10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 September 30, 2007
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from           to

Commission file number 0-14836

METAL MANAGEMENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	94-2835068
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
325 N. LaSalle Street, Suite 550, Chicago, IL	60610
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code (312) 645-0700

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o           No x

As of October 30, 2007, the registrant had 26,050,153 shares of common stock outstanding.

INDEX

			Page
PART I: FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Operations — three and six months ended September 30, 2007 and 2006 (unaudited)		1
		Consolidated Balance Sheets — September 30, 2007 and March 31, 2007 (unaudited)		2
		Consolidated Statements of Cash Flows — six months ended September 30, 2007 and 2006 (unaudited)		3
		Consolidated Statement of Stockholders’ Equity — six months ended September 30, 2007 (unaudited)		4
		Notes to Consolidated Financial Statements (unaudited)		5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		25
	Item 4.	Controls and Procedures		25
PART II: OTHER INFORMATION
	Item 1.	Legal Proceedings		27
	Item 1A.	Risk Factors		27
	Item 4.	Submission of Matters to a Vote of Security Holders		28
	Item 6.	Exhibits		29
Signatures				30
Employment Agreement with Daniel W. Dienst
Section 302 Certification
Section 302 Certification
Section 906 Certification

PART I: FINANCIAL INFORMATION

Item 1.  Financial Statements

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

	Three Months Ended						Six Months Ended
	September 30,			September 30,			September 30,			September 30,
	2007			2006			2007			2006
Net sales	$	715,155		$	584,708		$	1,369,208		$	1,080,620
Operating expenses:
Cost of sales (excluding depreciation)		643,047			507,263			1,226,925			930,184
General and administrative		28,043			22,775			53,470			43,647
Depreciation and amortization		9,461			7,344			17,731			14,191
Merger expenses		2,588			0			2,588			0
Severance and other charges		701			0			701			442
Operating income		31,315			47,326			67,793			92,156
Income from joint ventures		942			554			1,659			2,414
Interest expense		(1,498	)		(284	)		(2,959	)		(606	)
Interest and other income, net		140			513			259			944
Gain on sale of joint venture interest		0			0			0			26,362
Income before income taxes		30,899			48,109			66,752			121,270
Provision for income taxes		13,136			19,036			26,250			47,308
Net income	$	17,763		$	29,073		$	40,502		$	73,962
Earnings per share:
Basic	$	0.70		$	1.11		$	1.61		$	2.86
Diluted	$	0.69		$	1.09		$	1.58		$	2.79
Cash dividends declared per share	$	0.075		$	0.075		$	0.15		$	0.15
Weighted average common shares outstanding:
Basic		25,235			26,089			25,197			25,834
Diluted		25,618			26,581			25,603			26,489

See accompanying notes to consolidated financial statements

1

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

	September 30,			March 31,
	2007			2007
ASSETS
Current assets:
Cash and cash equivalents	$	13,996		$	9,354
Accounts receivable, net		232,984			227,397
Inventories		180,807			191,301
Deferred income taxes		5,678			5,544
Prepaid income taxes		1,270			0
Prepaid expenses and other assets		13,406			12,132
Total current assets		448,141			445,728
Property and equipment, net		216,516			187,124
Goodwill		27,263			14,766
Intangible assets, net		27,543			13,267
Deferred income taxes, net		10,325			10,437
Investments in joint ventures		22,151			20,760
Other assets		3,072			3,441
Total assets	$	755,011		$	695,523
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	643		$	46
Accounts payable		170,601			177,747
Income taxes payable		0			12,271
Other accrued liabilities		36,548			35,482
Total current liabilities		207,792			225,546
Long-term debt, less current portion		31,186			160
Other liabilities		9,114			4,987
Total long-term liabilities		40,300			5,147
Stockholders’ equity:
Preferred stock		0			0
Common stock		276			271
Additional paid-in capital		207,727			201,577
Accumulated other comprehensive loss		(1,958	)		(2,008	)
Retained earnings		352,129			315,517
Treasury stock, at cost		(51,255	)		(50,527	)
Total stockholders’ equity		506,919			464,830
Total liabilities and stockholders’ equity	$	755,011		$	695,523

See accompanying notes to consolidated financial statements

2

METAL MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

	Six months ended
	September 30,			September 30,
	2007			2006
Cash flows from operating activities:
Net income	$	40,502		$	73,962
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		17,731			14,191
Deferred income taxes		389			592
Income from joint ventures		(1,659	)		(2,277	)
Gain on sale of joint venture interest		0			(26,362	)
Distribution of earnings from joint ventures		30			8,548
Stock-based compensation expense		4,473			3,159
Excess tax benefits from stock-based awards		(1,031	)		(60	)
Other		106			965
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		9,698			(9,439	)
Inventories		17,912			(57,662	)
Other assets		(2,177	)		(4,390	)
Accounts payable		(10,962	)		26,127
Income taxes payable		(3,293	)		14,434
Other liabilities		(5,424	)		(7,776	)
Net cash provided by operating activities		66,295			34,012
Cash flows from investing activities:
Purchases of property and equipment		(31,686	)		(36,022	)
Proceeds from sale of property and equipment		540			979
Acquisitions, net of cash acquired		(54,999	)		(28,299	)
Purchases of short-term investments		0			(95,150	)
Proceeds from sale of short-term investments		0			103,650
Proceeds from sale of joint venture interest		0			46,005
Other		120			(1,200	)
Net cash used in investing activities		(86,025	)		(10,037	)
Cash flows from financing activities:
Issuances of long-term debt		392,876			10,373
Repayments of long-term debt		(365,472	)		(11,310	)
Issuance of common stock		555			8,205
Repurchase of common stock		(728	)		(13,937	)
Excess tax benefits from stock-based awards		1,031			60
Cash dividends paid to stockholders		(3,890	)		(3,993	)
Fees paid to issue long-term debt		0			(608	)
Net cash provided by (used in) financing activities		24,372			(11,210	)
Net increase in cash and cash equivalents		4,642			12,765
Cash and cash equivalents at beginning of period		9,354			37,717
Cash and cash equivalents at end of period	$	13,996		$	50,482
Supplemental disclosures of cash flow information:
Cash interest paid	$	2,593		$	378
Cash income taxes paid, net of refunds	$	30,499		$	32,358

See accompanying notes to consolidated financial statements

3

METAL MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)

														Accumulated
											Additional			Other
	Common Stock				Treasury Stock						Paid-in			Comprehensive			Retained
	Shares		Amount		Shares			Amount			Capital			Loss			Earnings			Total
Balance at March 31, 2007		27,129	$	271		(1,516	)	$	(50,527	)	$	201,577		$	(2,008	)	$	315,517		$	464,830
Net income		0		0		0			0			0			0			40,502			40,502
Amortization of pension costs, net of tax		0		0		0			0			0			50			0			50
Total comprehensive income																					40,552
Exercise of stock options and warrants		30		0		0			0			255			0			0			255
Issuance of restricted stock, net of cancellations		409		4		0			0			(4	)		0			0			0
Issuance of stock under employee stock purchase plan		9		1		0			0			299			0			0			300
Tax benefit related to equity compensation		0		0		0			0			1,092			0			0			1,092
Stock-based compensation expense		0		0		0			0			4,473			0			0			4,473
Repurchase of common stock		0		0		(15	)		(728	)		0			0			0			(728	)
Cash dividends paid to stockholders		0		0		0			0			0			0			(3,890	)		(3,890	)
Other		0		0		0			0			35			0			0			35
Balance at September 30, 2007		27,577	$	276		(1,531	)	$	(51,255	)	$	207,727		$	(1,958	)	$	352,129		$	506,919

See accompanying notes to consolidated financial statements

4

METAL MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – Accounting Policies

Business

Metal Management, Inc., a Delaware corporation, and its wholly owned subsidiaries (the “Company”) are principally engaged in the business of collecting, processing and marketing ferrous and non-ferrous scrap metals. The Company collects obsolete and industrial scrap metal, processes it into reusable forms, and supplies the recycled metals to its customers, including electric-arc furnace mills, integrated steel mills, foundries, secondary smelters and metals brokers. These services are provided through the Company’s recycling facilities located in 17 states. The Company’s 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. The Company also processes non-ferrous metals including, but not limited to, aluminum, stainless steel and other nickel-bearing metals, copper, brass, titanium and high-temperature alloys, using similar techniques and through application of certain of the Company’s proprietary technologies.

The Company has one reportable segment operating in the scrap metal recycling industry, as determined in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosure about Segments of an Enterprise and Related Information.”

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). 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 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, 2007.

Revenue Recognition

The Company’s primary source of revenue is from the sale of processed ferrous and non-ferrous scrap metals. The Company also generates revenues from the brokering of scrap metals or from services performed, including but not limited to tolling, stevedoring and dismantling. Revenues from tolling, stevedoring and dismantling are insignificant to the Company.

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition.” Revenues from processed ferrous and non-ferrous scrap metal sales are recognized when title and risk of loss have passed to the customer. Revenues relating to brokered sales are recognized upon receipt of the materials by the customer. Revenues from services are recognized as the service is performed. Sales adjustments related to price and weight differences and allowances for uncollectible receivables are accrued against revenues as incurred.

5

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

Revenues by product category were as follows (in thousands):

	Three Months Ended				Six Months Ended
	September 30,		September 30,		September 30,		September 30,
	2007		2006		2007		2006
Ferrous metals	$	486,519	$	350,607	$	892,846	$	646,111
Non-ferrous metals		176,040		200,377		384,951		376,024
Brokerage – ferrous		46,369		26,941		79,584		42,904
Brokerage – non-ferrous		1,784		1,807		2,798		5,474
Other		4,443		4,976		9,029		10,107
Net sales	$	715,155	$	584,708	$	1,369,208	$	1,080,620

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS No. 157 to have a material effect on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities – Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits entities to choose to measure certain financial assets and liabilities at fair value. Unrealized gains and losses, arising subsequent to adoption, are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS No. 159 to have a material effect on its consolidated financial statements.

NOTE 2 – Merger Transaction

On September 24, 2007, the Company entered into a definitive merger agreement (the “Merger Agreement”) with Sims Group Limited, a corporation organized under the laws of Victoria, Australia (“Sims”). Under the terms of the Merger Agreement, each outstanding share of the Company’s common stock will be converted into the right to receive 2.05 American Depositary Shares of Sims (“Sims ADSs”), with each Sims ADS representing one ordinary share of Sims. All outstanding options to purchase shares of the Company’s common stock will be converted into options to purchase shares of Sims ADS, as adjusted for the exchange ratio. Under certain circumstances, if the Merger Agreement is terminated, the Company or Sims may be required to pay the other party a termination fee of $25.0 million.

The consummation of the merger is subject to a number of customary closing conditions, including, but not limited to, approval by the Company’s shareholders. Pending all requisite approvals, the parties expect to close the merger in the first quarter of calendar 2008 but no assurance can be provided with respect to the timing or consummation of the merger with Sims. On October 30, 2007, the Company received notification from the Federal Trade Commission that it had granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The terms of the Merger Agreement also include certain restrictions or limitations on future transactions of the Company prior to the closing of the merger, including acquisitions or dispositions, additional borrowings, issuance of equity and changes in employee benefit plans. The terms of certain of the Company’s contracts, employee benefit arrangements and debt agreements have provisions that will result in changes to the terms or settlement amounts upon a change in control of the Company.

In the three months ended September 30, 2007, the Company incurred costs associated with the merger of approximately $2.6 million consisting primarily of legal, accounting and investment banking fees.

6

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

NOTE 3 – Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur from the assumed exercise of stock options, assumed vesting of restricted stock, and assumed issuance of common stock under the employee stock purchase plan using the treasury stock method.

The computation of basic and diluted earnings per share is as follows (in thousands, except for per share amounts):

	Three months ended				Six months ended
	September 30,		September 30,		September 30,		September 30,
	2007		2006		2007		2006
Numerator:
Net income	$	17,763	$	29,073	$	40,502	$	73,962
Denominator:
Weighted average common shares outstanding, basic		25,235		26,089		25,197		25,834
Incremental common shares attributable to dilutive stock options and warrants		160		167		170		344
Incremental common shares attributable to unvested restricted stock		223		325		236		311
Weighted average common shares outstanding, diluted		25,618		26,581		25,603		26,489
Basic income per share	$	0.70	$	1.11	$	1.61	$	2.86
Diluted income per share	$	0.69	$	1.09	$	1.58	$	2.79

In both the three and six months ended September 30, 2007, the assumed conversion of 0.1 million stock options were excluded from the diluted earnings per share calculation. In both the three and six months ended September 30, 2006, the assumed conversion of 0.3 million stock options were excluded from the diluted earnings per share calculation. These stock options were excluded from the diluted earnings per share calculation as their inclusion would have been anti-dilutive.

