<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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

                          ---------------------------

                                   FORM 10-Q

<Table>
<S>     <C>
[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
        FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003


[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
        FOR THE TRANSITION PERIOD FROM ________ TO________
</Table>

                          COMMISSION FILE NO. 0-14836

                          ---------------------------

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

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

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

       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 ___

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

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  Yes  X      No ___

     As of October 28, 2003, the registrant had 10,717,170 shares of common
stock outstanding.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                     INDEX

<Table>
<Caption>
                                                                            PAGE
                                                                            ----
<S>         <C>                                                             <C>
PART I:     FINANCIAL INFORMATION

ITEM 1.     Financial Statements

            Consolidated Statements of Operations -- three and six
              months ended September 30, 2003 and 2002 (unaudited)            1

            Consolidated Balance Sheets -- September 30, 2003 and March
              31, 2003 (unaudited)                                            2

            Consolidated Statements of Cash Flows -- six months ended
              September 30, 2003 and 2002 (unaudited)                         3

            Consolidated Statement of Stockholders' Equity -- six months
              ended September 30, 2003 (unaudited)                            4

            Notes to Consolidated Financial Statements (unaudited)            5

ITEM 2.     Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                      15

ITEM 3.     Quantitative and Qualitative Disclosures about Market Risk       25

ITEM 4.     Controls and Procedures                                          25

PART II:    OTHER INFORMATION

ITEM 1.     Legal Proceedings                                                26

ITEM 4.     Submission of Matters to a Vote of Security Holders              27

ITEM 6.     Exhibits and Reports on Form 8-K                                 27

            Signatures                                                       28

            Exhibit Index                                                    29
</Table>
<PAGE>

                         PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

<Table>
<Caption>
                                             THREE MONTHS ENDED               SIX MONTHS ENDED
                                        -----------------------------   -----------------------------
                                        SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                            2003            2002            2003            2002
                                            ----            ----            ----            ----
<S>                                     <C>             <C>             <C>             <C>
NET SALES                                 $230,048        $192,845        $457,030        $386,313
Cost of sales                              198,553         168,030         395,511         333,218
                                          --------        --------        --------        --------
Gross profit                                31,495          24,815          61,519          53,095

Operating expenses:
  General and administrative                13,206          12,220          25,802          23,598
  Depreciation and amortization              4,439           4,244           9,056           8,628
                                          --------        --------        --------        --------
Total operating expenses                    17,645          16,464          34,858          32,226
                                          --------        --------        --------        --------
OPERATING INCOME                            13,850           8,351          26,661          20,869

Income (loss) from joint ventures            1,045             (48)          1,930             (78)
Interest expense                            (1,966)         (2,895)         (4,228)         (5,900)
Interest and other income (expense)
  (Note 3)                                    (119)          2,745            (110)          2,836
(Loss) gain on debt extinguishment
  (Note 5)                                    (363)            283            (363)            283
                                          --------        --------        --------        --------

Income before income taxes                  12,447           8,436          23,890          18,010
Provision for income taxes                  (4,953)         (2,081)         (9,377)         (4,318)
                                          --------        --------        --------        --------
NET INCOME                                $  7,494        $  6,355        $ 14,513        $ 13,692
                                          ========        ========        ========        ========

EARNINGS PER SHARE:
  Basic                                   $   0.71        $   0.62        $   1.39        $   1.34
                                          ========        ========        ========        ========
  Diluted                                 $   0.67        $   0.61        $   1.34        $   1.32
                                          ========        ========        ========        ========

SHARES USED IN COMPUTATION OF EARNINGS
  PER SHARE:
  Basic                                     10,610          10,162          10,420          10,162
                                          ========        ========        ========        ========
  Diluted                                   11,123          10,404          10,862          10,404
                                          ========        ========        ========        ========
</Table>

          See accompanying notes to consolidated financial statements

                                        1
<PAGE>

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

<Table>
<Caption>
                                                                SEPTEMBER 30,    MARCH 31,
                                                                    2003           2003
                                                                    ----           ----
<S>                                                             <C>              <C>
                           ASSETS
Current assets:
  Cash and cash equivalents                                       $  1,547       $    869
  Accounts receivable, net                                          86,321         66,746
  Inventories                                                       46,030         49,319
  Prepaid expenses and other assets                                  5,169          7,167
                                                                  --------       --------
     TOTAL CURRENT ASSETS                                          139,067        124,101

Property and equipment, net                                        114,898        114,684
Goodwill and other intangibles, net                                  2,529          5,809
Deferred financing costs, net                                        3,416          1,290
Other assets                                                         4,809          2,767
                                                                  --------       --------
                        TOTAL ASSETS                              $264,719       $248,651
                                                                  ========       ========


            LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
  Current portion of long-term debt                               $    372       $    318
  Accounts payable                                                  59,529         57,195
  Accrued interest                                                     550          1,483
  Other accrued liabilities                                         18,670         17,571
                                                                  --------       --------
     TOTAL CURRENT LIABILITIES                                      79,121         76,567

Long-term debt, less current portion                                80,202         89,292
Other liabilities                                                    3,840          4,510
                                                                  --------       --------
     TOTAL LONG-TERM LIABILITIES                                    84,042         93,802

Stockholders' equity:
  Preferred stock                                                        0              0
  New common equity -- issuable                                          0             98
  Common stock                                                         107            102
  Warrants                                                             428            423
  Additional paid-in capital                                        74,302         65,453
  Accumulated other comprehensive loss                              (2,212)        (2,212)
  Retained earnings                                                 28,931         14,418
                                                                  --------       --------
     TOTAL STOCKHOLDERS' EQUITY                                    101,556         78,282
                                                                  --------       --------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $264,719       $248,651
                                                                  ========       ========
</Table>

          See accompanying notes to consolidated financial statements

                                        2
<PAGE>

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

<Table>
<Caption>
                                                                       SIX MONTHS ENDED
                                                                ------------------------------
                                                                SEPTEMBER 30,    SEPTEMBER 30,
                                                                    2003             2002
                                                                    ----             ----
<S>                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                        $  14,513        $  13,692
Adjustments to reconcile net income to cash flows from
  operating activities:
     Depreciation and amortization                                    9,056            8,628
     Deferred taxes                                                   8,848            4,318
     (Gain) loss on sale of property and equipment                       91           (2,410)
     (Income) loss from joint ventures                               (1,930)              78
     Amortization of debt issuance costs                                768            1,113
     Provision for bad debt                                             289               60
     (Gain) loss on debt extinguishment                                 363             (283)
     Other                                                              311              108
Changes in assets and liabilities:
     Accounts receivable                                            (19,864)          (5,058)
     Inventories                                                      3,289           (2,152)
     Accounts payable                                                 2,334            4,542
     Accrued interest                                                  (933)            (155)
     Other                                                           (3,691)          (2,767)
                                                                  ---------        ---------
Net cash provided by operating activities                            13,444           19,714

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                (3,850)          (3,477)
  Proceeds from sale of property and equipment                          317            5,947
  Other                                                                 (38)             (30)
                                                                  ---------        ---------
Net cash (used in) provided by investing activities                  (3,571)           2,440

CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuances of long-term debt                                       467,338          364,162
  Repayments of long-term debt                                     (444,841)        (384,750)
  Repurchase of Junior Secured Notes                                (31,896)            (849)
  Proceeds from exercise of stock options and warrants                3,097                0
  Fees paid to issue long-term debt                                  (2,893)            (134)
                                                                  ---------        ---------
Net cash used in financing activities                                (9,195)         (21,571)
                                                                  ---------        ---------

Net increase in cash and cash equivalents                               678              583
Cash and cash equivalents at beginning of period                        869              838
                                                                  ---------        ---------

Cash and cash equivalents at end of period                        $   1,547        $   1,421
                                                                  =========        =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid                                                     $   4,369        $   4,920
                                                                  =========        =========
Income taxes paid                                                 $     581        $     158
                                                                  =========        =========
</Table>

