
Financial Officer

Date: February 14, 2003

33

METAL MANAGEMENT, INC.

EXHIBIT INDEX

NUMBER AND DESCRIPTION OF EXHIBIT

2.1 Disclosure Statement with respect to First Amended Joint
Plan of Reorganization of Metal Management, Inc. and its
Subsidiary Debtors, dated May 4, 2001 (incorporated by
reference to Exhibit 2.1 of the Company's Annual Report on
Form 10-K for the year ended March 31, 2001).
3.1 Second Amended and Restated Certificate of Incorporation of
the Company, as filed with the Secretary of State of the
State of Delaware on June 29, 2001 (incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on
Form 10-K for the year ended March 31, 2001).
3.2 Amended and Restated By-Laws of the Company adopted as of
June 29, 2001 (incorporated by reference to Exhibit 3.2 of
the Company's Annual Report on Form 10-K for the year ended
March 31, 2001).
10.1 Employment Agreement, dated February 12, 2003 between Alan
D. Ratner and the Company.
10.2 Metal Management, Inc. 2002 Incentive Stock Plan
(incorporated by reference to Exhibit 99.1 of the Company's
Registration Statement on Form S-8, filed on October 24,
2002).
99.1 Certification of Chief Executive Officer pursuant to 18 USC
27 Section 1350 as adopted pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to 18 USC
29 Section 1350 as adopted pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002.