NOTE 4 – Balance Sheet Information

Inventories

Inventories for all periods presented are stated at the lower of cost or market. Cost is determined principally on the average cost method. Inventories consist of the following (in thousands):

	September 30,		March 31,
	2007		2007
Ferrous metals	$	83,020	$	108,553
Non-ferrous metals		97,624		82,538
Other		163		210
	$	180,807	$	191,301

7

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

Property and Equipment

Property and equipment consists of the following (in thousands):

	September 30,			March 31,
	2007			2007
Land and improvements	$	64,312		$	52,646
Buildings and improvements		36,039			29,679
Operating machinery and equipment		175,453			151,296
Automobiles and trucks		19,262			15,720
Furniture, office equipment and software		7,348			6,408
Construction in progress		24,326			27,154
		326,740			282,903
Less – accumulated depreciation		(110,224	)		(95,779	)
	$	216,516		$	187,124

Other Accrued Liabilities

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

	September 30,		March 31,
	2007		2007
Accrued employee compensation and benefits	$	16,116	$	25,771
Accrued insurance		6,676		5,186
Other		13,756		4,525
	$	36,548	$	35,482

Accrued Severance and Other Charges

On July 18, 2007, the Company’s then President of Metal Management Midwest, Inc., Harold J. Rouster, passed away unexpectedly. Mr. Rouster’s employment agreement provided that in the case of his death, his estate would receive a lump sum cash payment equal to his unpaid base salary through March 31, 2008. Accordingly, the Company expensed a one time payment made to Mr. Rouster’s estate of $245.4 thousand in the three months ended September 30, 2007 to satisfy this obligation. The Company also recorded $352.9 thousand of stock-based compensation expense related to the acceleration of vesting of restricted stock held by Mr. Rouster and incurred $102.3 thousand of other costs related to Mr. Rouster’s death.

During the six months ended September 30, 2006, the Company recognized severance and other charges of approximately $0.4 million related to the termination of a former Executive Vice President. The severance and other charges consisted of cash severance of $263.2 thousand and $179.2 thousand of stock-based compensation expense related to the acceleration of vesting of stock options and restricted stock held by the former Executive Vice President.

NOTE 5 – Acquisitions

The Company accounts for acquisitions using the purchase method of accounting. The results of operations for companies acquired are included in the Company’s consolidated financial statements for periods subsequent to the date of the acquisition. The pro forma effects of acquisitions on the Company’s consolidated financial statements were not significant.

On July 31, 2007, the Company acquired substantially all the assets of Universal Recycling, Inc. (“Universal”) a scrap metal recycler located in northern Indiana. The total purchase price was approximately $12.6 million, which consisted of $12.5 million in cash and $0.1 million in transaction costs.

8

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

Based on preliminary valuations of the tangible and intangible assets associated with the Universal acquisition, the Company allocated the purchase consideration as follows (in thousands):

Accounts receivable	$	2,648
Inventories		939
Property and equipment		5,531
Amortizable intangible assets		2,122
Goodwill		1,515
Accounts payable and accrued liabilities		(118	)
	$	12,637

On May 21, 2007, the Company acquired substantially all the assets of Mars Industries, Inc. (“Mars”) located in Detroit, Michigan. The purchase price was approximately $43.1 million, which consisted of $42.8 million in cash and $0.3 million in transaction costs.

Based on valuations of the tangible and intangible assets associated with the Mars acquisition, the Company allocated the purchase consideration, net of $0.5 million of cash acquired as follows (in thousands):

Accounts receivable	$	12,740
Inventories		6,479
Property and equipment		9,442
Other assets		317
Amortizable intangible assets		13,706
Goodwill		10,810
Accounts payable and accrued liabilities		(6,668	)
Long-term debt		(4,212	)
	$	42,614

The Company financed the Universal and Mars acquisitions from borrowings under its credit agreement. The amortizable intangible assets for the Universal and Mars acquisitions consists of customer relationships and non-compete agreements that are being amortized over a period of ten years and five years, respectively. All of the goodwill in connection with both acquisitions will be deductible for tax purposes.

The purchase price allocations for both acquisitions may be adjusted as additional information relative to the acquired businesses and the fair market values of the assets and liabilities of the businesses become known or change.

NOTE 6 – Goodwill and Intangible Assets

The following represents a rollforward of goodwill from March 31, 2007 to September 30, 2007 (in thousands):

Balance at March 31, 2007	$	14,766
Purchase accounting adjustments		172
Acquisitions (see Note 5)		12,325
Balance at September 30, 2007	$	27,263

9

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

Intangible assets, excluding goodwill, consist of the following (in thousands):

	September 30, 2007					March 31, 2007
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Customer relationships	$	23,699	$	(2,115	)	$	10,350	$	(804	)
Non-compete agreements		7,438		(1,479	)		4,824		(1,103	)
	$	31,137	$	(3,594	)	$	15,174	$	(1,907	)

Amortization expense for intangible assets in the three and six months ended September 30, 2007 was $1.0 million and $1.7 million, respectively. Amortization expense for intangible assets in the three and six months ended September 30, 2006 was $0.7 million and $1.1 million, respectively. As of September 30, 2007, estimated future intangible asset amortization expense is as follows (in thousands):

Remainder of fiscal 2008	$	2,016
Fiscal 2009		3,825
Fiscal 2010		3,673
Fiscal 2011		3,541
Fiscal 2012		2,947
Thereafter		11,541

NOTE 7 – Long-term Debt

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

	September 30,			March 31,
	2007			2007
Credit Agreement	$	30,173		$	0
Other debt (including capital leases) due 2007 to 2010		1,656			206
		31,829			206
Less – current portion of long-term debt		(643	)		(46	)
	$	31,186		$	160

Credit Agreement

The Company has a $300 million secured five-year revolving credit and letter of credit facility, with a maturity date of May 1, 2011 (the “Credit Agreement). Pursuant to the Credit Agreement, the Company pays a fee on the undrawn portion of the facility that is determined by the leverage ratio. Significant covenants under the Credit Agreement include the satisfaction of a leverage ratio and interest coverage ratio. In addition, the Credit Agreement permits capital expenditures of up to $85 million for the year ending March 31, 2008 and $65 million in each of the following three fiscal years after March 31, 2008.

The Credit Agreement provides for interest rates based on variable rates tied to the prime rate plus or minus a margin or the London Interbank Offered Rate (“LIBOR”) plus a margin. The margin is based on the Company’s leverage ratio (as defined in the Credit Agreement) as determined for the trailing four fiscal quarters.

Other Debt

In connection with the acquisition of Mars, the Company assumed long-term debt of $4.2 million that consisted of a line-of-credit balance of $2.3 million and capital lease obligations of $1.9 million. Subsequent to closing of the Mars acquisition, the Company repaid the line-of-credit in full and $0.5 million of capital leases.

10

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

NOTE 8 – Employee Benefit Plans

The Company sponsors three defined benefit pension plans for employees at certain of its subsidiaries. Only employees covered under collective bargaining agreements accrue future benefits under these defined benefit pension plans. These benefits are based either on years of service and compensation or on years of service at fixed benefit rates. The Company’s funding policy for its pension plans is to contribute amounts required to meet regulatory requirements. The components of net pension costs were as follows (in thousands):

	Three Months Ended						Six Months Ended
	September 30,			September 30,			September 30,			September 30,
	2007			2006			2007			2006
Service cost	$	42		$	42		$	85		$	87
Interest cost		187			174			377			353
Expected return on plan assets		(210	)		(169	)		(417	)		(368	)
Amortization of prior service cost		2			5			4			5
Amortization of net actuarial loss		36			42			76			94
Net periodic benefit cost	$	57		$	94		$	125		$	171

In the six months ended September 30, 2007, the Company made cash contributions of $0.8 million to its pension plans. Based on consideration of estimates provided by its actuaries, the Company does not expect to make any additional cash funding contributions to its pension plans through March 31, 2008.

Multi-Employer Plans

The Company also contributes to several multi-employer pension plans for certain employees covered under collective bargaining agreements. Pension contributions to these multi-employer plans were $0.2 million and $0.3 million in both the three and six months ended September 30, 2007 and 2006, respectively.

Non-Qualified Deferred Compensation Plan

The Company established a non-qualified deferred compensation plan effective January 1, 2007 for a group of key employees who are not permitted to participate in the Company’s 401(k) plan. Participant deferrals are limited to amounts permitted under Internal Revenue Code Section 402(g) for voluntary contributions into a 401(k) plan. The Company may also provide discretionary contributions including a matching contribution at the same contribution rate as the 401(k) plan.

In connection with the non-qualified deferred compensation plan, the Company established a Rabbi Trust which is funded by the Company in order to satisfy the Company’s contractual liability to pay benefits under the terms of the plan. The Rabbi Trust is subject to the claims of the Company’s creditors. Plan assets are invested generally in the same mutual funds available to the participants and the Company rebalances the portfolio periodically to match the investment allocation of the participants.

The Company accounts for the non-qualified deferred compensation plan in accordance with Emerging Issues Task Force Issue No. 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts are Held in a Rabbi Trust and Invested.” The investments of the non-qualified deferred compensation plan are included in other assets at fair value with a corresponding liability, which is included in other long-term liabilities in the Company’s consolidated balance sheet. The non-qualified deferred compensation plan assets are classified as trading and reported at fair value with unrealized gains and losses included in the consolidated statement of operations.

NOTE 9 – Income Taxes

On April 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. This interpretation requires the Company to recognize in

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

the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions. The adoption of FIN 48 did not result in an adjustment to the Company’s tax liability for uncertain tax positions.

The amount of gross unrecognized tax benefits (including interest and penalties) at April 1, 2007 was $8.4 million, all of which if recognized would impact the effective tax rate. At September 30, 2007, the amount of gross unrecognized tax benefits was $8.3 million. The Company believes that it is reasonably possible that unrecognized tax benefits will decrease by approximately $3.7 million over the next 12 months as a result of payments that may be made to settle certain state income tax matters.

As of April 1, 2007, interest and penalties accrued for uncertain tax positions was $0.8 million. The change in the accrual for interest and penalties in the six months ended September 30, 2007 was not material. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions as part of income tax expense.

The Company is subject to taxation in the U.S. and various state and local jurisdictions. The Company was audited by the Internal Revenue Service (“IRS”) for its 2004 tax year. The IRS audit was closed without any adjustment. The U.S. federal tax returns for the 2005 and 2006 tax years are subject to examination. The state of Illinois is currently conducting an income tax audit for the 2005 and 2006 tax years. For the Company’s other major state and local jurisdictions, tax years 2002 through 2006 are subject to examination.

NOTE 10 – Commitments and Contingencies

Legal Proceedings

On June 7, 2007, the Company filed a complaint (the “Complaint”) against Wheeling-Pittsburgh Steel Corporation (“WPSC”) in the Supreme Court of the State of New York County of New York. The Complaint arises from a series of purchase orders (the “Purchase Orders”) issued by WPSC to the Company beginning on or about February 20, 2007, for the purchase, shipment and delivery from the Company to WPSC of specified quantities and types of scrap metal. In the Complaint, the Company is seeking damages for the breach, anticipatory breach, wrongful rejection and repudiation of the Purchase Orders based on the following WPSC actions: (1) WPSC accepted delivery without objection of approximately $31 million worth of scrap metal sold to it by the Company but has failed to make payment for those goods when due; (2) by its conduct, WPSC has indicated its intention not to pay for an additional amount of approximately $8 million in scrap metal purchased by it but where payment has since become past due; and (3) WPSC has blanket rejected scrap metal as nonconforming, in some cases even before the scrap metal was delivered and inspected, and without giving the Company an opportunity to cure any goods alleged by WPSC to be nonconforming as required by the Purchase Orders and the Uniform Commercial Code. Stated in terms of tonnage, the Complaint alleges that WPSC has rejected and/or repudiated agreed Purchase Orders for approximately 86,400 tons of scrap metal, of which 76,800 tons had not yet been shipped or which is en route to WPSC and 9,600 tons of which the Company has already delivered to WPSC, in addition to the approximately 16,000 tons of scrap metal previously rejected. The damages being sought includes the contractual price of the goods, plus incidental damages, costs and disbursements of the action, prejudgment interest and such other relief as may be just and proper.