          See accompanying notes to consolidated financial statements

                                        3
<PAGE>

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

<Table>
<Caption>
                                    NEW                                                      ACCUMULATED
                                   COMMON       COMMON STOCK                  ADDITIONAL        OTHER
                                  EQUITY -      ------------                   PAID-IN      COMPREHENSIVE    RETAINED
                                  ISSUABLE    SHARES    AMOUNT    WARRANTS     CAPITAL          LOSS         EARNINGS     TOTAL
                                  --------    ------    ------    --------     -------          ----         --------     -----
<S>                               <C>         <C>       <C>       <C>         <C>           <C>              <C>         <C>
BALANCE AT MARCH 31, 2003           $ 98      10,153     $102       $423       $65,453         $(2,212)      $14,418     $ 78,282
Distribution of equity in
  accordance with the Plan           (98)          2        0          8            90               0             0            0
Issuance of restricted stock
  and options                          0          21        0          0            78               0             0           78
Exercise of stock options and
  warrants and related tax
  benefits                             0         498        5         (3)        4,068               0             0        4,070
Tax benefit on usage of
  predecessor company deferred
  tax assets                           0           0        0          0         4,613               0             0        4,613
Net income                             0           0        0          0             0               0        14,513       14,513
                                    ----      ------     ----       ----       -------         -------       -------     --------
BALANCE AT SEPTEMBER 30, 2003       $  0      10,674     $107       $428       $74,302         $(2,212)      $28,931     $101,556
                                    ====      ======     ====       ====       =======         =======       =======     ========
</Table>

          See accompanying notes to consolidated financial statements

                                        4
<PAGE>

                             METAL MANAGEMENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- GENERAL

Business
     Metal Management, Inc., a Delaware corporation, and its wholly owned
subsidiaries (the "Company") are principally engaged in the business of
collecting and processing ferrous and non-ferrous metals. The Company collects
industrial scrap metal and obsolete 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 13 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 aluminum, stainless steel, copper,
brass, titanium and high-temperature alloys, using similar techniques and
through application of certain of the Company's proprietary technologies.

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 only normal recurring
adjustments) necessary to fairly state the financial position and the results of
operations for the periods presented. Certain amounts have been reclassified
from the previously reported financial statements in order to conform to the
financial statement presentation of the current period.

     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, 2003.

Recent Accounting Pronouncements
     In November 2002, the Financial Accounting Standards Board (the "FASB")
issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45"). FIN 45 requires certain guarantees be recorded at fair value
as opposed to the current practice of recording a liability only when a loss is
probable and reasonably estimable. FIN 45 also requires a guarantor to make
significant new guaranty disclosures, even when the likelihood of making any
payments under the guarantee is remote. The Company adopted this interpretation
on December 31, 2002. The adoption of FIN 45 resulted in additional disclosures
made by the Company that are included in this Report.

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51 and applies immediately to any variable
interest entities created after January 31, 2003 and to variable interest
entities in which an interest is obtained after that date. FIN 46 will be
applicable to the Company in the third quarter of fiscal 2004, for interests
acquired in variable interest entities prior to February 1, 2003. The Company
does not have any variable interest entities and therefore adoption of this
interpretation will have no impact on its consolidated financial statements.

     In April 2003, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," to provide clarification on
                                        5
<PAGE>

the financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS No. 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of this statement had
no impact on the Company's consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS No. 150 are effective for financial instruments entered into
or modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The adoption of this statement had no impact on the Company's
consolidated financial statements.

Restricted Stock
     In May 2003, the Company granted 20,776 shares of restricted stock under
its 2002 Incentive Stock Plan to certain employees, giving them the rights of
stockholders, except that they may not sell, assign, pledge or otherwise
encumber such shares. Such shares are subject to forfeiture if certain
employment conditions are not met. The restricted stock vests through March 31,
2006.

     The fair value of the restricted stock at the date of grant is amortized to
expense ratably over the vesting period. The Company recorded stock compensation
expense of approximately $38,000 and $70,000 related to restricted stock in the
three and six months ended September 30, 2003, respectively.

Stock-Based Compensation
     The Company accounts for its stock-based compensation plans under the
recognition and measurement principles of Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees," and related
interpretations and complies with the disclosure-only provisions of SFAS No.
148, "Accounting for Stock-Based Compensation -- Transition and Disclosure."
Pursuant to APB No. 25, no stock-based compensation cost is recognized with
respect to options and warrants granted that have an exercise price equal or
greater than the market value of the common stock on the date of grant.

                                        6
<PAGE>

     Net income, as reported, includes the after-tax impact of stock
compensation expense related to restricted stock grants. The following table
illustrates the pro forma effects on net income and earnings per share if the
Company had applied the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation
(in thousands, except for earnings per share):

<Table>
<Caption>
                                           THREE MONTHS ENDED                 SIX MONTHS ENDED
                                     ------------------------------    ------------------------------
                                     SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                         2003             2002             2003             2002
                                         ----             ----             ----             ----
<S>                                  <C>              <C>              <C>              <C>
Net income, as reported                 $ 7,494          $ 6,355          $14,513          $13,692
  Add: Stock-based employee
     compensation expense
     included in reported net
     income, net of related tax
     effects                                  5                3                5               31
  Deduct: Total stock-based
     employee compensation
     expense determined under the
     fair value method for all
     awards, net of related tax
     effects                               (895)            (231)          (1,054)            (727)
                                        -------          -------          -------          -------
PRO FORMA NET INCOME                    $ 6,604          $ 6,127          $13,464          $12,996
                                        =======          =======          =======          =======
Earnings per share:
  Basic -- as reported                  $  0.71          $  0.62          $  1.39          $  1.34
                                        =======          =======          =======          =======
  Basic -- pro forma                    $  0.62          $  0.60          $  1.29          $  1.28
                                        =======          =======          =======          =======

  Diluted -- as reported                $  0.67          $  0.61          $  1.34          $  1.32
                                        =======          =======          =======          =======
  Diluted -- pro forma                  $  0.59          $  0.59          $  1.23          $  1.25
                                        =======          =======          =======          =======
</Table>

                                        7
<PAGE>

NOTE 2 -- EARNINGS PER SHARE

     Basic earnings per share ("EPS") is computed by dividing net income by the
weighted average common shares outstanding. Diluted EPS reflects the potential
dilution that could occur from the exercise of stock options and warrants. The
following is a reconciliation of the numerators and denominators used in
computing EPS (in thousands, except for earnings per share):

<Table>
<Caption>
                                           THREE MONTHS ENDED                 SIX MONTHS ENDED
                                     ------------------------------    ------------------------------
                                     SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                         2003             2002             2003             2002
                                         ----             ----             ----             ----
<S>                                  <C>              <C>              <C>              <C>
NUMERATOR:
Net income                              $ 7,494          $ 6,355          $14,513          $13,692
Elimination of interest expense
  upon assumed conversion of note
  payable, net of tax                         0               30                0               59
                                        -------          -------          -------          -------
Net income                              $ 7,494          $ 6,385          $14,513          $13,751
                                        =======          =======          =======          =======
DENOMINATOR:
Weighted average number of shares
  outstanding                            10,610           10,162           10,420           10,162
Assumed conversion of note
  payable                                     0              242                0              242
Incremental common shares
  attributable to dilutive stock
  options and warrants                      513                0              442                0
                                        -------          -------          -------          -------
Weighted average number of
  diluted shares outstanding             11,123           10,404           10,862           10,404
                                        =======          =======          =======          =======

Basic earnings per share                $  0.71          $  0.62          $  1.39          $  1.34
                                        =======          =======          =======          =======
Diluted earnings per share              $  0.67          $  0.61          $  1.34          $  1.32
                                        =======          =======          =======          =======
</Table>

     For the three and six months ended September 30, 2003, options and warrants
to purchase 696,719 and 730,653 shares, respectively, of the Company's common
stock were excluded from the diluted EPS calculation, and for the three and six
months ended September 30, 2002, options and warrants to purchase 2,617,500
shares of the Company's common stock were excluded from the diluted EPS
calculation. These shares were excluded from the diluted EPS calculation as the
option and warrant exercise prices were greater than the average market price of
the Company's common stock for the respective period.