In a related matter, on June 7, 2007, the Company filed a notice of motion for summary judgment in lieu of a complaint (the “Notice”) against Esmark Incorporated, Sun Steel Company LLC, Century Steel Company LLC, North American Steel Company LLC, Great Western Steel Company LLC, Electric Coating Technologies Bridgeview LLC, U.S. Metals & Supply LLC, Miami Valley Steel Service, Inc., Premier Resource Group LLC, Independent Steel Company LLC, Electric Coating Technologies LLC, Esmark Realty LLC, Century Steel Realty LLC, Great Western Realty LLC, Isco Realty LLC, Miami Valley Realty LLC, Sun Steel Realty LLC, U.S. Metals Realty LLC (collectively, “Esmark”) in the Supreme Court of the State of New York County of New York. The Company entered into an unconditional guaranty agreement (the “Guaranty”) with Esmark pursuant to which Esmark agreed to unconditionally, jointly and severally guarantee all money owing to the

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

Company under the Purchase Orders with WPSC without monetary limit. Therefore, the Company filed the Notice to seek payment of approximately $31 million (reduced to approximately $21 million on September 5, 2007 to reflect interim payments) currently past due under Purchase Orders pursuant to the express terms and conditions of the Guaranty, together with interest, expenses and reasonable attorneys’ fees. On October 3, 2007, the court denied the motion for the summary judgment in lieu of complaint and, pursuant to applicable court rules, the Notice was converted into a complaint and the action against Esmark will now proceed. The Company intends to seek additional monies, together with interest, expenses and attorneys’ fees, as payments become due and owing in the ordinary course.

The Company intends to vigorously pursue its rights and remedies directly against WPSC and against Esmark from the unlimited and unrepudiated Guaranty, but there can be no assurance as to the outcome of these actions or their effect on the Company’s financial condition or results of operations.

From time to time, the Company is involved in various litigation matters involving ordinary and routine claims incidental to its business. A significant portion of these matters result from environmental compliance issues and workers compensation related claims arising from the Company’s operations. There are presently no legal proceedings pending against the Company, which, in the opinion of the Company’s management, is likely to have a material adverse effect on its business, financial condition or results of operations.

Environmental and Labor Matters

The Company is subject to comprehensive local, state, federal and international regulatory and statutory environmental requirements relating to, among others, the acceptance, storage, treatment, handling and disposal of solid waste and hazardous waste, the discharge of materials into air, the management and treatment of wastewater and storm water, the remediation of soil and groundwater contamination, the restoration of natural resource damages and the protection of employees’ health and safety. The Company believes that it and its subsidiaries are in material compliance with currently applicable statutes and regulations governing the protection of human health and the environment, including employee health and safety. 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.

Certain of the Company’s subsidiaries have received notices from the United States Environmental Protection Agency (“USEPA”), state agencies or third parties that the subsidiary has been identified as potentially responsible for the cost of investigation and cleanup of landfills or other sites where the subsidiary’s material was shipped. In most cases, many other parties are also named as potentially responsible parties. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) enables USEPA and state agencies to recover from owners, operators, generators and transporters the cost of investigation and cleanup of sites which pose serious threats to the environment or public health. In certain circumstances, a potentially responsible party can be held jointly and severally liable for the cost of cleanup. In other cases, a party who is liable may only be liable for a divisible share. Liability can be imposed even if the party shipped materials in a lawful manner at the time of shipment and the liability for investigation and cleanup costs can be significant, particularly in cases where joint and several liability may be imposed.

CERCLA, including the Superfund Recycling Equity Act of 1999 (“SREA”), limits the exposure of scrap metal recyclers for sales of certain recyclable material under certain circumstances. However, the recycling defense is subject to conducting reasonable care evaluations of current and potential consumers. The Company is executing its SREA responsibility through a contractor working for a trade association called the Institute of Scrap Recycling Industries.

Because CERCLA can be imposed retroactively on shipments that occurred many years ago, and because USEPA and state agencies are still discovering sites that present problems to public heath or the environment, the Company can provide no assurance that it will not become liable in the future for significant costs associated with any such investigations and remediation of CERCLA waste sites.

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

On July 1, 1998, Metal Management Connecticut, Inc. (“MM-Connecticut”), a subsidiary of the Company, acquired the scrap metal recycling assets of Joseph A. Schiavone Corp. (formerly known as Michael Schiavone & Sons, Inc.). The acquired assets include real property in North Haven, Connecticut upon which MM-Connecticut’s scrap metal recycling operations are currently performed (the “North Haven Facility”). The owner of Joseph A. Schiavone Corp. was Michael Schiavone (“Schiavone”). On March 31, 2003, the Connecticut Department of Environmental Protection (“CTDEP”) filed suit against Joseph A. Schiavone Corp., Schiavone, and MM-Connecticut in the Superior Court of the State of Connecticut – Judicial District of Hartford. An amended complaint was filed by the CTDEP on October 21, 2003. The suit alleges, among other things, that the North Haven Facility discharged and continues to discharge contaminants, including oily material, into the environment and has failed to comply with the terms of certain permits and other filing requirements. The suit seeks injunctions to restrict MM-Connecticut from maintaining discharges and to require MM-Connecticut to remediate the facility. The suit also seeks civil penalties from all of the defendants in accordance with Connecticut environmental statutes. The suit makes specific claims against Schiavone and Joseph A. Schiavone Corp. for their alleged violations of environmental laws including, among other things, Joseph A. Schiavone Corp.’s failure to comply with the Connecticut Property Transfer Act when it sold the North Haven Facility to MM-Connecticut. At this stage, the Company is not able to predict MM-Connecticut’s potential liability in connection with this action or any required investigation and/or remediation. The Company believes that MM-Connecticut has meritorious defenses to certain of the claims asserted in the suit and MM-Connecticut intends to vigorously defend itself against the claims. In addition, the Company believes it is entitled to indemnification from Joseph A. Schiavone Corp. and Schiavone for some or all of the obligations and liabilities that may be imposed on MM-Connecticut in connection with this matter under the various agreements governing its purchase of the North Haven Facility from Joseph A. Schiavone Corp., as well as for costs associated with the undisclosed conditions of the property. The Company cannot provide assurances that Joseph A. Schiavone Corp. or Schiavone will have sufficient resources to fund any or all indemnifiable claims to which the Company may be entitled.

In a letter dated July 13, 2005, MM-Connecticut and the Company received notification from Schiavone of his demand seeking indemnification (including the advance of all costs, charges and expenses incurred by Schiavone in connection with his defense) from MM-Connecticut and the Company to those claims made against Schiavone in the action brought by CTDEP. Schiavone’s demand refers to his employment agreement at the time and to the certificate of incorporation of MM-Connecticut, which provide for indemnification against claims by reason of his being or having been a director, officer, employee, or agent of MM-Connecticut, or serving or having served at the request of MM-Connecticut as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise to the fullest extent permitted by applicable law. The Company believes that MM-Connecticut has meritorious defenses to Schiavone’s indemnification demand. The Company has also asserted its own claims for indemnification against Schiavone pursuant to the terms of the asset purchase agreement.

The Company has worked with an independent environmental consultant to implement a CTDEP approved characterization plan jointly funded by Schiavone and the Company. The Company is continuing its efforts to reach an acceptable settlement with the other parties with respect to the CTDEP action, but it cannot provide assurances that such a settlement will in fact be reached.

On November 10, 2006, the Company filed a demand for arbitration with the American Arbitration Association against Schiavone and Joseph A. Schiavone Corp. in accordance with the arbitration provisions of the asset purchase agreement governing MM-Connecticut’s purchase of the North Haven Facility. In the arbitration demand, the Company has asserted various breach of contract claims and claims for fraudulent inducement and fraudulent concealment against Schiavone and Joseph A. Schiavone Corp. The Company seeks findings of liability against Schiavone and an order for indemnification, punitive damages, compliance with the Connecticut Property Transfer Act, and reimbursement for arbitration costs. The arbitration proceeding is in its initial stages. In its initial response in the arbitration proceeding, Schiavone and Joseph A. Schiavone

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

Corp. have denied any liability to the Company and asserted various counterclaims for indemnification. While at this preliminary stage the Company is unable to determine the outcome or potential amount of recovery, the Company believes that its claims are meritorious. The Company intends to vigorously defend the counterclaims asserted by Schiavone and Joseph A. Schiavone Corp. in the arbitration.

On December 15, 2006, the Company filed an application for prejudgment remedy and a motion for disclosure of assets against Schiavone in the U.S. District Court for the District of Connecticut to identify and preserve Schiavone’s assets during the pendency of the arbitration proceedings so that an award in the Company’s favor may be satisfied in the event the Company prevails. At this preliminary stage, the Company is unable to determine the likelihood of success, but believes that its arguments are meritorious.

On April 29, 1998, Metal Management Midwest, Inc. (“MM-Midwest”), a subsidiary of the Company, acquired substantially all of the operating assets of 138 Scrap, Inc. (“138 Scrap”) that were used in its scrap metal recycling business. Most of these assets were located at a recycling facility in Riverdale, Illinois (the “Facility”). On March 12, 2007, the Village of Riverdale filed suit against numerous third parties, including MM-Midwest, in the United States District Court – Northern District of Illinois. The suit alleges, among other things, that the release or disposal of hazardous substances within the meaning of CERCLA has occurred at an approximately 57 acre property in the Village of Riverdale (which includes the 8.8 acre Facility that was leased by MM-Midwest until December 31, 2003). At this stage, the Company cannot predict MM-Midwest’s potential liability, if any, in connection with such lawsuit or any required remediation. The Company believes that MM-Midwest has meritorious defenses to certain of the claims outlined in the suit and MM-Midwest intends to vigorously defend itself. In addition, although the Company believes that it would be entitled to indemnification from the prior owner of 138 Scrap for some or all of the obligations that may be imposed on MM-Midwest in connection with this matter under the agreement governing its purchase of the operating assets of 138 Scrap, the Company cannot provide assurances that the prior owner will have sufficient resources to fund any indemnifiable claims to which the Company may be entitled.

On or about September 23, 2005, CTDEP issued two Notices of Violation (“NOVs”) to Metal Management Aerospace, Inc. (“MM-Aerospace”), a subsidiary of the Company, alleging violations of environmental law at MM-Aerospace’s Hartford facility, including, among other things: (1) operation of a solid waste facility without a permit; (2) failure to comply with certain regulatory requirements pertaining to the management and/or disposal of used oil, hazardous wastes and/or polychlorinated byphenols; (3) failure to comply with certain waste water discharge obligations; (4) failure to comply with certain storm water management requirements; and (5) failure to maintain the facility so as not to create an unreasonable source of pollution to the waters of the State of Connecticut. Substantially similar NOVs were also issued by CTDEP to the property lessor and former business owner, Danny Corp., at the same time.

On October 21, 2005, MM-Aerospace submitted substantive responses to CTDEP regarding the NOVs. At this time, because CTDEP has yet to formally respond to MM-Aerospace’s NOV responses, the Company is unable to determine MM-Aerospace’s potential liability under environmental law in connection with these NOVs. The Company believes that MM-Aerospace has meritorious defenses to certain of the allegations outlined in the NOVs that were raised in the Company’s responses to said NOVs. In addition, the Company believes that by virtue of certain consent orders, Connecticut Transfer Act obligations, and lease/transactional documents executed by Danny Corp. and/or its predecessors in interest, certain environmental liabilities noted in the NOVs will be the responsibility of Danny Corp. However, at the present time, even if Danny Corp. is determined to be liable for any of the matters raised in the NOVs, there can be no assurance that Danny Corp. will have sufficient resources to fund any or all of such liabilities.

On June 22, 2006, Metal Management Alabama, Inc. (“MM-Alabama”), a subsidiary of the Company, received a notice from the Alabama Department of Environmental Management (“ADEM”) directing MM-Alabama to prepare a plan to remove waste from a property in Cleburne County, Alabama known as the “CAMMCO Site.” MM-Alabama has begun an investigation to determine (1) if it has any liability for the

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

waste allegedly present on the CAMMCO Site, (2) the nature and quantity of the waste allegedly on the CAMMCO Site, (3) the identities of other potentially responsible parties, and (4) the availability of insurance or indemnity for any possible liability. At this preliminary stage, the Company has not determined whether MM-Alabama has any liability with respect to the CAMMCO Site.

NOTE 11 – Stockholders’ Equity

The Company is authorized to issue, in one or more series, up to a maximum of 2,000,000 shares of preferred stock. The Company has not issued any shares of preferred stock. The Company is authorized to issue 50,000,000 shares of common stock, par value $0.01 per share.

Stock Repurchase Program

On September 8, 2006, the Company’s Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to 2.7 million shares of its common stock. Under the Credit Agreement, the Company is permitted to spend up to $100 million for the purchase of its common stock during the term of the Credit Agreement. During the six months ended September 30, 2007, the Company did not repurchase any of its common stock under the stock repurchase program. Since the inception of the stock repurchase program, the Company has purchased 1.5 million shares of its common stock at a cost of approximately $49.9 million, or at an average cost of $33.25 per share. The stock repurchase program has no expiration date but may be terminated at any time by the Board of Directors.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), “Share Based Payment.” SFAS No. 123(R) requires measurement of compensation cost for share-based awards at fair value and recognition of compensation cost over the service period, net of forfeitures. The fair value of restricted stock is determined based on the number of shares granted and the grant date fair value of the Company’s common stock. The fair value of the stock options and shares granted under the employee stock purchase plan is determined using the Black-Scholes valuation model. Stock-based compensation expense for the three months ended September 30, 2007 and 2006 amounted to $2.7 million and $1.8 million, respectively, and $4.5 million and $3.2 million for the six months ended September 30, 2007 and 2006, respectively.

At September 30, 2007, there was $0.8 million and $19.9 million of unrecognized compensation cost related to nonvested stock options and nonvested restricted stock, respectively, which is expected to be recognized over a period of 0.5 years and 1.7 years, respectively.

NOTE 12 – Investments in Joint Ventures

At September 30, 2007, investments in joint ventures were $22.2 million, which primarily represents the Company’s 50% ownership interest in Metal Management Nashville, LLC and 50% ownership interest in Port Albany Ventures LLC.

The Company previously had an investment of 28.5% in Southern Recycling, LLC (“Southern”). On April 28, 2006, Southern was sold to a third party for $161.4 million in cash. Based upon its ownership interest, the Company received approximately $46.0 million in cash. In the six months ended September 30, 2006, the Company recognized a pre-tax gain on the sale of its ownership interest in Southern of $26.4 million.

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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,” “our” 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, 2007 and Item 1A. “Risk Factors” of Part II of this Report, 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 (“Annual Report”) for the year ended March 31, 2007 (“fiscal 2007”).

Overview and Industry

We are one of the largest domestic scrap metal recycling companies with 53 facilities in 17 states. We enjoy leadership positions in many markets, such as Birmingham, Chicago, Cleveland, Denver, Detroit, Hartford, Houston, Memphis, Mississippi, Newark, New Haven, Phoenix, Pittsburgh, Salt Lake City, Toledo and Tucson. Through two joint venture investments, we also have operations in Albany and Nashville. We operate in one reportable segment, the scrap metal recycling industry.

Our operations primarily involve the collection, processing and marketing of ferrous and non-ferrous scrap 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. In addition to the buying, processing and marketing of ferrous and non-ferrous scrap metals, we are periodically retained as demolition contractors in certain of our large metropolitan markets in which we dismantle obsolete machinery, buildings and other structures containing metal and, in the process, collect both the ferrous and non-ferrous metals from these sources. At certain of our locations adjacent to commercial waterways, we provide stevedoring services.

We believe that we provide one of the most comprehensive product 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 scrap metals, including aluminum, copper, stainless steel and other nickel-bearing metals, brass, titanium and high-temperature alloys, using similar techniques and through application of our proprietary technologies.

The markets for scrap metals are highly competitive, both in the purchase of unprocessed scrap and the sale of processed scrap. With regard to the purchase of unprocessed scrap, we compete with numerous independent recyclers, as well as smaller scrap companies engaged only in collecting industrial scrap. In many cases we also purchase unprocessed scrap metal from smaller scrap dealers and other processors. Successful procurement of materials is determined primarily by the price offered by the purchaser for the unprocessed scrap and the proximity of our processing facility to the source of the unprocessed scrap. With regard to the sale of processed scrap, we compete in a global market. Competition for sales of processed scrap is based primarily on the price and quality of the scrap metals, the level of service provided in terms of reliability and timing of delivery, and availability of scrap and scrap substitutes. We believe that our ability to process substantial volumes, access to multiple modes of transportation systems, deliver a broad product line to consumers, collect and sell scrap in regional, national and international markets, and to provide other value-added services to our customers offers us a competitive advantage.

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We face potentially greater competition for sales of processed scrap from producers of steel products, such as integrated steel mills and mini-mills, if more or larger steel mills vertically integrate by entering the scrap metals recycling business or by attempting to secure scrap supply through direct purchasing from our suppliers. Certain steel manufacturers currently operate scrap yards. Many of these producers have substantially greater financial, marketing and other resources. Scrap metals processors also face competition from substitutes for prepared ferrous scrap, such as pre-reduced iron pellets, hot briquetted iron, pig iron, iron carbide and other forms of processed iron. The availability and relative prices of substitutes for ferrous scrap could result in a decreased demand for processed ferrous scrap and could result in lower prices and/or lower demand for our products.

Merger Agreement with Sims

On September 24, 2007, we entered into a definitive merger agreement (the “Merger Agreement”) with Sims Group Limited, a corporation organized under the laws of Victoria, Australia (“Sims”). Under the terms of the Merger Agreement, each outstanding share of our common stock will be converted into the right to receive 2.05 American Depositary Shares of Sims (“Sims ADSs”), with each Sims ADS representing one ordinary share of Sims. All outstanding options to purchase shares of our common stock will be converted into options to purchase shares of Sims ADS, as adjusted for the exchange ratio. Under certain circumstances, if the Merger Agreement is terminated, we or Sims may be required to pay the other party a termination fee of $25.0 million. The consummation of the merger is subject to a number of customary closing conditions, including, but not limited to, approval by our shareholders. Pending all requisite approvals, we expect to close the merger in the first quarter of calendar 2008 but no assurance can be provided with respect to the timing or consummation of the merger with Sims. On October 30, 2007, we received notification from the Federal Trade Commission that it had granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The terms of the Merger Agreement also include certain restrictions or limitations on our future transactions prior to the closing of the merger, including acquisitions or dispositions, additional borrowings, issuance of equity and changes in employee benefit plans. The terms of certain of our contracts, employee benefit arrangements and debt agreements have provisions which will result in changes to the terms or settlement amounts upon a change in control.

Recent Events

On July 31, 2007, we acquired substantially all of the assets of Universal Recycling, Inc. (“Universal”) for approximately $12.6 million. Universal is a scrap metal recycler located in northern Indiana. The purchase price consisted of $12.5 million in cash and $0.1 million in transaction costs.

On June 7, 2007, we filed a complaint against Wheeling-Pittsburgh Steel Corporation (“WPSC”) in the Supreme Court of the State of New York County of New York. The complaint arises from a series of purchase orders issued by WPSC to us beginning on or about February 20, 2007, for the purchase, shipment and delivery to WPSC of specified quantities and types of scrap metal. In the complaint, we are seeking damages for the breach, anticipatory breach, wrongful rejection and repudiation of the purchase orders. See “Note 10 – Commitments & Contingencies – Legal Proceedings” in the notes to the consolidated financial statements for additional information.

On May 21, 2007, we acquired substantially all of the assets of Mars Industries, Inc. (“Mars”) for approximately $43.1 million. Mars is a full-service scrap metal recycler located in Detroit. The purchase price consisted of $42.8 million in cash and $0.3 million in transaction costs.

Results of Operations

Our operating results are highly cyclical in nature. They tend to reflect and be amplified by changes to general economic conditions, both domestically and internationally. This leads to significant fluctuations in demand and pricing for our products. Over the last three years, we have experienced strong industry conditions but also encountered extreme volatility in scrap prices.

Our operating results for the three and six months ended September 30, 2007 reflect higher sales but lower profitability as compared to the three and six months ended September 30, 2006. The decline in our

18

operating results was primarily due to lower ferrous and non-ferrous margins and lower non-ferrous sales volumes.

Ferrous sales increased in the three and six months ended September 30, 2007 as a result of higher sales volumes. However, ferrous margins were impacted by sequentially lower ferrous scrap prices (primarily in the three months ended June 30, 2007) and the remarketing of our ferrous scrap which was originally sold to WPSC (see discussion under “Recent Events” above). After achieving record results in fiscal 2007, the market for ferrous scrap metals weakened in the months of April and May 2007, causing prices for certain grades of ferrous scrap to decline by approximately $85 per ton, before stabilizing in June 2007 and increasing slightly in the three months ended September 30, 2007. In addition, in the six months ended September 30, 2007, our ferrous margins were impacted by aggressive competition for the purchase of unprocessed ferrous scrap metal and high export freight rates.

Non-ferrous sales decreased by $24.3 million in the three months ended September 30, 2007 compared to the three months ended September 30, 2006 primarily due to lower prices, (mainly for nickel alloys), sales disruptions for copper and aluminum into southern China, as well as sequentially weaker demand for stainless steel, which had been a strong driver for us until this quarter. This resulted in a compression of non-ferrous margins in the three months ended September 30, 2007. Non-ferrous sales increased by $8.9 million in the six months ended September 30, 2007 compared to the six months ended September 30, 2006 mainly due to favorable pricing and demand in the three months ended June 30, 2007.

The following table sets forth our statement of operations and sales volume data for the three and six months ended September 30, 2007 and 2006.

Consolidated Statement of Operations ($ in thousands:)

	Three Months Ended September 30,												Six Months Ended September 30,
	2007			%			2006			%			2007			%			2006			%
Sales by commodity:
Ferrous metals	$	486,519			68.0		$	350,607			60.0		$	892,846			65.2		$	646,111			59.8
Non-ferrous metals		176,040			24.6			200,377			34.2			384,951			28.1			376,024			34.8
Brokerage – ferrous		46,369			6.5			26,941			4.6			79,584			5.8			42,904			4.0
Brokerage – non-ferrous		1,784			0.3			1,807			0.3			2,798			0.2			5,474			0.5
Other		4,443			0.6			4,976			0.9			9,029			0.7			10,107			0.9
Net sales		715,155			100.0	%		584,708			100.0	%		1,369,208			100.0	%		1,080,620			100.0	%
Cost of sales (excluding depreciation)		643,047			90.0			507,263			86.7			1,226,925			89.6			930,184			86.1
General and administrative expense		28,043			3.9			22,775			3.9			53,470			3.9			43,647			4.0
Depreciation and amortization expense		9,461			1.3			7,344			1.3			17,731			1.3			14,191			1.3
Merger expenses		2,588			0.3			0			0.0			2,588			0.2			0			0.0
Severance and other charges		701			0.1			0			0.0			701			0.0			442			0.0
Operating income		31,315			4.4			47,326			8.1			67,793			5.0			92,156			8.6
Income from joint ventures		942			0.1			554			0.1			1,659			0.1			2,414			0.2
Interest expense		(1,498	)		0.2			(284	)		0.1			(2,959	)		0.2			(606	)		0.1
Interest and other income, net		140			0.0			513			0.1			259			0.0			944			0.1
Gain on sale of joint venture interest		0			0.0			0			0.0			0			0.0			26,362			2.4
Pre-tax income		30,899			4.3			48,109			8.2			66,752			4.9			121,270			11.2
Provision for income taxes		13,136			1.8			19,036			3.2			26,250			1.9			47,308			4.4
Net income	$	17,763			2.5	%	$	29,073			5.0	%	$	40,502			3.0	%	$	73,962			6.8	%

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	Three Months Ended September 30,				Six Months Ended September 30,
	2007		2006		2007		2006
Sales volume by commodity (In thousands):
Ferrous metals (tons)		1,549		1,266		2,823		2,338
Non-ferrous metals (lbs.)		125,614		139,691		245,215		265,312
Brokerage – ferrous (tons)		160		83		269		166
Brokerage – non-ferrous (lbs.)		689		1,057		1,658		2,913

Net Sales

Consolidated net sales increased by $130.4 million (22.3%) and $288.6 million (26.7%) to $715.1 million and $1.4 billion in the three and six months ended September 30, 2007, respectively, compared to $584.7 million and $1.1 billion in the three and six months ended September 30, 2006, respectively. The increase was primarily due to increases in ferrous metals sales associated with higher average selling prices and sales volumes for ferrous material, offset in part by lower non-ferrous sales volumes as compared to the three and six months ended September 30, 2006. We recognized record net sales in the three and six months ended September 30, 2007.

Ferrous Sales

Ferrous sales increased by $135.9 million (38.8%) and $246.7 million (38.2%) to $486.5 million and $892.8 million in the three and six months ended September 30, 2007, respectively, compared to $350.6 million and $646.1 million in the three and six months ended September 30, 2006, respectively. The increase was due to higher average selling prices which increased by $37 per ton (13.4%) to $314 per ton and by $40 per ton (14.4%) to $316 per ton in the three and six months ended September 30, 2007, respectively, compared to $277 per ton and $276 per ton in the three and six months ended September 30, 2006, respectively. In addition, sales volumes increased by 283,000 tons (22.4%) to 1.6 million tons and 485,000 tons (20.7%) to 2.8 million tons in the three and six months ended September 30, 2007, respectively, compared to 1.3 million tons and 2.3 million tons in the three and six months ended September 30, 2006, respectively.

The increase in selling prices for ferrous scrap is evident in data published by the American Metal Market (“AMM”). According to AMM, the average price for #1 Heavy Melting Steel Scrap – Chicago (which is a common indicator for ferrous scrap) was approximately $259 per ton and $263 per ton in the three and six months ended September 30, 2007, respectively, compared to $219 per ton and $233 in the three and six months ended September 30, 2006, respectively. In addition to changes in product mix, our average ferrous selling prices are also impacted by the amount of ferrous scrap sold on a destination basis where our selling price includes freight costs. We have also experienced higher freight costs contributing to higher realized selling prices. Freight costs tend to be a pass through, which increase realized prices but do not significantly affect operating income. In the three and six months ended September 30, 2007, we had more destination-based ferrous sales (mainly export sales) compared to the three and six months ended September 30, 2006.