NOTE 3 -- SUPPLEMENTAL 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
consisted of the following at (in thousands):

<Table>
<Caption>
                                              SEPTEMBER 30,    MARCH 31,
                                                  2003           2003
                                              -------------    ---------
<S>                                           <C>              <C>
Ferrous metals                                   $25,634        $32,791
Non-ferrous metals                                19,881         15,851
Other                                                515            677
                                                 -------        -------
                                                 $46,030        $49,319
                                                 =======        =======
</Table>

                                        8
<PAGE>

Property and Equipment
     Property and equipment consisted of the following at (in thousands):

<Table>
<Caption>
                                              SEPTEMBER 30,    MARCH 31,
                                                  2003           2003
                                              -------------    ---------
<S>                                           <C>              <C>
Land and improvements                           $ 29,289       $ 23,759
Buildings and improvements                        20,112         19,180
Operating machinery and equipment                 88,856         87,846
Automobiles and trucks                             8,827          8,724
Computer equipment and software                    2,414          2,227
Furniture, fixture and office equipment              800            773
Construction in progress                           3,505          2,570
                                                --------       --------
                                                 153,803        145,079
Less -- accumulated depreciation                 (38,905)       (30,395)
                                                --------       --------
                                                $114,898       $114,684
                                                ========       ========
</Table>

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

<Table>
<Caption>
                                              SEPTEMBER 30,    MARCH 31,
                                                  2003           2003
                                              -------------    ---------
<S>                                           <C>              <C>
Accrued employee compensation and benefits       $ 6,763        $ 9,783
Accrued land purchase obligation                   4,000              0
Accrued insurance                                  2,426          1,059
Accrued real and personal property taxes           1,934          1,659
Other                                              3,547          5,070
                                                 -------        -------
                                                 $18,670        $17,571
                                                 =======        =======
</Table>

Interest and Other Income
     Significant components of interest and other income are as follows (in
thousands):

<Table>
<Caption>
                            THREE MONTHS ENDED               SIX MONTHS ENDED
                       -----------------------------   -----------------------------
                       SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                           2003            2002            2003            2002
                           ----            ----            ----            ----
<S>                    <C>             <C>             <C>             <C>
Gain (loss) on
  disposal of
  property and
  equipment               $ (118)         $2,393          $  (91)         $2,410
Interest income                2              53               5             106
Other income
  (expense)                   (3)            299             (24)            320
                          ------          ------          ------          ------
  Total                   $ (119)         $2,745          $ (110)         $2,836
                          ======          ======          ======          ======
</Table>

     During the three months ended September 30, 2002, the Company sold a parcel
of real property in Ohio that was classified as "held for sale." The sale
resulted in a pre-tax gain of approximately $2.6 million.

                                        9
<PAGE>

NOTE 4 -- GOODWILL AND OTHER INTANGIBLES

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

<Table>
<Caption>
                                 SEPTEMBER 30, 2003          MARCH 31, 2003
                                 ------------------          --------------
                                GROSS                     GROSS
                               CARRYING   ACCUMULATED    CARRYING   ACCUMULATED
                                AMOUNT    AMORTIZATION    AMOUNT    AMORTIZATION
                                ------    ------------    ------    ------------
<S>                            <C>        <C>            <C>        <C>
Other intangibles:
  Customer lists                $1,280       $  (86)      $1,280       $  (43)
  Non-compete agreement            240          (40)         240          (10)
  Pension intangible                 6            0            6            0
Goodwill                         1,129            0        4,336            0
                                ------       ------       ------       ------
  Goodwill and other
    intangibles                 $2,655       $ (126)      $5,862       $  (53)
                                ======       ======       ======       ======
</Table>

     Total amortization expense for other intangibles during the three and six
months ended September 30, 2003 was $37,000 and $73,000, respectively. Based on
the other intangibles recorded as of September 30, 2003, annual amortization
expense for other intangibles will be approximately $0.1 million for each of the
next five fiscal years.

     During the six months ended September 30, 2003, the Company reduced
goodwill by $3.3 million as a result of the utilization of pre-emergence
deferred tax assets (see Note 6 -- Income Taxes).

NOTE 5 -- LONG-TERM DEBT

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

<Table>
<Caption>
                                                   SEPTEMBER 30,    MARCH 31,
                                                       2003           2003
                                                   -------------    ---------
<S>                                                <C>              <C>
Credit Agreement:
  Revolving credit facility                           $59,858        $57,225
  Term loan                                            20,000              0
12.75% Junior Secured Notes                                 0         31,533
Other debt (including capital leases)                     716            852
                                                      -------        -------
                                                       80,574         89,610
Less -- current portion of long-term debt                (372)          (318)
                                                      -------        -------
                                                      $80,202        $89,292
                                                      =======        =======
</Table>

Credit Agreement
     On August 13, 2003, the Company entered into an amended and restated credit
facility (the "Credit Agreement") with Deutsche Bank Trust Company Americas, as
agent for the lenders thereunder. The Credit Agreement provides for maximum
borrowings of $130 million and expires on July 1, 2007. $110 million of the
Credit Agreement is available as a revolving loan and letter of credit facility
and $20 million is available as a term loan. In consideration for the Credit
Agreement, the Company paid fees and expenses of approximately $2.6 million. The
Credit Agreement is available to fund working capital needs and for general
corporate purposes.

     Borrowings under the Credit Agreement are subject to certain borrowing base
limitations based upon a formula equal to 85% of eligible accounts receivable,
the lesser of $45 million or 70% of eligible inventory, a fixed asset sublimit
of $12.7 million as of September 30, 2003, and a term loan of $20.0 million (the
"Term Loan"). The fixed asset sublimit amortizes by $2.5 million on a quarterly
basis and under certain other conditions. Upon the full amortization of the
fixed asset sublimit, the Term Loan will then amortize by $2.5 million on a
quarterly basis and under certain other conditions. A security interest in
substantially all of

                                        10
<PAGE>

the assets and properties of the Company, including pledges of the capital stock
of the Company's subsidiaries, has been granted to the agent for the lenders as
collateral against the obligations of the Company under the Credit Agreement.
Pursuant to the Credit Agreement, the Company pays a fee of .375% on the undrawn
portion of the facility.

     Borrowings on all outstanding balances under the Credit Agreement (other
than the Term Loan) bear interest, at the Company's option, either at the prime
rate (as specified by Deutsche Bank AG, New York Branch) plus a margin or LIBOR
plus a margin. The margin on prime rate loans range from 0.50% to 1.00% and the
margin on LIBOR loans range from 2.50% to 3.00%. The margin is based on the
leverage ratio (as defined in the Credit Agreement) achieved by the Company for
the preceding quarter. Borrowings under the Term Loan bear interest at LIBOR
plus 6.00% (with a floor on LIBOR equal to 2.50%).

     Under the Credit Agreement, the Company is required to satisfy specified
financial covenants, including a minimum fixed charge coverage ratio of 1.25 to
1.00 and a maximum leverage ratio of 3.00 to 1.00, through December 31, 2004.
After December 31, 2004, the maximum leverage ratio is 2.25 to 1.00. Both ratios
are tested for the twelve-month period ending each fiscal quarter. The Credit
Agreement also provides for maximum capital expenditures of $16 million for the
twelve-month period ending each fiscal quarter.

     The Credit Agreement also contains restrictions which, among other things,
limit the Company's ability to (i) incur additional indebtedness; (ii) pay
dividends; (iii) enter into transactions with affiliates; (iv) enter into
certain asset sales; (v) engage in certain acquisitions, investments, mergers
and consolidations; (vi) prepay certain other indebtedness; (vii) create liens
and encumbrances on the Company's assets; and (viii) other matters customarily
restricted in such agreements.

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

Debt Extinguishment
     On April 1, 2003, the Company adopted SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement requires, among other items, the classification of
gains and losses from extinguishment of debt as a component of income from
operations. The Company previously recorded gains or losses from extinguishments
of debt as an extraordinary item, net of income taxes. For the three and six
months ended September 30, 2002, the Company reclassified $283,000 ($236,000 net
of tax) from extraordinary gain on extinguishment of debt to gain on debt
extinguishment.

     On August 14, 2003, the Company purchased approximately $30.5 million par
amount of Junior Secured Notes at a price of 101% of the principal amount, plus
accrued and unpaid interest. On September 18, 2003, the Company redeemed the
remaining $1.0 million par amount of Junior Secured Notes at a price of 100% of
the principal amount, plus accrued and unpaid interest. The repurchase and
redemption of the Junior Secured Notes resulted in the recognition of a $0.4
million loss on debt extinguishment during the three months ended September 30,
2003. The Company used availability under the Credit Agreement to fund the
repurchase and redemption of the Junior Secured Notes. The Junior Secured Notes
were cancelled following the redemption of the remaining notes on September 18,
2003.

NOTE 6 -- INCOME TAXES

     The Company recorded income tax expense of $5.0 million and $9.4 million in
the three and six months ended September 30, 2003, respectively. The effective
income tax rate differs from the statutory tax rate due primarily to the effects
of state income taxes. During the six months ended September 30, 2003, the
Company recorded a tax benefit of $1.0 million, related to the exercise of stock
options and warrants, as an increase to
                                        11
<PAGE>

additional paid-in capital. The tax benefits from the exercise of stock options
and warrants resulted in a lower utilization of net operating loss ("NOL")
carryforwards, but had no impact on the effective tax rate.