The increase in sales volumes was primarily due to additional tons sold to international markets. In the six months ended September 30, 2007, we exported 1,040,000 tons of ferrous scrap compared to 600,000 tons in the six months ended September 30, 2006. Recent acquisitions also contributed to increased scrap flows but not significantly.

Non-ferrous Sales

Non-ferrous sales decreased by $24.3 million (12.1%) to $176.1 million in the three months ended September 30, 2007 compared to $200.4 million in the three months ended September 30, 2006. The decline was primarily due to a decrease in sales volumes of 14.1 million pounds (10.1%) as a result of weaker demand for stainless steel and nickel scrap from our consumers.

Non-ferrous sales increased by $8.9 million (2.4%) to $384.9 million in the six months ended September 30, 2007 compared to $376.0 million in the six months ended September 30, 2006. The increase was due to higher average selling prices for non-ferrous products (primarily higher nickel prices), which

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increased by approximately $0.15 per pound (10.6%) to $1.57 per pound and offset a decrease in non-ferrous sales volume of 20.1 million pounds (7.6%).

The increase in nickel prices in the six months ended September 30, 2007 is evident in data published by the London Metals Exchange (“LME”). According to LME data, nickel prices were 60.3% higher in the six months ended September 30, 2007 compared to the six months ended September 30, 2006.

Our non-ferrous sales are also impacted by the mix of non-ferrous metals sold. Generally, prices for copper are higher than prices for aluminum and stainless steel. In addition, the amount of high-temperature alloys that we sell, and the selling prices for these metals, will impact our non-ferrous sales as prices for these metals are generally higher than other non-ferrous metals.

Brokerage Sales

Brokerage ferrous sales increased by $19.4 million (72.1%) and $36.7 million (85.5%) to $46.4 million and $79.6 million in the three and six months ended September 30, 2007, respectively, compared to $27.0 million and $42.9 million in the three and six months ended September 30, 2006, respectively. The increase was due to higher brokered ferrous sales volumes, which increased by 77,000 tons (92.8%) and 103,000 tons (62.0%) in the three and six months ended September 30, 2007, respectively. Average ferrous brokered selling prices decreased by $35 per ton (10.7%) in the three months ended September 30, 2007 compared to the three months ended September 30, 2006, while average ferrous brokered selling prices increased by $38 per ton (14.5%) in the six months ended September 30, 2007 compared to the six months ended September 30, 2006. The average selling prices for brokered ferrous 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 ferrous scrap metal are generally associated with higher unit prices. The volume of ferrous brokerage shipments varies with our export strategies that change from quarter to quarter.

Brokerage non-ferrous sales decreased by $2.7 million (48.9%) to $2.8 million in the six months ended September 30, 2007 compared to $5.5 million in the six months ended September 30, 2006. The decrease was due to lower brokered non-ferrous sales volumes, which decreased by 1.3 million pounds (43.1%) compared to the six months ended September 30, 2006. 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. The average selling prices for brokered non-ferrous sales can vary greatly based on product mix.

Other Sales

Other sales are primarily derived from our stevedoring and bus dismantling operations. Stevedoring is a fee for service business primarily associated with our dock operations at Port Newark terminal. The decrease in other sales in the three and six months ended September 30, 2007 was a result of lower stevedoring service based revenue.

Cost of Sales (excluding depreciation)

Cost of sales consists of material costs, freight costs and processing expenses. Cost of sales increased by $135.8 million (26.8%) and $296.7 million (31.9%) to $643.1 million and $1.2 billion in the three and six months ended September 30, 2007, respectively, compared to $507.3 million and $930.2 million in the three and six months ended September 30, 2006, respectively. The increase was primarily due to higher material costs, which increased by $113.4 million (27.4%) and $249.4 million (32.7%) in the three and six months ended September 30, 2007, respectively, compared to the three and six months ended September 30, 2006, and higher freight costs and increased processing expenses.

Freight costs were higher by $14.3 million (30.4%) and $34.1 million (44.6%) in the three and six months ended September 30, 2007, respectively, due to a higher percentage of sales made on delivered contracts, higher freight rates and additional freight and demurrage costs incurred as a result of remarketing ferrous scrap metal that was originally sold to WPSC (see discussion under “Recent Events” above). Processing costs increased by $8.0 million (17.3%) and $13.2 million (14.5%) in the three and six months ended September 30, 2007, respectively, due to higher labor, fuel and operating lease costs and increased unit shipments. A portion of the increase in cost of sales was also due to recent acquisitions.

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General and Administrative Expense

General and administrative expense was $28.0 million and $53.5 million in the three and six months ended September 30, 2007, respectively, compared to $22.8 million and $43.6 million in the three and six months ended September 30, 2006. The increase was primarily due to higher compensation expense and professional fees.

Compensation expense increased by $3.0 million and $5.9 million in the three and six months ended September 30, 2007, respectively, primarily due to higher salary expense, as a result of an increase in headcount associated with recent acquisitions and higher stock-based compensation expense. Professional fees increased by $1.6 million and $2.5 million in the three and six months ended September 30, 2007, respectively, primarily due to legal expenses associated with the WPSC lawsuit. In the three and six months ended September 30, 2007, legal expenses associated with the WPSC lawsuit were $1.0 million and $1.3 million, respectively.

Depreciation and Amortization Expense

Depreciation expense was $8.5 million and $16.0 million in the three and six months ended September 30, 2007, respectively, compared to depreciation expense of $6.6 million and $13.1 million in the three and six months ended September 30, 2006, respectively. Amortization expense was $1.0 million and $1.7 million in the three and six months ended September 30, 2007, respectively, compared to amortization expense of $0.7 million and $1.1 million in the three and six months ended September 30, 2006, respectively.

The increase in depreciation expense was due to the significant capital investments we have made in the last three years as well as depreciation expense associated with fixed assets acquired in recent acquisitions. The increase in amortization expense was a result of intangible assets associated with recent acquisitions. In the three and six months ended September 30, 2007, depreciation and amortization expense increased by $1.6 million and $2.5 million, respectively, due to recent acquisitions.

Merger Expenses

In the three months ended September 30, 2007, we incurred costs associated with our pending merger with Sims of $2.6 million consisting primarily of legal, accounting and investment banking fees.

Severance and Other Charges

On July 18, 2007, our then President of Metal Management Midwest, Inc., Harold J. Rouster, passed away unexpectedly. Mr. Rouster’s employment agreement provided that in the case of his death, his estate would receive a lump sum cash payment equal to his unpaid base salary through March 31, 2008. Accordingly, we expensed a one time payment made to Mr. Rouster’s estate of $245.4 thousand in the three months ended September 30, 2007 to satisfy this obligation. We also recorded $352.9 thousand of stock-based compensation expense related to the acceleration of vesting of restricted stock held by Mr. Rouster and incurred $102.3 thousand of other costs related to Mr. Rouster’s death.

In the six months ended September 30, 2006, we recognized severance and other charges of approximately $0.4 million related to the termination of a former Executive Vice President.

Income from Joint Ventures

Income from joint ventures was $0.9 million and $1.7 million in the three and six months ended September 30, 2007, respectively, compared to $0.6 million and $2.4 million in the three and six months ended September 30, 2006, respectively. The increase in the three months ended September 30, 2007 was primarily attributable to higher income from Metal Management Nashville, LLC. The decrease in the six months ended September 30, 2007 was due to the sale of our 28.5% interest in Southern Recycling, LLC (“Southern”) in April 2006. We recognized $1.0 million of joint venture income from Southern in the six months ended September 30, 2006. We currently have a 50% ownership interest in three joint ventures.

Interest Expense

Interest expense was $1.5 million and $3.0 million in the three and six months ended September 30, 2007, respectively, compared to $0.3 million and $0.6 million in the three and six months ended September 30, 2006, respectively. The increase was due to interest incurred from borrowings under our credit agreement. At

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September 30, 2006, we had no borrowings outstanding under the credit agreement. See “Liquidity and Capital Resources” below for a more detailed discussion of the increase in borrowings.

Interest and Other Income

Interest and other income was $0.1 million and $0.3 million in the three and six months ended September 30, 2007, respectively, compared to $0.5 million and $0.9 million in three and six months ended September 30, 2006, respectively. The decrease was due to lower dividend and interest income as a result of less cash and short-term investments in the three and six months ended September 30, 2007 compared to the three and six months ended September 30, 2006.

Gain on Sale of Joint Venture Interest

On April 28, 2006, we and our joint venture partner sold our membership interests in Southern to a third party for $161.4 million in cash. Based upon our ownership interest, we received $46.0 million in cash from the sale proceeds. We recorded a pre-tax gain from the sale of our ownership interest of $26.4 million in the six months ended September 30, 2006.

Income Taxes

In the three and six months ended September 30, 2007, we recognized income tax expense of $13.1 million and $26.3 million, respectively, resulting in an effective tax rate of approximately 42.5% and 39.3%, respectively. In the three and six months ended September 30, 2006, our income tax expense was $19.0 million and $47.3 million, respectively, resulting in an effective tax rate of 39.6% and 39.0%, respectively. The effective tax rate increased in three months ended September 30, 2007 due to non-deductible merger expenses and an increase in non-deductible stock-based compensation. The effective tax rate differs from the federal statutory rate mainly due to state taxes and permanent tax items.

Net Income

Net income was $17.8 million and $40.5 million in the three and six months ended September 30, 2007, respectively, compared to $29.1 million and $74.0 million in the three and six months ended September 30, 2006, respectively. Net income decreased due to lower ferrous and non-ferrous margins, higher processing and general and administrative expenses, and merger expenses recognized in the three and six months ended September 30, 2007. Net income in the six months ended September 30, 2006 benefited from the one-time after-tax gain of $16 million recognized on the sale of our ownership interest in Southern.

Liquidity and Capital Resources

Our sources of liquidity include cash and cash equivalents, collections from customers and borrowings under our credit agreement. Cash and cash equivalents totaled $14.0 million at September 30, 2007, an increase of $4.6 million from March 31, 2007. We believe these sources are adequate to fund operating expenses and related liabilities, planned capital expenditures, acquisitions, the payment of cash dividends to stockholders and our stock repurchase program.

We have a $300 million secured five-year revolving credit and letter of credit facility, with a maturity date of May 1, 2011 (“Credit Agreement”). Pursuant to the Credit Agreement, we pay a fee on the undrawn portion of the facility that is determined by the leverage ratio. Significant covenants under the Credit Agreement include the satisfaction of a leverage ratio and interest coverage ratio. The Credit Agreement permits capital expenditures of $85 million for the year ending March 31, 2008. In addition, the Credit Agreement limits the amount we can spend on stock repurchases to $100 million during the term of the Credit Agreement. We satisfied all of our covenants under the Credit Agreement as of September 30, 2007. The Credit Agreement provides for interest rates based on variable rates tied to the prime rate plus or minus a margin or the London Interbank Offered Rate (“LIBOR”) plus a margin. The margin is based on our leverage ratio (as defined in the Credit Agreement) as determined for the trailing four fiscal quarters.

At September 30, 2007, our total indebtedness was $31.8 million, of which $30.2 million was outstanding under the Credit Agreement. At March 31, 2007, we had no borrowings outstanding under the Credit Agreement. Total unused borrowings under the Credit Agreement were approximately $262.9 million and $293.1 million at September 30, 2007 and March 31, 2007, respectively. Borrowings in the six months ended

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September 30, 2007 increased primarily to fund the acquisitions of Mars and Universal, capital expenditures, merger expenses, and working capital changes since March 31, 2007.

Cash Flows

The following sets forth our cash flows (in thousands):

	Six Months Ended
	September 30,			September 30,
	2007			2006
Net cash provided by operating activities	$	66,295		$	34,012
Net cash used in investing activities	$	(86,025	)	$	(10,037	)
Net cash provided by (used in) financing activities	$	24,372		$	(11,210	)

Operating Activities

Net cash provided by operating activities increased in the six months ended September 30, 2007 compared to the six months ended September 30, 2006 due to lower investments in working capital. The decrease in working capital investments was mainly due to higher accounts receivable collections due to a reduction in days sales outstanding and lower inventory levels, offset in part by a reduction in accounts payable due to lower purchase prices for scrap metal.

Investing Activities

Net cash used in investing activities increased in the six months ended September 30, 2007 compared to the six months ended September 30, 2006. In the six months ended September 30, 2007, we used $55.0 million of cash for acquisitions and $31.7 million of cash for capital expenditures. In the six months ended September 30, 2006, we received $46.0 million of cash from the sale of our ownership interest in Southern and $8.5 million of cash from the sale of short-term investments. These cash proceeds were used, in part, for acquisitions of $28.3 million and capital expenditures of $36.0 million.