     Upon emergence from bankruptcy on June 29, 2001, the Company had available
NOL carryforwards of approximately $112 million, which expire through 2022, and
net deferred tax assets (including NOL carryforwards) of approximately $75
million. In accordance with SFAS No. 109, "Accounting for Income Taxes,"
realization of net deferred tax assets that existed as of the emergence date
will first reduce goodwill until exhausted and thereafter are reported as an
increase to additional paid-in capital. In addition, the use of emergence date
net deferred tax assets during the three and six months ended September 30, 2003
resulted in the recognition of income tax expense without the corresponding
payment of cash taxes. The Company has recorded a valuation allowance against
the emergence date net deferred tax assets, including NOL carryforwards
remaining at September 30, 2003, due to the uncertainty regarding their ultimate
realization. Realization is dependent upon generating sufficient future taxable
income and the release of the valuation allowance is dependent on the Company's
ability to forecast future results. When the Company is able to demonstrate a
pattern of predictable level of profitability and thereby sufficiently reduce
the uncertainty relating to the realization of the NOL carryforwards, the
valuation allowance will be reversed and recorded as an increase to additional
paid-in capital. The Company's ability to utilize NOL carryforwards could become
subject to annual limitations under Section 382 of the Internal Revenue Code if
a change of control occurs, as defined by the Internal Revenue Code and could
result in the Company having increased income tax payment obligations.

NOTE 7 -- COMMITMENTS AND CONTINGENCIES

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

     Certain of the Company's subsidiaries receive, from time to time, notices
from the United States Environmental Protection Agency that these companies and
numerous other parties are considered potentially responsible parties and may be
obligated under Superfund, or similar state regulatory schemes, to pay a portion
of the cost of remedial investigation, feasibility studies and, ultimately,
remediation to correct alleged releases of hazardous substances at various third
party sites. Superfund may impose joint and several liability for the costs of
remedial investigations and actions on the entities that arranged for disposal
of certain wastes, the waste transporters that selected the disposal sites, and
the owners and operators of these sites. Responsible parties (or any one of
them) may be required to bear all of such costs regardless of fault, legality of
the original disposal, or ownership of the disposal site.

     Although recent amendments to the Superfund law have limited the exposure
of scrap metal recyclers under Superfund for sales of recyclable material, the
Company can provide no assurance that it will not become liable in the future
for significant costs or penalties associated with the investigation and
remediation of Superfund sites. The only Superfund site in which the Company is
currently involved as a potentially responsible party is the Jack's Creek
Superfund site in Pennsylvania. As part of the Company's Chapter 11 bankruptcy
proceedings, the Company agreed to pay the Jack's Creek PRP Group approximately
$153,000 (of which approximately $57,000 remains to be paid) to discharge its
obligations in connection with this Superfund site.

     On July 1, 1998, Metal Management Connecticut, Inc. ("MTLM-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
MTLM-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

                                        12
<PAGE>

March 31, 2003, the Connecticut Department of Environmental Protection filed
suit against Joseph A. Schiavone Corp., Schiavone, and MTLM-Connecticut in the
Superior Court of the State of Connecticut -- Judicial District of Hartford. 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 MTLM-Connecticut
from maintaining discharges and to require MTLM-Connecticut to remediate the
facility. The suit also seeks civil penalties from all of the defendants in
accordance with Connecticut environmental statutes. At this stage, the Company
is not able to predict MTLM-Connecticut's potential liability in connection with
this action or any required investigation and/or remediation. The Company
believes that MTLM-Connecticut has meritorious defenses to certain of the claims
asserted in the suit and MTLM-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 MTLM-Connecticut in
connection with this matter under the various agreements governing its purchase
of the North Haven Facility from Joseph A. Schiavone Corp. The Company cannot
provide assurances that Joseph A. Schiavone Corp. or Schiavone will have
sufficient resources to fund any or all indemnifiable claims that the Company
may assert.

     During the period from September 2002 to the present, the Arizona
Department of Environmental Quality ("ADEQ") issued six Notices of Violations
("NOVs") to Metal Management Arizona L.L.C. ("MTLM-Arizona"), a subsidiary of
the Company, for alleged violations at MTLM-Arizona's Tucson and Phoenix
facilities including: (i) not developing and submitting a "Solid Waste Facility
Site Plan"; (ii) placing shredder residue on a surface that does not meet
Arizona's permeability specifications; (iii) alleged failure to follow ADEQ
protocol for sampling and analysis of waste from the shredding of motor vehicles
at the Phoenix facility; and (iv) use of excavated soil used to stabilize
railroad tracks adjacent to the Phoenix facility. On September 5, 2003,
MTLM-Arizona was notified that ADEQ had referred the outstanding NOV issues to
the Arizona Attorney General. MTLM-Arizona is cooperating fully with ADEQ and
the Arizona Attorney General's office. At this preliminary stage, the Company
cannot predict MTLM-Arizona's potential liability, if any, in connection with
the NOVs or any required remediation.

Legal Proceedings
     In May 2003, a former employee of Metal Management Memphis, L.L.C.
("MTLM-Memphis"), a subsidiary of the Company, filed suit individually and on
behalf of his minor children (Callicutt v. Metal Management Memphis LLC) in the
Circuit Court of Shelby County, Tennessee for the 30th Judicial District at
Memphis, alleging that he was exposed to hazardous concentrations of toxic
substances, including lead dust, as an employee of MTLM-Memphis. Plaintiff
further claims that his minor children have sustained neuro-cognitive and brain
injuries allegedly as a result of lead contamination being transferred from his
clothing to the children. The suit seeks $1.5 million in compensatory damages,
an unspecified amount of punitive damages and for the establishment by
MTLM-Memphis of a fund to provide plaintiffs with on-going medical treatment.
The Company intends to vigorously defend these allegations; however, initial
discovery has not yet begun, and the Company is not able at this preliminary
stage to estimate MTLM-Memphis' potential liability, if any, in connection with
this action.

     In January 2003, the Company received a subpoena requesting that it provide
documents to a grand jury that is investigating scrap metal purchasing practices
in the four state region of Ohio, Illinois, Indiana and Michigan. The Company is
fully cooperating with the subpoena and the grand jury's investigation. The
Company is unable at this preliminary stage to determine future legal costs or
other costs to be incurred in responding to such subpoena or other impact to the
Company of such investigation.

     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.

                                        13
<PAGE>

Purchase of Real Property
     In August 2003, the Company exercised a purchase option for land on which
it operates a scrap metals recycling facility in Houston, Texas. The purchase
price of the land is $4.0 million and the land purchase is expected to close
prior to January 15, 2004.

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

NOTE 8 -- STOCKHOLDERS' EQUITY

     In accordance with the Company's plan of reorganization (the "Plan"), the
Company was required to distribute 10,000,000 shares of common stock and
warrants to purchase 750,000 shares of common stock (designated as "Series A
Warrants") as follows:

<Table>
<Caption>
                                                   COMMON       SERIES A
                                                   STOCK        WARRANTS
                                                   -----        --------
<S>                                              <C>           <C>
Unsecured creditors                               9,900,000             0
Predecessor company preferred stockholders            7,300        54,750
Predecessor company common stockholders              92,700       695,250
                                                 ----------    ----------
          Total                                  10,000,000       750,000
                                                 ==========    ==========
</Table>

     The Series A Warrants are immediately exercisable at an exercise price of
$21.19 per share and expire on June 29, 2006. Preferred stockholders and common
stockholders of the predecessor company were required to return their old
preferred and common stock certificates in order to receive a distribution of
the Company's common stock and Series A Warrants. Pursuant to the Plan, any
claims which were not made by the second anniversary of the Plan (June 29, 2003)
were deemed to have been forfeited. The Company has cancelled 7,221 shares of
common stock and Series A Warrants to acquire 53,279 shares of common stock
which were issuable to predecessor company preferred stockholders and common
stockholders and not timely claimed. All shares of common stock issuable under
the Plan have been issued.

                                        14
<PAGE>

     This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this Form 10-Q which address
activities, events or developments that Metal Management, Inc. (herein, "Metal
Management," the "Company," "we," "us" or other similar terms) expects or
anticipates will or may occur in the future, including such things as future
acquisitions (including the amount and nature thereof), business strategy,
expansion and growth of our business and operations, general economic and market
conditions and other such matters are forward-looking statements. Although we
believe the expectations expressed in such forward-looking statements are based
on reasonable assumptions within the bounds of our knowledge of our business, a
number of factors could cause actual results to differ materially from those
expressed in any forward-looking statements. These and other risks,
uncertainties and other factors are discussed under "Risk Factors" appearing in
our Annual Report on Form 10-K for the year ended March 31, 2003, as the same
may be amended from time to time.

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

     The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included under Item 1 of
this Report. In addition, reference should be made to the audited consolidated
financial statements and notes thereto and related Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended March 31, 2003 ("Annual Report").

GENERAL
     We are one of the largest full-service metals recyclers in the United
States, with recycling facilities located in 13 states. We enjoy leadership
positions in many major metropolitan markets, including Birmingham, Chicago,
Cleveland, Denver, Hartford, Houston, Memphis, Newark, Phoenix, Salt Lake City,
Toledo and Tucson. We have a 28.5% equity ownership position in Southern
Recycling, L.L.C. ("Southern"), one of the largest scrap metals recyclers in the
Gulf Coast region. Our operations primarily involve the collection and
processing of ferrous and non-ferrous metals. We collect industrial scrap metal
and obsolete scrap metal, process it into reusable forms and supply the recycled
metals to our customers, including electric arc furnace mills, integrated steel
mills, foundries, secondary smelters and metal brokers. In addition to buying,
processing and selling 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 also operate a bus dismantling
business combined with a bus replacement parts business at our Northeast
operations.

     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 metals, including aluminum, copper, stainless steel, brass,
titanium and high-temperature alloys, using similar techniques and through
application of our proprietary technologies.

     We have achieved a leading position in the metals recycling industry
primarily by implementing a national strategy of completing and integrating
regional acquisitions. In making acquisitions, we have focused on major
metropolitan markets where prime industrial and obsolete scrap metals
(automobiles, appliances and industrial equipment) are readily available and
from where we believe we can better serve our customer base. In pursuing this
strategy, we acquired certain large regional companies to serve as platforms
into which subsequent acquisitions would be integrated. We believe that through
the integration of our acquired businesses, we have enhanced our competitive
position and profitability of the operations because of broader distribution
channels, improved managerial and financial resources, enhanced purchasing power
and increased economies of scale. Since emerging from bankruptcy in June 2001,
we have acquired one scrap metal recycling company and we may acquire other
companies in the future if attractive opportunities are identified.

                                        15
<PAGE>

RECENT EVENTS
     During September 2003, we entered into a confidentiality and standstill
agreement (the "Agreement") with European Metal Recycling, Ltd ("EMR"). Pursuant
to the Agreement, we will make available to EMR certain non-public information
regarding our company and our operations. The Agreement with EMR is not
exclusive and does not prevent us from entering into other similar agreements.
We have retained Deutsche Bank Securities, Inc. to provide a strategic
assessment and to provide advice to our board of directors should we receive any
offers. There can be no guarantee, however, that we will consummate a business
combination or other similar transaction with EMR or any other party.

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 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.

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

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

Accounts Receivable and Allowance for Uncollectible Accounts Receivable
     Accounts receivable consist primarily of amounts due from customers from
product and brokered sales. The allowance for uncollectible accounts receivable
totaled $0.8 million and $1.0 million at September 30, 2003 and March 31, 2003,
respectively. Our determination of the allowance for uncollectible accounts
receivable includes a number of factors, including the age of the accounts, past
experience with the accounts, changes in collection patterns and general
industry conditions.

     As indicated in our Annual Report under the section entitled "Risk
Factors -- The loss of any significant customers could adversely affect our
results of operations or financial condition," the weakening business cycle in
the steel and metals sectors during our fiscal 2001 led to bankruptcy filings by
many of our customers which caused us to recognize additional allowances for
uncollectible accounts receivable. While we believe our allowance for
uncollectible accounts is adequate, changes in economic conditions or any
weakness in the steel and metals industry could adversely impact our future
earnings.

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

Valuation of Long-lived Assets and Goodwill
     We regularly review the carrying value of certain long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be realizable. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset are compared
to the asset's carrying
                                        16
<PAGE>

amount to determine if an impairment of such asset is necessary. The effect of
any impairment would be to expense the difference between the fair value of such
asset and its carrying value.

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

Self-Insured Reserves
     We are self-insured for medical claims for most of our employees. Our
exposure to medical claims is protected by a stop-loss insurance policy. We
record a reserve for reported but unpaid claims and the estimated cost of
incurred but not reported ("IBNR") claims. Our reserve is based on a lag
estimate and our historical claims experience.

     Effective April 1, 2003, we began to self-insure for workers' compensation
claims. We have a large deductible insurance policy that provides a stop-loss
for individual workers' compensation claims that exceed $250,000. We record a
reserve for IBNR claims. Our reserve is based on an actuarial analysis performed
by our insurance broker. In connection with our large deductible workers'
compensation insurance policy, we provide a letter of credit for the benefit of
the insurance carrier.

Pension Plans
     Pension benefits are based on formulas that, among other things, reflect
the employees' years of service and compensation levels during their employment
period. Pension benefit obligations and related expense are actuarially computed
based on certain assumptions, including the long-term rate of return on plan
assets, the discount rate used to determine the present value of future pension
benefits, and the rate of compensation increases. Actual results will often
differ from actuarial assumptions because of economic and other factors.

     In accordance with the provisions of SFAS No. 87, "Employers' Accounting
for Pensions," the discount rate that we assume is required to reflect the rates
of high-quality debt instruments that would provide the future cash flows
necessary to pay benefits when they come due. We reduced our discount rate from
7.25% at March 31, 2002 to 6.75% at March 31, 2003 to reflect market interest
rate reductions. The effect of a lower discount rate increased the present value
of benefit obligations and has increased pension expense in fiscal 2004.

     To determine the expected long-term rate of return on pension plan assets,
we consider the current and expected asset allocations, as well as historical
returns on plan assets. We assumed that long-term returns on pension assets were
9.00% during fiscal 2003. Based on the negative returns of the stock market in
recent years, we have reduced our expected long-term rate of return assumption
in fiscal 2004 to 8.00%.

Income Taxes
     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

     Upon emergence from bankruptcy on June 29, 2001, we had available NOL
carryforwards of approximately $112 million, which expire through 2022, and net
deferred tax assets (including NOL carryforwards) of approximately $75 million.
In accordance was SFAS No. 109, "Accounting for Income Taxes," realization of
net deferred tax assets that existed as of the emergence date will be reported
as an increase to additional paid-in capital. In addition, our use of emergence
date net deferred tax assets during the three and six months ended September 30,
2003 resulted in the recognition of income tax expense without a corresponding
payment of cash taxes. We have recorded a valuation allowance against the
emergence date net deferred tax assets, including NOL carryforwards remaining at
September 30, 2003, due to the uncertainty regarding their

                                        17
<PAGE>

ultimate realization. Realization is dependent upon generating sufficient future
taxable income and the release of the valuation allowance is dependent on our
ability to forecast future results. When we are able to demonstrate a pattern of
predictable level of profitability and thereby sufficiently reduce the
uncertainty relating to the realization of the NOL carryforwards, the valuation
allowance will be reversed and recorded as an increase to additional paid-in
capital. Our ability to utilize NOL carryforwards could become subject to annual
limitations under Section 382 of the Internal Revenue Code if a change of
control occurs, as defined by the Internal Revenue Code and could result in us
having increased income tax payment obligations.