Financing Activities

Net cash provided by financing activities increased in the six months ended September 30, 2007 compared to the six months ended September 30, 2006. The increase was due to $27.4 million of borrowings which were used to fund acquisitions and capital expenditures. In the six months ended September 30, 2006, we used $11.2 million of cash in financing activities primarily for the repurchase of our common stock.

Off-Balance Sheet Arrangements, Contractual Obligations and Other Commitments

Off-Balance Sheet Arrangements

Other than operating leases, we do not have any significant off-balance sheet arrangements that are likely to have a current or future effect on our financial condition, results of operations or cash flows. We enter into operating leases for new equipment due to favorable financing terms. These operating leases are attractive to us since the implied interest rates are sometimes lower than interest rates under the Credit Agreement. We expect to selectively use operating leases for new equipment as required by our operations.

Contractual Obligations

In our Annual Report for fiscal 2007, we disclosed our contractual obligations. There have been no material changes to contractual obligations other than an increase in total debt to $31.8 million at September 30, 2007 compared to $0.2 million at March 31, 2007. The increase in total debt was due to borrowings under our Credit Agreement as described above under “Liquidity and Capital Resources.” In addition, see “Note 9 – Income Taxes” in the notes to the consolidated financial statements regarding potential obligations related to uncertain tax positions that we believe may be settled in the next twelve months.

Other Commitments

We are required to make contributions to our defined benefit pension plans. These contributions are required under the minimum funding requirements of the Employee Retirement Income Security Act (ERISA). However, due to uncertainties regarding significant assumptions involved in estimating future required contributions, such as pension plan benefit levels, interest rate levels and the amount of pension plan asset returns, we are not able to reasonably estimate the amount of future required contributions beyond fiscal 2008.

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Our minimum required pension contribution for fiscal 2008 is approximately $0.8 million, all of which was paid in the six months ended September 30, 2007.

We also enter into letters of credit in the ordinary course of operating and financing activities. As of October 15, 2007, we had outstanding letters of credit of $6.9 million, much of which is securing insurance policies.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires the use of estimates and judgments that affect the reported amounts and related disclosures of commitments and contingencies. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report, except as follows:

Income Taxes

On April 1, 2007, we adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. This interpretation requires us to recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions. See “Note 9 – Income Taxes” in the notes to the consolidated financial statements regarding the impact of the adoption of FIN 48.

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.” This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 157 to have a material effect on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 159 to have a material effect on our consolidated financial statements.

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. We do not use derivative financial instruments. Refer to Item 7A of our Annual Report.

Item 4. Controls and Procedures

Evaluation of our Disclosure Controls and Procedures.

As of the end of the period covered by this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). This evaluation was done under the supervision and with the participation of management, including Daniel W. Dienst, our Chairman of the Board, Chief Executive Officer and President (“CEO”), and Robert C. Larry, our Executive Vice President, Finance and Chief Financial Officer (“CFO”).

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Based upon this evaluation, our CEO and our CFO have concluded that our disclosure controls and procedures were effective, as of September 30, 2007 to provide reasonable assurance that information that is required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow for timely decisions regarding disclosure.

There has been no change in our internal control over financial reporting during the three months ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

CEO and CFO Certifications.

As an exhibit to this report, there are “Certifications” of the CEO and CFO. The first form of Certification is required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section of the quarterly report is the information concerning the controls evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Limitations on the Effectiveness of Controls.

Our management, including our CEO and our CFO, does not expect that our disclosure controls or our internal controls and procedures over financial reporting 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.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

On June 7, 2007, the Company filed a complaint (the “Complaint”) against Wheeling-Pittsburgh Steel Corporation (“WPSC”) in the Supreme Court of the State of New York County of New York. The Complaint arises from a series of purchase orders (the “Purchase Orders”) issued by WPSC to the Company beginning on or about February 20, 2007, for the purchase, shipment and delivery from the Company to WPSC of specified quantities and types of scrap metal. In the Complaint, the Company is seeking damages for the breach, anticipatory breach, wrongful rejection and repudiation of the Purchase Orders based on the following WPSC actions: (1) WPSC accepted delivery without objection of approximately $31 million worth of scrap metal sold to it by the Company but has failed to make payment for those goods when due; (2) by its conduct, WPSC has indicated its intention not to pay for an additional amount of approximately $8 million in scrap metal purchased by it but where payment has since become past due; and (3) WPSC has blanket rejected scrap metal as nonconforming, in some cases even before the scrap metal was delivered and inspected, and without giving the Company an opportunity to cure any goods alleged by WPSC to be nonconforming as required by the Purchase Orders and the Uniform Commercial Code. Stated in terms of tonnage, the Complaint alleges that WPSC has rejected and/or repudiated agreed Purchase Orders for approximately 86,400 tons of scrap metal, of which 76,800 tons had not yet been shipped or which is en route to WPSC and 9,600 tons of which the Company has already delivered to WPSC, in addition to the approximately 16,000 tons of scrap metal previously rejected. The damages being sought includes the contractual price of the goods, plus incidental damages, costs and disbursements of the action, prejudgment interest and such other relief as may be just and proper.

In a related matter, on June 7, 2007, the Company filed a notice of motion for summary judgment in lieu of a complaint (the “Notice”) against Esmark Incorporated, Sun Steel Company LLC, Century Steel Company LLC, North American Steel Company LLC, Great Western Steel Company LLC, Electric Coating Technologies Bridgeview LLC, U.S. Metals & Supply LLC, Miami Valley Steel Service, Inc., Premier Resource Group LLC, Independent Steel Company LLC, Electric Coating Technologies LLC, Esmark Realty LLC, Century Steel Realty LLC, Great Western Realty LLC, Isco Realty LLC, Miami Valley Realty LLC, Sun Steel Realty LLC, U.S. Metals Realty LLC (collectively, “Esmark”) in the Supreme Court of the State of New York County of New York. The Company entered into an unconditional guaranty agreement (the “Guaranty”) with Esmark pursuant to which Esmark agreed to unconditionally, jointly and severally guarantee all money owing to the Company under the Purchase Orders with WPSC without monetary limit. Therefore, the Company filed the Notice to seek payment of approximately $31 million (reduced to approximately $21 million on September 5, 2007 to reflect interim payments) currently past due under Purchase Orders pursuant to the express terms and conditions of the Guaranty, together with interest, expenses and reasonable attorneys’ fees. On October 3, 2007 the court denied the motion for the summary judgment in lieu of complaint and, pursuant to applicable court rules, the Notice was converted into a complaint and the action against Esmark will now proceed. The Company intends to seek additional monies, together with interest, expenses and attorneys’ fees, as payments become due and owing in the ordinary course.

The Company intends to vigorously pursue its rights and remedies directly against WPSC and against Esmark from the unlimited and unrepudiated Guaranty, but there can be no assurance as to the outcome of these actions or their effect on the Company’s financial condition or results of operations.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those previously disclosed in our Annual Report on Form 10-K for fiscal 2007, other than the following:

Risks associated with our pending merger with Sims

In the event our merger with Sims is not consummated, the price of our stock may be affected.

Our closing stock price was $48.86 on September 21, 2007 and closed at $54.74 on September 25, 2007, after the announcement of the merger. We believe the increase in the stock price is primarily due to the exchange ratio of Sims ADS per share of our common stock, which represents a premium of approximately

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18.2% over the price of the trading day immediately preceding the announcement of the execution of the Merger Agreement. In the event the merger with Sims is not consummated, the price of our common stock may be adversely affected because the stockholders will not receive the premium contemplated by the Merger Agreement.

Further, if the merger is terminated and our board of directors seeks another merger or business combination, stockholders cannot be certain that we will be able to find a party willing to pay an equivalent or better consideration than the consideration to be paid in the proposed merger.

We may fail to realize the anticipated cost savings and other benefits expected from the merger with Sims.

We may fail to realize the anticipated cost savings and other benefits that we expect to achieve from the merger. Delays encountered by us or Sims in the transition process could have a material adverse effect on our revenues, expenses, operating results and financial condition. Although we expect benefits to result from the merger, there can be no assurance that we will actually realize these anticipated benefits.

Achieving the benefits of the merger will depend in part upon meeting the challenges inherent in the successful combination and integration of global business enterprises of the size and scope of us and Sims and the possible resulting diversion of management attention for an extended period of time, both pre-closing and post-closing. There can be no assurance that we and Sims will meet these challenges and that such diversion will not negatively affect our operations.

Additionally, successful integration of the company with Sims will require us to retain key employees. There can be no assurance that we will be able to retain key employees to the same extent we had been able to retain key employees in the past.

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

Our Annual Meeting of Stockholders was held on September 18, 2007 in New York, New York. At the meeting, our stockholders elected five members to our board of directors pursuant to the following votes:

	Votes in		Votes
Name	Favor		Withheld
Norman R. Bobins		21,666,235		1,340,373
Daniel W. Dienst		22,541,383		465,225
John T. DiLacqua		22,912,005		94,603
Robert Lewon		22,912,171		94,437
Gerald E. Morris		22,910,680		95,928

In addition to electing directors, our stockholders also approved the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2008 by the vote of 22,437,422 in favor, 540,030 against and 29,156 abstentions.

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Item 6. Exhibits

2	.1	Agreement and Plan of Merger, dated as of September 24, 2007, by and among Sims Group Limited, MMI Acquisition Corporation, and Metal Management, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated September 24, 2007).
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 April 29, 2003 (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2003).
4	.1	Amended and Restated Credit Agreement, dated as of May 9, 2006, among Metal Management, Inc. and certain subsidiaries of Metal Management, Inc. specified therein, as borrowers, the lenders party thereto and LaSalle Bank National Association, in its capacity as agent for the lenders (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K dated May 9, 2006).
4	.2	First Amendment to the Amended and Restated Credit Agreement, dated as of October 13, 2006, among Metal Management, Inc. and certain subsidiaries of Metal Management, Inc. specified therein, as borrowers, the lenders party thereto and LaSalle Bank National Association, in its capacity as agent for the lenders (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K dated October 13, 2006).
4	.3	Second Amendment to the Amended and Restated Credit Agreement, dated as of January 12, 2007, among Metal Management, Inc. and certain subsidiaries of Metal Management, Inc. specified therein, the lenders (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K dated January 12, 2007).
4	.4	Third Amendment to the Amended and Restated Credit Agreement, dated as of May 18, 2007, among Metal Management, Inc. and certain subsidiaries of Metal Management, Inc. specified therein, as borrowers, the lenders party thereto and LaSalle Bank National Association, in its capacity as agent for the lenders (incorporated by reference to Exhibit 4.5 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2007).
10	.1	Employment Agreement, dated July 26, 2007 between Daniel W. Dienst and the Company.
31	.1	Certification of Daniel W. Dienst pursuant to Section 240.13a-14(a) and Section 240.15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of Robert C. Larry pursuant to Section 240.13a-14(a) and Section 240.15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	Certification of Daniel W. Dienst and Robert C. Larry pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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/  Daniel W. Dienst

Daniel W. Dienst

Chairman of the Board,

Chief Executive Officer

and President

(Principal Executive Officer)

By:  /s/  Robert C. Larry

Robert C. Larry

Executive Vice President,

Finance, Chief Financial

Officer, Treasurer and Secretary

(Principal Financial Officer)

By:  /s/  Amit N. Patel

Amit N. Patel

Vice President, Finance

and Controller

(Principal Accounting Officer)

Date: November 6, 2007

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EX-10.1

Execution Copy

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (“Agreement”), is made and entered into as of July 26, 2007, by and between Daniel W. Dienst (“Executive”) and Metal Management, Inc., a Delaware corporation (“MTLM”).

     NOW, THEREFORE, in consideration of the premises, promises, mutual covenants and mutual agreements contained herein, Executive and MTLM hereby agree as follows:

     1. Employment.

     (a) On the terms and subject to the conditions set forth in this Agreement, MTLM employs Executive as its President and Chief Executive Officer to perform such duties and responsibilities as are consistent with such position and such other positions as may be assigned to Executive, from time to time, by the Board of Directors of MTLM (the “Board”). As of the Commencement Date (as defined below), Executive is a member of the Board and has been elected to serve as Chairman of the Board. During the Employment Period (as defined below), MTLM shall use best efforts to see that Executive while employed under this Agreement continues to be nominated and elected to serve on the Board. For as long as Executive is so employed, he shall devote his full business time, energy and ability to his duties, except for reasonably necessary attention to the management of his personal affairs. If Executive is Chairman of the Board and/or a director when his employment terminates under this Agreement, whether pursuant to Section 6 or 7 of this Agreement, he shall tender his resignation as Chairman and/or director effective as of the Termination Date (as defined below) if so requested by the Board.

     (b) Executive’s worksites during the Employment Period (as defined below) shall be 325 North LaSalle Street, Suite 550, Chicago, Illinois 60610 and 127 East 69th Street, New York, New York 10021 or such other locations as may be mutually agreed upon by MTLM and Executive, with Executive’s time allocated between such sites as shall be reasonably determined to be necessary and appropriate by Executive to fulfill Executive’s duties and responsibilities and exercise Executive’s powers under the terms of this Agreement.