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

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

RESULTS OF OPERATIONS

SALES
     Consolidated net sales for the three months ended September 30, 2003 and
2002 in general product categories were as follows ($ in thousands):

<Table>
<Caption>
                                                SEPTEMBER 30, 2003                SEPTEMBER 30, 2002
                                            ---------------------------       ---------------------------
COMMODITY                                                NET                               NET
(WEIGHT IN THOUSANDS)                       WEIGHT      SALES       %         WEIGHT      SALES       %
----------------------------------------    ------      -----       -         ------      -----       -
<S>                                         <C>        <C>         <C>        <C>        <C>         <C>
Ferrous metals (tons)                         1,126    $165,843    72.1%        1,031    $124,010    64.3%
Non-ferrous metals (lbs.)                   104,233      53,767    23.4       111,571      50,981    26.4
Brokerage -- ferrous (tons)                      33       5,368     2.3           111      13,169     6.8
Brokerage -- non-ferrous (lbs.)                 987         462     0.2         3,636       1,168     0.6
Other                                                     4,608     2.0                     3,517     1.9
                                                       --------    ----                  --------    ----
                                                       $230,048     100%                 $192,845     100%
                                                       ========    ====                  ========    ====
</Table>

     Consolidated net sales for the six months ended September 30, 2003 and 2002
in general product categories were as follows ($ in thousands):

<Table>
<Caption>
                                                SEPTEMBER 30, 2003                SEPTEMBER 30, 2002
                                            ---------------------------       ---------------------------
COMMODITY                                                NET                               NET
(WEIGHT IN THOUSANDS)                       WEIGHT      SALES       %         WEIGHT      SALES       %
----------------------------------------    ------      -----       -         ------      -----       -
<S>                                         <C>        <C>         <C>        <C>        <C>         <C>
Ferrous metals (tons)                         2,211    $319,452    69.9%        2,129    $246,445    63.8%
Non-ferrous metals (lbs.)                   200,330     103,440    22.6       224,887     102,841    26.6
Brokerage -- ferrous (tons)                     184      23,963     5.2           240      28,952     7.5
Brokerage -- non-ferrous (lbs.)               2,890       1,252     0.3         5,978       2,005     0.5
Other                                                     8,923     2.0                     6,070     1.6
                                                       --------    ----                  --------    ----
                                                       $457,030     100%                 $386,313     100%
                                                       ========    ====                  ========    ====
</Table>

     Consolidated net sales increased by $37.2 million (19.3%) and $70.7 million
(18.3%) to $230.0 million and $457.0 million in the three and six month periods
ended September 30, 2003, respectively, compared to consolidated net sales of
$192.8 million and $386.3 million in the three and six month periods ended
September 30, 2002, respectively. The increase in consolidated net sales was
primarily due to higher average selling prices for both ferrous and non-ferrous
products.

                                        18
<PAGE>

Ferrous Sales
     Ferrous sales increased by $41.8 million (33.7%) and $73.1 million (29.6%)
to $165.8 million and $319.5 million in the three and six months ended September
30, 2003, respectively, compared to ferrous sales of $124.0 million and $246.4
million in the three and six months ended September 30, 2002, respectively. The
increase was attributable to higher average selling prices combined with an
increase in sales volumes. The average selling price for ferrous products was
approximately $147 per ton and $144 per ton for the three and six months ended
September 30, 2003, respectively, which represents an increase of $27 per ton
(22.5%) and $29 per ton (24.8%) from the three and six months ended September
30, 2002, 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 $113.29 per ton for the
three months ended September 30, 2003 compared to $98.50 per ton for the three
months ended September 30, 2002.

     Demand for our ferrous scrap continues to be strong. International demand
remains favorable due to relative attractiveness of scrap metal from the U.S. in
part due to weakening in the value of the U.S. dollar. Consequently, U.S. scrap
is more attractive to overseas buyers and, in particular, we have seen strong
demand from China, Korea and Turkey. The strong international demand is evident
in data released by the U.S. Commerce Department, which shows that U.S. exports
of ferrous scrap for calendar 2003 (through August 2003) were approximately 8.1
million tons, an increase of 24% from the comparable period in calendar 2002.
Domestic demand for scrap metal has been favorable despite reduced levels of
steel production because of tighter supplies of prompt industrial grades of
scrap metal. Domestic demand for scrap metal is also being favorably impacted by
higher prices for scrap substitute products such as DRI and HBI relative to
obsolete grades of scrap metal, and due to lower levels of imports of scrap
metal to the U.S.

Non-ferrous Sales
     Non-ferrous sales increased by $2.8 million (5.5%) and $0.6 million (0.6%)
to $53.8 million and $103.4 million in the three and six months ended September
30, 2003, respectively, compared to non-ferrous sales of $51.0 million and
$102.8 million in the three and six months ended September 30, 2002,
respectively. The increase was due to higher average selling prices partially
offset by lower sales volumes. In the three and six months ended September 30,
2003, non-ferrous sales volumes decreased by 7.3 million pounds and 24.6 million
pounds, respectively, and average selling price for non-ferrous products
increased by approximately $.06 per pound compared to the three and six months
ended September 30, 2002.

     Our non-ferrous operations have benefited from rising prices for aluminum,
copper and stainless steel (nickel base metal). However, the supply for
non-ferrous metals continues to remain weak due to the slowdown in U.S.
industrial production, especially in the aerospace and telecommunications
industries, which has caused a decrease in sales volumes. Competition from China
has resulted in lower volumes of copper and aluminum wire being processed and
sold from our wire-chopping operation. As a result, we have significantly
curtailed our wire-chopping operation choosing instead in many cases to sell
unprocessed copper and aluminum abroad.

     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
(generally from our Aerospace subsidiary) 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 decreased by $7.8 million (59.2%) and $5.0 million
(17.2%) to $5.4 million and $24.0 million in the three and six months ended
September 30, 2003, respectively, compared to brokerage ferrous sales of $13.2
million and $29.0 million in the three and six months ended September 30, 2002,
respectively. The decrease was primarily a result of lower demand from certain
of our domestic brokerage customers. The decrease in brokered ferrous volume was
partially offset by an increase in brokered ferrous sales price per ton. The
average selling price for brokered metals is significantly affected by the
product mix,

                                        19
<PAGE>

such as prompt industrial grades versus obsolete grades, which can vary
significantly between periods. Prompt industrial grades of scrap metal are
generally associated with higher unit prices.

Other Sales
     Other sales are primarily derived from our stevedoring and bus dismantling
operations. The increase in other sales in the three and six months ended
September 30, 2003 is primarily a result of higher stevedoring revenue, which
increased by $1.0 million and $2.7 million, respectively, from the three and six
months ended September 30, 2002.

GROSS PROFIT
     Gross profit was $31.5 million (13.7% of sales) and $61.5 million (13.5% of
sales) during the three and six months ended September 30, 2003, respectively,
compared to gross profit of $24.8 million (12.9% of sales) and $53.1 million
(13.7% of sales) during the three and six months ended September 30, 2002. The
improvement in the amount of gross profit earned during the three and six months
ended September 30, 2003 was due to higher material margins realized on ferrous
products sold, partially offset by higher processing costs. Additionally, we
continue to improve our performance through higher realization of Zorba
(non-ferrous metals recovered as a by-product from the shredding process) and
from realizing attractive prices for Zorba in the three and six months ended
September 30, 2003.

     Our processing cost on a per unit basis increased slightly in the three and
six months ended September 30, 2003 compared to the three and six months ended
September 30, 2002, respectively. The increase in processing costs was mainly
attributable to higher lease, repair and maintenance expenses. Our operating
rental expense has increased due to the utilization of favorable operating
leases for material handling equipment (see Liquidity and Capital Resources).

GENERAL AND ADMINISTRATIVE EXPENSES
     General and administrative expenses were $13.2 million (5.7% of sales) and
$25.8 million (5.6% of sales) in the three and six months ended September 30,
2003, respectively, compared to general and administrative expenses of $12.2
million (6.3% of sales) and $23.6 million (6.1% of sales) in the three and six
months ended September 30, 2002, respectively. The increase results from higher
medical claims expense, professional fees and compensation expense.

     We are self-insured for health insurance for most of our employees. Medical
claims were higher by $0.3 million and $0.8 million in the three and six months
ended September 30, 2003, respectively, compared to the three and six months
ended September 30, 2002. Professional fees increased by $0.2 million and $0.6
million in the three and six months ended September 30, 2003, respectively,
primarily due to higher legal expense. Since January 2003, we have incurred
legal costs related to our cooperation with a subpoena received from the
Department of Justice.

DEPRECIATION AND AMORTIZATION
     Depreciation and amortization expense was $4.4 million (1.9% of sales) and
$9.1 million (2.0% of sales) in the three and six months ended September 30,
2003, respectively, compared to depreciation and amortization expense of $4.2
million (2.2% of sales) and $8.6 million (2.2% of sales) in the three and six
months ended September 30, 2002, respectively. The increase is due to capital
expenditures incurred since September 2002.

INCOME (LOSS) FROM JOINT VENTURES
     Income from joint ventures was $1.0 million and $1.9 million in the three
and six months ended September 30, 2003, respectively, compared to loss from
joint ventures of $48,000 and $78,000 in the three and six months ended
September 30, 2002, respectively. The income from joint ventures primarily
represents our 28.5% share of income from Southern. In February 2003, Southern
strengthened its capitalization by accomplishing a long-term refinancing of its
debt that resulted in a repayment of a loan that we made to Southern.
Additionally, following the refinancing of Southern, we began to report our
share of earnings from

                                        20
<PAGE>

Southern. Southern has benefited from the improving scrap markets which led to
profitability and the recovery of our investment that had been previously
reserved.

INTEREST EXPENSE
     Interest expense was $2.0 million (0.9% of sales) and $4.2 million (0.9% of
sales) in the three and six months ended September 30, 2003, respectively,
compared to interest expense of $2.9 million (1.5% of sales) and $5.9 million
(1.5% of sales) in the three and six months ended September 30, 2002,
respectively. The decrease was a result of lower borrowings and interest rates.
Our average borrowings in the three and six months ended September 30, 2003 were
approximately $32 million and $31 million, less than our average borrowings in
the three and six months ended September 30, 2002, respectively.

     As a result of the repurchase and redemption of our 12.75% Junior Secured
Notes, our overall interest rate on outstanding borrowings was lower in the
three and six months ended September 30, 2003 compared to the three and six
months ended September 30, 2002. We repurchased and retired $31.5 million of
12.75% Junior Secured Notes through proceeds from a $20 million term loan, which
bears interest at 8.50%, and from proceeds borrowed under the revolving credit
portion of our Credit Agreement.

INCOME TAXES
     In the three and six months ended September 30, 2003, we recognized income
tax expense of $5.0 million and $9.4 million, resulting in an effective tax rate
of 39.8% and 39.3%, respectively. The recognition of income tax expense results
from the utilization of NOL carryforwards and other deferred tax assets of our
predecessor company, which are not offset by a corresponding reversal of the
related valuation allowance. Valuation allowance reversals of the predecessor
company, under generally accepted accounting principles, are recorded first as a
reduction in goodwill until exhausted and then as an increase to additional
paid-in capital. The effective tax rate differs from the statutory rate
primarily due to the impact of state income taxes.

     In the three and six months ended September 30, 2002, our income tax
expense was $2.1 million and $4.3 million resulting in an effective tax rate of
24.7% and 24.0%, respectively. During the three and six months ended September
30, 2002, we estimated our income tax expense assuming that our use of
predecessor company NOL carryforwards would be limited in their annual
utilization. In December 2002, we finalized and filed our federal income tax
return and made an election that increased the amount of predecessor company NOL
carryforwards utilized. Consequently, our effective income tax rate is higher
due to the increase in the amount of predecessor company NOL carryforwards
utilized.

NET INCOME
     Net income was $7.5 million and $14.5 million in the three and six months
ended September 30, 2003, respectively, compared to net income of $6.4 million
and $13.7 million in the three and six months ended September 30, 2002,
respectively. Net income is higher due to the recognition of income from joint
ventures, lower interest expense and higher material margins on ferrous products
sold.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
     During the six months ended September 30, 2003, our operating activities
generated net cash of $13.4 million compared to net cash generated of $19.7
million in the six months ended September 30, 2002. Cash generated by operating
activities during the six months ended September 30, 2003 is comprised of $32.3
million of cash generated from net income, adjusted for non-cash items, offset
by investments in working capital of $18.9 million. The working capital increase
was primarily due to a $19.9 million increase in accounts receivable. The
increase in accounts receivable is due to higher sales during the three months
ended September 30, 2003 ($230 million) compared to sales during the three
months ended March 31, 2003 ($214 million).

     We used $3.6 million in net cash for investing activities in the six months
ended September 30, 2003 compared to net cash generated of $2.4 million in the
six months ended September 30, 2002. In the six months

                                        21
<PAGE>

ended September 30, 2003, purchases of property and equipment were $3.9 million,
while we generated $0.3 million of cash from the sale of redundant fixed assets.

     During the six months ended September 30, 2003, we used $9.2 million of net
cash for financing activities compared to net cash used of $21.6 million in the
six months ended September 30, 2002. Cash generated from operating activities,
net of cash used in investing activities, was used to reduce overall
indebtedness by $9.0 million. In addition, we paid $2.9 million of fees and
expenses associated with our Credit Agreement. This was partially offset by
proceeds of $3.1 million of cash received from the exercise of stock options and
warrants.

Indebtedness
     At September 30, 2003, our total indebtedness was $80.6 million, a decrease
of $9.0 million from March 31, 2003. Our primary source of financing is our
revolving credit and letter of credit facility.

     On August 13, 2003, we entered into an amended and restated credit facility
(the "Credit Agreement") with Deutsche Bank Trust Company Americas, as agent for
the lenders thereunder. The Credit Agreement provides for maximum borrowings of
$130 million and expires on July 1, 2007. $110 million of the Credit Agreement
is available as a revolving loan and letter of credit facility and $20 million
is available as a term loan. The Credit Agreement is available to fund working
capital needs and for general corporate purposes.

     Borrowings under the Credit Agreement are subject to certain borrowing base
limitations based upon a formula equal to 85% of eligible accounts receivable,
the lesser of $45 million or 70% of eligible inventory, a fixed asset sublimit
of $12.7 million as of September 30, 2003, and a term loan of $20.0 million (the
"Term Loan"). The fixed asset sublimit amortizes by $2.5 million on a quarterly
basis and under certain other conditions. Upon the full amortization of the
fixed asset sublimit, the Term Loan will then amortize by $2.5 million on a
quarterly basis and under certain other conditions. A security interest in
substantially all of our assets and properties, including pledges of the capital
stock of our subsidiaries, has been granted to the agent for the lenders as
collateral against our obligations under the Credit Agreement. Pursuant to the
Credit Agreement, we pay a fee of .375% on the undrawn portion of the facility.

     Borrowings on all outstanding balances under the Credit Agreement (other
than the Term Loan) bear interest, at our option, either at the prime rate (as
specified by Deutsche Bank AG, New York Branch) plus a margin or LIBOR plus a
margin. The margin on prime rate loans range from 0.50% to 1.00% and the margin
on LIBOR loans range from 2.50% to 3.00%. The margin is based on our leverage
ratio (as defined in the Credit Agreement) for the preceding quarter. Borrowings
under the Term Loan bear interest at LIBOR plus 6.00% (with a floor on LIBOR
equal to 2.50%).

     Under the Credit Agreement, we are required to satisfy specified financial
covenants, including a minimum fixed charge coverage ratio of 1.25 to 1.00 and a
maximum leverage ratio of 3.00 to 1.00, through December 31, 2004. After
December 31, 2004, the maximum leverage ratio is 2.25 to 1.00. Both ratios are
tested for the twelve-month period ending each fiscal quarter. The Credit
Agreement also provides for maximum capital expenditures of $16 million for the
twelve-month period ending each fiscal quarter.

     The Credit Agreement also contains restrictions which, among other things,
limit our ability to (i) incur additional indebtedness; (ii) pay dividends;
(iii) enter into transactions with affiliates; (iv) enter into certain asset
sales; (v) engage in certain acquisitions, investments, mergers and
consolidations; (vi) prepay certain other indebtedness; (vii) create liens and
encumbrances on our assets; and (viii) other matters customarily restricted in
such agreements. We were in compliance with all financial covenants contained in
the Credit Agreement as of September 30, 2003. As of October 30, 2003, we had
outstanding borrowings of approximately $84 million under the Credit Agreement
and undrawn availability of approximately $42 million.

     Our ability to meet financial ratios and tests in the future may be
affected by events beyond our control, including fluctuations in operating cash
flows and working capital. While we currently expect to be in compliance with
the covenants and satisfy the financial ratios and tests in the future, there
can be no assurance that we will meet such financial ratios and tests or that we
will be able to obtain future amendments or waivers

                                        22
<PAGE>

to the Credit Agreement, if so needed, to avoid a default. In the event of
default, the lenders could elect to not make loans to us and declare all amounts
borrowed under the Credit Agreement to be due and payable.

     On August 14, 2003, we purchased approximately $30.5 million par amount of
Junior Secured Notes at a price of 101% of the principal amount, plus accrued
and unpaid interest. On September 18, 2003, we redeemed the remaining $1.0
million par amount of Junior Secured Notes at a price of 100% of the principal
amount, plus accrued and unpaid interest. The repurchase and redemption of the
Junior Secured Notes resulted in the recognition of a $0.4 million loss on debt
extinguishment during the three months ended September 30, 2003. We funded the
repurchase and redemption of the Junior Secured Notes with availability under
the Credit Agreement. The Junior Secured Notes were cancelled following the
redemption of the remaining notes on September 18, 2003.