     (c) Executive shall have the right to continue to serve on the board of directors of those business, civic and charitable organizations on which Executive is now serving as of the date of this Agreement, and that are set forth on Exhibit A attached hereto, as long as doing so has no significant adverse affect on the performance of Executive’s duties and responsibilities or the exercise of Executive’s powers under this Agreement. Executive shall not serve on any other boards of directors and shall not provide services (whether as an employee or

independent contractor) to any for-profit organization on or after the date of this Agreement without the prior consent of the Board (which shall not be unreasonably withheld in light of Executive’s duties and responsibilities under this Agreement).

     2. Term. The term of employment under this Agreement shall commence on August 1, 2007 (the “Commencement Date”) and shall continue through, and end as of the close of business on March 31, 2012 (the “Employment Period”); provided, however, that on March 31, 2012 and each anniversary thereof, the Employment Period shall be extended for an additional year unless either MTLM or Executive, as the case may be, notifies the other not less than 90 days prior to the end of the then current Employment Period of its or his desire not to extend the Employment Period; provided further that the Employment Period may terminate sooner upon the occurrence of certain events as described in Sections 5, 6, 7, 8 and 9 of this Agreement. The date on which Executive’s employment is terminated shall be referred to herein as the “Termination Date”.

     3. Compensation.

     (a) Base Compensation. The base compensation to be paid to Executive for his services under this Agreement shall be not less than $950,000 per year (“Base Compensation”), subject to applicable withholdings, payable in equal periodic installments in accordance with the usual payroll practices of MTLM, but no less frequently than monthly, commencing on the Commencement Date. Executive’s base compensation shall be subject to annual review for cost of living and merit factors, with any adjustments determined by the compensation committee of the Board. Notwithstanding anything herein to the contrary, Base Compensation may be reduced below $950,000 per year if such reduction is in the same proportion as a reduction generally affecting other executive officers of MTLM.

     (b) Annual Bonus. For the fiscal year ending March 31, 2008, and for each subsequent fiscal year ending March 31 during the Employment Period, Executive’s target annual bonus shall be not less than 100% of Base Compensation (subject to applicable withholdings) (“Target Bonus”), and Executive’s maximum bonus (as a percentage of Base Compensation) shall be not less than that in effect under MTLM’s annual bonus program on the Commencement Date (“Maximum Bonus”). Executive shall be eligible to receive an annual bonus in accordance with the terms of MTLM’s annual bonus program as then in effect for MTLM’s senior executives as such program is modified by this Section 3(b); provided, however, the compensation committee of the Board may direct MTLM to pay Executive an annual bonus that exceeds the annual bonus otherwise payable under such program. Notwithstanding anything contained herein to the contrary, Executive’s Target Bonus may be reduced below 100% of Base Compensation if such reduction is in the same proportion as a reduction affecting other executive officers of MTLM. Each annual bonus

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described in this Section 3(b) shall be paid at the time called for under MTLM’s annual bonus program for senior executives.

     (c) Annual Restricted Stock Grant. For the fiscal year ending March 31, 2008 and for each subsequent fiscal year ending March 31 during the Employment period, Executive may, at the discretion of the Compensation Committee of the Board, be granted a number of shares of common stock, $0.01 par value per share (the “MTLM Stock”) pursuant to the terms of the Amended and Restated Metal Management, Inc. 2002 Incentive Stock Plan or any successor plan (the “Plan”). All terms and conditions to such grant shall be set forth for Executive in a certificate in accordance with the terms of the Plan, including that that all shares shall become non-forfeitable upon a Triggering Event (as defined below); in addition to the foregoing, however, such certificate shall provide that all shares shall become non-forfeitable upon termination of Executive’s employment if MTLM notifies Executive that it will not extend the Employment Period as provided under Section 2 of this Agreement.

     (d) Special Restricted Stock Grant. Upon execution and delivery of the this Agreement by MTLM and Executive, Executive shall be granted 196,532 MTLM Shares pursuant to the Plan. Notwithstanding any provision in the Plan, Executive’s interest in 117,920 shares shall become non-forfeitable on July 26, 2010 provided Executive is still employed by MTLM on such date, and his interest in an additional 39,306 shares shall become non-forfeitable on each of the next two subsequent anniversaries of such date provided Executive is still employed by MTLM on such anniversary date. All terms and conditions to such grant shall be set forth for Executive in a certificate in accordance with the terms of the Plan; provided, however, that such certificate shall provide that all shares shall become non-forfeitable upon (i) a Triggering Event or (ii) termination of Executive’s employment if MTLM notifies Executive that it will not extend the Employment Period as provided under Section 2 of this Agreement, and such certificate shall include a waiver signed by Executive with respect to the provisions of Section 15 of the Plan that provide that such shares would become non-forfeitable solely upon such Change of Control (as defined in the Plan).

     4. Fringe Benefits. MTLM shall furnish Executive with accident, health and life insurance (“Welfare Benefits”) and reimbursement of all documented reasonable and necessary out-of-pocket expenses incurred by Executive on behalf of MTLM by reason of the performance of Executive’s duties and responsibilities hereunder. Further, MTLM shall furnish Executive with all of the additional fringe benefits made generally available by MTLM to its executive officers recognizing that such fringe benefits may be changed from time to time provided Executive shall be deemed immediately eligible for any such fringe benefits to the extent permissible under the terms of applicable law and the terms of the underlying plans, programs and policies. Executive shall be entitled to take five weeks of paid vacation per calendar year, and shall be paid on all national and state holidays, during the Employment Period. Vacation allowances shall not be cumulative from year to year. MTLM shall include Executive as a covered person under MTLM’s directors and officers’ insurance policy. MTLM shall furnish Executive with appropriate

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office space (as set forth in Section 1(b) of this Agreement), equipment, supplies, and such other facilities and personnel as necessary or appropriate (de minimis use thereof by Executive for personal reasons shall not be deemed a breach of this Agreement). MTLM shall pay Executive’s dues in such societies and organizations as MTLM deems appropriate, and shall pay on behalf of Executive (or reimburse Executive for) documented reasonable out-of-pocket expenses incurred by Executive in attending conventions, seminars, trade shows and other business meetings and business entertainment and promotional expenses. MTLM shall pay Executive an automobile allowance of $1,000.00 per month, subject to applicable withholdings.

     5. Death or Permanent Disability. If, during the Employment Period, Executive dies (as confirmed by a certificate of death) or Executive is permanently disabled such that, in the opinion of a physician selected by MTLM and Executive, Executive (or his spouse or legal representative) is rendered incapable of performing the services contemplated under this Agreement for 180 days in any 12 consecutive months by reason of illness, accident, or other physical or mental disability (“Permanent Disability”), this Agreement shall be deemed to be terminated as of the date of such death or of the determination of Permanent Disability. Notwithstanding the foregoing, Executive shall be entitled to the benefits as provided in Section 8 of this Agreement. During any period prior to such time when Executive has a Permanent Disability, as described above, MTLM shall be obligated to perform its obligations under this Agreement in accordance with its terms, including, but not limited to, its obligations under Section 3 of this Agreement.

     6. Involuntary Termination. Except in the case of termination for Cause pursuant to Section 7 of this Agreement, if MTLM terminates Executive’s employment hereunder without Executive’s consent, such termination shall be a Triggering Event, and Executive shall be entitled to receive the benefits as provided in Section 8(b) of this Agreement.

     7. Termination Voluntary or for Cause.

     (a) In the event: (i) Executive voluntarily terminates his employment hereunder without Good Reason (as defined below) or (ii) Executive’s employment hereunder is terminated for Cause, unless otherwise provided herein, all of his compensation and benefits under this Agreement shall cease immediately upon the date of such termination, provided that Executive shall be entitled to receive the compensation provided in Section 3 of this Agreement paid on a pro rata basis to the date of such termination.

     (b) Termination for Cause. Any of the following events shall be considered as “Cause” for the immediate termination of the Employment Period by MTLM:

     (i) conviction of Executive for a felony, or a nolo contendere plea with respect to a the same; or

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     (ii) conviction of Executive for misappropriation by Executive of funds or property of MTLM or the commission of acts of fraud relating to his employment in each case resulting in material harm to MTLM, or a nolo contendere plea with respect to the same; or

     (iii) (a) willful breach of this Agreement that is not cured by Executive within 10 days following receipt by Executive of written notice of such breach from MTLM or (b) material neglect by Executive of any of his material duties or responsibilities hereunder that is not cured by Executive within 30 days following receipt by Executive of written notice of the acts that MTLM assert constitute such neglect by Executive, provided, however, that any such willful breach or material neglect that is not curable shall be considered Cause for the immediate termination of the Employment Period by MTLM; or

     (iv) conduct on the part of Executive that is materially adverse to any known interest of MTLM that continues unabated, or uncured to the reasonable satisfaction of MTLM, after the expiration of 10 days following receipt of written notice by Executive from MTLM.

Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a written termination notice signed by a member of the Board duly authorized to deliver such notice.

     8. Acceleration of Payments.

     (a) For this Agreement, the following terms shall have the following meanings:

     (i) “Good Reason” shall mean the occurrence of any of the following events without Executive’s express written consent: (a) a reduction by MTLM of Executive’s Base Compensation, Target Bonus or Maximum Bonus provided in Section 3 of this Agreement unless such reduction is in the same proportion as a reduction generally affecting other executive officers of MTLM; (b) a material reduction in Welfare Benefits unless such reduction is in the same proportion as a reduction generally affecting other executive officers of MTLM; (c) any material breach by MTLM of any provisions of this Agreement (including Section 1(b) of this Agreement) that is not cured by MTLM within 10 days following receipt by MTLM of written notice of such breach from Executive; (d) the assignment of Executive by MTLM without his consent to a position, responsibility or duties of a materially lesser status or degree of responsibility than his position, responsibilities or duties as of the Commencement Date as provided for in Section 1 of the Agreement; provided, however that Executive no longer being President or Chairman of the Board shall not be nor shall be deemed to be Good Reason; or (e) upon a Change of Control (as defined below), the failure by the

5

acquiring company or its direct or indirect parent, subsidiary or affiliate to assume MTLM’s obligations hereunder.

     (ii) “Trigger Date” means the date on which a Triggering Event occurs.

     (iii) “Triggering Event” means any of: (A) a resignation of Executive as an employee of MTLM due to Good Reason; (B) termination of the Employment Period under Section 5 of this Agreement; or (C) involuntary termination of the Employment Period by MTLM, except in the case of termination for Cause (which, for the avoidance of doubt, does not include the non-extension of this Agreement as provided in Section 2 of this Agreement).

     (b) Occurrence of Triggering Event. Upon the occurrence of a Triggering Event described in clause (A) or (C) of Section 8(a)(iii) of this Agreement, Executive shall continue to receive from MTLM for two years after such Triggering Event: (i) Base Compensation as provided under Section 3(a) of this Agreement, (ii) an amount equal to Target Bonus and (iii) Welfare Benefits (with the same cost sharing arrangements in effect at the time of such Triggering Event) as provided under Section 4 of this Agreement. The payments described in clauses (i) and (ii) above are subject to applicable withholdings, and are payable in equal periodic installments in accordance with the usual payroll practices of MTLM, but no less frequently than monthly, commencing on the Termination Date. In the event of a Triggering Event, Executive shall receive a pro rata annual bonus for the year of termination based upon actual performance results during such period and payable at time called for under MTLM’s annual bonus program for senior executives. The Welfare Benefits are subject to applicable withholdings to the extent such benefits are taxable benefits. Furthermore, upon the occurrence of a Triggering Event, any unvested stock options or stock grants or any unvested long term incentive plan compensation shall immediately become vested. If this Agreement is terminated as a result of Executive’s death, Executive’s then current spouse and dependent children shall be entitled to continue to participate in the MTLM provided health and medical insurance programs for one year after such death, unless, in each case, such continued participation is prohibited by any applicable laws or would otherwise jeopardize the tax qualified status of any such programs. If MTLM is prohibited by applicable law or would otherwise jeopardize the tax qualified status of any health or medical insurance plan and as a result MTLM terminates coverage, it shall promptly reimburse Executive for the cost of obtaining comparable third party coverage.

     (c) Code Section 409A.

     (i) If the Executive is a “specified employee” (as defined in Treasury Regulation Section 1.409A-l(i)) of MTLM and if MTLM reasonably determines that amounts payable under Section 8(b) of this

6

Agreement are on account of an “involuntary separation from service” (as defined in Treasury Regulation Section 1.409A-l(m)) and are not subject to tax under Section 409A of the Code, the Executive shall receive payments during the six-month period immediately following the Termination Date equal to the lesser of (A) the amount payable under Section 8(b) of this Agreement and (B) two times the compensation limit in effect under Code Section 40l(a)(17) for the calendar year in which the Termination Date occurs (with any amounts that otherwise would have been payable under Section 8(b) of this Agreement during such six-month period being paid on the first regular payroll date following the six-month anniversary of the Termination Date).

     (ii) If MTLM reasonably determines that such termination is not an “involuntary separation from service” (as defined in Treasury Regulation Section 1.409A-l(m)), amounts that would otherwise have been paid during the six-month period immediately following the Termination Date shall be paid on the first regular payroll date immediately following the six-month anniversary of the Termination Date without regard to whether such amounts are then taxable under Section 409A of the Code.

     (iii) Any amounts not paid during such six-month period pursuant to the special timing rule in Section 8(c)(i) or (ii) of this Agreement shall accrue at an annual rate (compounded monthly) equal to the federal short-term rate (as in effect under Section l274(d) of the Code on the Termination Date), and shall be paid on the first regular payroll date immediately following the six-month anniversary of the Termination Date.

     9. Non-Competition.

     (a) General. In addition to any other obligations of Executive under any other agreement with MTLM, in order to assure that MTLM shall realize the benefits of this Agreement and in consideration of the employment set forth in this Agreement, Executive shall not:

     (i) during the period beginning on the date of this Agreement and ending 18 months after the Termination Date (the “Non-Competition Period”), directly or indirectly, whether through an affiliate or otherwise, alone or as a partner, joint venturer, member, officer, director, employee, consultant, agent, independent contractor, stockholder, or in any other capacity of any company or business, engage in any business activity in any state in the United States or any other country or region in which, prior to the Termination Date, MTLM or any subsidiary or affiliate of MTLM conducts business or is actively planning to conduct business and, on and after the Termination Date, MTLM or any subsidiary or affiliate of MTLM on the Termination Date conducts business or is actively planning to conduct business, which business activity is directly or indirectly in

7

competition with the business, prior to the Termination Date, that is conducted by or is actively planned to be conducted by MTLM or any subsidiary or affiliate of MTLM and, on and after the Termination Date, is on the Termination Date conducted by or is actively planned to be conducted by MTLM or any subsidiary or affiliate of MTLM; provided, however; that, the beneficial ownership of less than 5% of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or over-the-counter market shall not be deemed, in and of itself, to violate the prohibitions of this Section 9; provided, however, that Executive shall not be bound by the restrictions set forth in this Section 9(a)(i) if MTLM shall not have cured the failure to make any material payment to Executive under this Agreement within 30 days following receipt by MTLM of written notice from Executive of such failure unless such failure to make such payment is due to MTLM’s allegation of a material breach of the terms of this Agreement;

     (ii) during the Non-Competition Period, directly or indirectly (a) induce any person that is a customer of MTLM or any subsidiary or affiliate of MTLM on the Termination Date to patronize any business directly or indirectly in competition with the business conducted by MTLM or any subsidiary or affiliate of MTLM on the Termination Date; (b) canvass, solicit or accept from any person that is a customer of MTLM or any subsidiary or affiliate of MTLM on the Termination Date, any such competitive business, or (c) request or advise any person that is a customer of MTLM or any subsidiary or affiliate of MTLM on the Termination Date to withdraw, curtail or cancel any such customer’s business with MTLM or any subsidiary or affiliate of MTLM on the Termination Date;

     (iii) during the Non-Competition Period, directly or indirectly employ, or knowingly permit any company or business directly or indirectly controlled by him, to employ, any person who was employed by any of MTLM or any then subsidiary or affiliate of MTLM at or within six months prior to the Termination Date, or in any manner seek to induce any such person to leave his or her employment; or

     (iv) directly or indirectly, at any time following the Termination Date, in any way utilize, disclose, copy, reproduce or retain in his possession any of MTLM’s or any subsidiary’s or affiliate’s proprietary rights or records, including, but not limited to, any of their customer or price lists.

     (b) Scope of Restriction. Executive agrees and acknowledges that the restrictions contained in this Section 9 are reasonable in scope and duration and are necessary to protect MTLM after the Commencement Date. If any provision of this Section 9 as applied to any party or to any circumstance is adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other circumstance or the validity or enforceability of this Agreement. If any such provision, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court

8

making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced. The parties agree and acknowledge that the breach of this Section 9 shall cause irreparable damage to MTLM and upon breach of any provision of this Section 9, MTLM shall be entitled to injunctive relief, specific performance or other equitable relief; provided, however, that this shall in no way limit any other remedies that MTLM may have (including, but not limited to, the right to seek monetary damages).

     (c) Termination of Payments Upon Breach. If Executive shall have breached this Section 9 in any material respect, all amounts and all benefits otherwise payable to Executive pursuant to Section 8 of this Agreement shall immediately cease. In addition, upon determination by a court of competent jurisdiction that Executive shall have breached this Section 9 in any material respect, Executive shall repay all amounts and all benefits previously paid by MTLM to Executive pursuant to Section 8 of this Agreement. Nothing in this Section 9(c) shall in any way limit any other remedies that MTLM may have with respect to any such breach.

     10. Change Of Control.

     (a) General. Notwithstanding anything in the Plan to the contrary, for purposes of this Agreement and with respect to any options, stock grants and stock appreciation rights issued under the Plan to Executive, “Change of Control” shall be deemed to have occurred at such time as (1) any “person” (as that term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) becomes after the effective date of this Agreement the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) directly or indirectly of securities representing 40% or more of the combined voting power of the then outstanding securities for election of directors of the Company or any successor to the Company, (2) during any period of two consecutive years or less, individuals who at the beginning of such period constitute the Board cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each person who was not a director at the beginning of such period was approved by vote of at least two-thirds of the directors then in office who were directors at the beginning of such period or who were directors previously so approved, (3) there is a dissolution or liquidation of the Company or any sale or disposition of 50% or more of the assets or business of the Company, or (4) there is a reorganization, merger, consolidation or share exchange (other than a reorganization, merger, consolidation, or share exchange with a wholly-owned subsidiary of the Company) of the Company unless (A) the persons who were the beneficial owners of the outstanding shares of the common stock of the Company immediately before the consummation of such transaction beneficially own more than 50% of the outstanding shares of the common stock of the successor or

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survivor corporation in such transaction immediately following the consummation of such transaction and (B) the shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in clause (A) immediately following the consummation of such transaction are beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of Company common stock immediately before the consummation of such transaction.

     (b) Special Tax Payments. If any payment or benefit to Executive under this Agreement, either alone or together with other payments or benefits to Executive from the Company, would constitute a “parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), such payments or benefits shall be reduced to an amount that would no longer constitute a “parachute payment”; provided, however, if such amount exceeds 10% of the total amounts Executive would otherwise have been entitled to receive, such amounts to be received shall be grossed up to an amount such that after payment of the excise tax imposed by Section 4999 of the Code, Executive will receive on an after tax basis the same amount Executive would have received if no such excise tax was imposed.

     11. Confidentiality of Information; Duty of Non-Disclosure. Executive acknowledges and agrees that his employment by MTLM under this Agreement necessarily involves his understanding of and access to certain trade secrets and confidential information pertaining to the business of MTLM or any subsidiary or affiliate of MTLM. Accordingly, Executive shall not, directly or indirectly, at any time (whether during the Employment Period or at any time thereafter) without the prior written consent of MTLM, disclose to or use for the benefit of any person, corporation or other entity, or for himself any and all files, trade secrets or other confidential information concerning the internal affairs of MTLM or any subsidiary or affiliate of MTLM, including, but not limited to, confidential information pertaining to clients, services, products, earnings, finances, operations, methods or other activities; provided, however, that the foregoing shall not apply to information that is of public record or is generally known, disclosed or available to the general public or the industry generally. Further, Executive shall not, directly or indirectly, remove or retain, without the express prior written consent of MTLM, and upon termination of this Agreement for any reason shall return to MTLM, any confidential figures, calculations, letters, papers, records, computer disks, computer print-outs, lists, documents, instruments, drawings, designs, programs, brochures, sales literature, or any copies thereof, or any information or instruments derived therefrom, or any other similar information of any type or description, however such information might be obtained or recorded, arising out of or in any way relating to the business of MTLM or any subsidiary or affiliate of MTLM or obtained as a result of his employment by MTLM or any subsidiary or affiliate of MTLM. Executive acknowledges that all of the foregoing are proprietary information, and are the exclusive property of MTLM. The covenants contained in this Section 11 shall survive the termination of this Agreement.

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     12. Authority; Enforceability. MTLM has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement, the performance by MTLM of its obligations hereunder have been duly and validly authorized by all necessary corporate action on the part of MTLM. This Agreement has been duly executed and delivered by MTLM and constitutes a valid and binding agreement of MTLM, enforceable against MTLM in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

     13. Goodwill. MTLM has invested substantial time and money in the development of its products, services, territories, advertising and marketing thereof, soliciting clients and creating goodwill. By accepting employment with MTLM, Executive acknowledges that the customers are the customers of MTLM and its subsidiaries and affiliates and that any goodwill created by Executive belongs to and shall inure to the benefit of MTLM.

     14. No Duty to Mitigate. In the event that Executive’s employment terminates hereunder, MTLM acknowledges and agrees that Executive has no duty to mitigate the costs to MTLM with respect to any amounts payable hereunder to Executive.

     15. Notices. Any notice or request to be given hereunder to either party hereto shall be deemed effective only if in writing and either (a) delivered personally or (b) sent by certified or registered mail, postage prepaid, to the following addresses or to such other address as either party may hereafter specify to the other by notice similarly served:

If to Executive:

Daniel W. Dienst
At the most recent address
in MTLM’s records

with a copy to:

Vedder Price
222 North LaSalle Street
Chicago, Illinois 60601
Attn: Philip L. Mowery

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If to MTLM:

Metal Management, Inc.
325 North LaSalle Street
Suite 550
Chicago, Illinois 60610
Attn: Chief Financial Officer

with a copy to:

King & Spalding LLP
1185 Avenue of the Americas
New York, New York 10036
Attn: E. William Bates, II

     16. Assignment. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of MTLM, whether by merger, sale of assets or otherwise. This Agreement shall be binding upon and inure to the benefit of Executive’s heirs.

     17. Attorneys’ Fees.

     (a) Upon receipt by MTLM of statement for legal services from the attorneys representing Executive, MTLM shall reimburse Executive or to pay on behalf of Executive the reasonable and necessary attorneys’ fees and associated expenses incurred by Executive in connection with the negotiation of this Agreement.

     (b) In the event suit or action is brought by any party under this Agreement to enforce or construe any of its terms, the prevailing party shall be entitled to recover, in addition to all other amounts and relief, its reasonable and necessary attorneys’ fees and associated expenses incurred at and in preparation for arbitration, trial, appeal and review.

     18. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of New York without reference to its choice-of-law principles.

     19. Modification. No modification or waiver of any provision hereof shall be made unless it is in writing and signed by both of the parties hereto.

     20. Scope of Agreement. This Agreement constitutes the whole of the agreement between the parties on the subject matter, superseding all prior oral and written conversations, negotiations, understandings, and agreements in effect as of the date of this Agreement.

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     21. Severability. To the extent that any provision of this Agreement may be deemed or determined to be unenforceable for any reason, such unenforceability shall not impair or affect any other provision, and this Agreement shall be interpreted so as to most fully give effect to its terms and still be enforceable.

     22. Execution In Counterparts. This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

METAL MANAGEMENT, INC.
By:	/s/ Robert C. Larry
	Robert C. Larry
	Executive Vice President, Finance and Chief Financial Officer
	/s/ Daniel W. Dienst
	Daniel W. Dienst

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EXHIBIT A

DIRECTORSHIPS

1.	Director, Ryerson Inc., Chicago, IL (prospective service as a director previously approved by the Board)
2.	Trustee, Kips Bay Boys & Girls Club, Bronx, NY
3.	Chairman, Newark Police Foundation, Newark, NJ

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EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Daniel W. Dienst, certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

          b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2007	/s/ Daniel W. Dienst
	Daniel W. Dienst
	Chairman of the Board, Chief Executive Officer and President

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

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 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

          b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2007	/s/ Robert C. Larry
	Robert C. Larry
	Executive Vice President, Finance, Chief Financial Officer, Treasurer and Secretary

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

     In connection with the quarterly report on Form 10-Q of Metal Management, Inc. (the “Corporation”) for the period ended September 30, 2007 (the “Report”), I, Daniel W. Dienst, the Chairman of the Board, Chief Executive Officer and President of the Corporation, and I, Robert C. Larry, Executive Vice President, Finance, Chief Financial Officer, Treasurer and Secretary of the Corporation, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) to my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Daniel W. Dienst

Daniel W. Dienst

Chairman of the Board, Chief

Executive Officer and President

November 6, 2007

/s/ Robert C. Larry

Robert C. Larry

Executive Vice President, Finance, Chief

Financial Officer, Treasurer and Secretary

November 6, 2007

     A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.