Future Capital Requirements
     We expect to fund our working capital needs, interest payments and capital
expenditures over the next twelve months with cash generated from operations,
supplemented by undrawn borrowing availability under the Credit Agreement. Our
future cash needs will be driven by working capital requirements, planned
capital expenditures and acquisition objectives, should attractive acquisition
opportunities present themselves. During the six months ended September 30,
2003, we received $3.1 million of cash from the exercise of stock options and
warrants by employees and directors. We may also receive additional proceeds in
the future from the exercise of outstanding stock options and warrants.

     Capital expenditures are planned to be approximately $14 million in fiscal
2004, which includes the purchase of land on which we operate a scrap metals
recycling facility in Houston, Texas and costs to complete the installation of a
"Mega" Shredder, that we currently own, at our facility in Phoenix, Arizona. We
expect the "Mega" Shredder to be operational by December 2003.

     In addition, due to favorable financing terms made available by equipment
manufacturing vendors, we have entered into operating leases for new equipment.
Since April 2002, we have entered into 26 operating leases for equipment which
would have cost approximately $6.3 million to purchase. These operating leases
are attractive to us since the implied interest rates are lower than interest
rates under our credit facilities. We expect to selectively use operating leases
for new material handling equipment or trucks required by our operations.

     We believe these sources of capital will be sufficient to fund planned
capital expenditures, interest payments and working capital requirements for the
next twelve months, although there can be no assurance that this will be the
case.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
     We do not have any off-balance sheet arrangements that are likely to have a
current or future effect on our results of operations, financial condition, or
cash flows. We have assumed various financial obligations and commitments in the
normal course of our operations and financing activities. Financial obligations
are considered to represent known future cash payments that we are required to
make under existing contractual arrangements, such as debt and lease agreements.

     The following table sets forth our known contractual obligations as of
September 30, 2003, and the effect such obligations are expected to have on our
liquidity and cash flow in future periods (in thousands):

<Table>
<Caption>
                                                  LESS THAN      ONE TO        THREE TO
                                       TOTAL      ONE YEAR     THREE YEARS    FIVE YEARS    THEREAFTER
                                       -----      --------     -----------    ----------    ----------
<S>                                   <C>         <C>          <C>            <C>           <C>
Long-term debt and capital leases     $ 80,574    $    372      $    132       $ 79,972      $     98
Operating leases                        41,597       7,922        10,109          5,378        18,188
Land purchase obligation                 4,000       4,000             0              0             0
Other contractual obligations            4,034       3,423           539             72             0
                                      --------    --------      --------       --------      --------
Total contractual cash obligations    $130,205    $ 15,717      $ 10,780       $ 85,422      $ 18,286
                                      ========    ========      ========       ========      ========
</Table>

                                        23
<PAGE>

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 2005. Our minimum required
pension contributions for the remainder of fiscal 2004 and fiscal 2005 will be
approximately $0.4 million and $1.9 million, respectively.

     We also enter into letters of credit in the ordinary course of operating
and financing activities. As of October 28, 2003, we had outstanding letters of
credit of $4.0 million which expire in fiscal 2004.

     In August 2003, we exercised a purchase option for land on which we operate
a scrap metals recycling facility in Houston, Texas. The purchase price of the
land is $4.0 million and the land purchase is expected to close prior to January
15, 2004.

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

Recent Accounting Pronouncements
     In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires certain
guarantees be recorded at fair value as opposed to the current practice of
recording a liability only when a loss is probable and reasonably estimable. FIN
45 also requires a guarantor to make significant new guaranty disclosures, even
when the likelihood of making any payments under the guarantee is remote. We
adopted this interpretation on December 31, 2002. The adoption of FIN 45
resulted in additional disclosures made by us that are included in this Report.

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51 and applies immediately to any variable
interest entities created after January 31, 2003 and to variable interest
entities in which an interest is obtained after that date. FIN 46 will be
applicable to us in the third quarter of fiscal 2004, for interests acquired in
variable interest entities prior to February 1, 2003. We do not have any
variable interest entities and therefore adoption of this interpretation will
have no impact on our consolidated financial statements.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" to provide
clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis. The provisions of SFAS
No. 149 are effective for contracts entered into or modified after June 30,
2003, and for hedging relationships designated after June 30, 2003. The adoption
of this statement did not impact our consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS No. 150 are effective for financial instruments entered into
or modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The adoption of this statement did not impact our consolidated
financial statements.

                                        24
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to financial risk resulting from fluctuations in interest
rates and commodity prices. We seek to minimize these risks through regular
operating and financing activities and, where appropriate, through use of
derivative financial instruments. Our use of derivative financial instruments is
limited and related solely to hedges of certain non-ferrous inventory positions
and purchase and sales commitments. Refer to Item 7A of the Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

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

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

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

     - our transactions are properly authorized;
     - our assets are safeguarded against unauthorized or improper use; and
     - our transactions are properly recorded and reported,

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

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

                                        25
<PAGE>

                           PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

USEPA v. Metal Management Midwest, Inc. ("MTLM-Midwest")

     Our subsidiary, MTLM-Midwest, operates seven facilities in the Chicago area
which were the subject of a series of inspections and document requests in the
mid-1990s by, among other agencies, the United States Environmental Protection
Agency ("USEPA") pursuant to the so-called Greater Chicagoland Initiative to
perform multimedia and multi-agency inspections of scrap yards in the Chicago
Area (the "USEPA Initiative"). As a result of the USEPA Initiative, USEPA
alleged that MTLM-Midwest's facilities had violated certain provisions of the
Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act,
the Oil Pollution Standards and the Toxic Substances Control Act. In January
2003, we entered into a Consent Decree with USEPA pursuant to which, without
admitting liability with respect to the alleged violations, we agreed (i) to
distribute to USEPA an allowed class 6 unsecured claim in our Chapter 11
bankruptcy proceedings to be satisfied through the issuance of shares of our
common stock allocated in our plan of reorganization to class 6 creditors, and
(ii) to perform environmental compliance audits at several of our MTLM-Midwest
facilities. The Consent Decree became final on July 17, 2003.

Callicutt v. Metal Management Memphis, L.L.C. ("MTLM-Memphis")

     In May 2003, a former employee of our subsidiary, MTLM-Memphis, filed suit
individually and on behalf of his minor children in the Circuit Court of Shelby
County, Tennessee for the 30th Judicial District at Memphis, alleging that he
was exposed to hazardous concentrations of toxic substances, including lead
dust, as an employee of MTLM-Memphis. Plaintiff further claims that his minor
children have sustained neuro-cognitive and brain injuries allegedly as a result
of lead contamination being transferred from his clothing to the children. The
suit seeks $1.5 million in compensatory damages, an unspecified amount of
punitive damages and for the establishment by MTLM-Memphis of a fund to provide
plaintiffs with on-going medical treatment. We intend to vigorously defend these
allegations; however, initial discovery has not yet begun, and we are not able
at this preliminary stage to estimate MTLM-Memphis' potential liability, if any,
in connection with this action.

Metal Management Arizona, L.L.C. ("MTLM-Arizona")

     During the period from September 2002 to the present, the Arizona
Department of Environmental Quality ("ADEQ") issued six Notices of Violations
("NOVs") to our subsidiary MTLM-Arizona for alleged violations at MTLM-Arizona's
Tucson and Phoenix facilities including: (i) not developing and submitting a
"Solid Waste Facility Site Plan"; (ii) placing shredder residue on a surface
that does not meet Arizona's permeability specifications; (iii) alleged failure
to follow ADEQ protocol for sampling and analysis of waste from the shredding of
motor vehicles at the Phoenix facility; and (iv) use of excavated soil used to
stabilize railroad tracks adjacent to the Phoenix facility. On September 5,
2003, MTLM-Arizona was notified that ADEQ had referred the outstanding NOV
issues to the Arizona Attorney General. MTLM-Arizona is cooperating fully with
ADEQ and the Arizona Attorney General's office. At this preliminary stage, we
cannot predict MTLM-Arizona's potential liability, if any, in connection with
the NOVs or any required remediation.

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

                                        26
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Our Annual Meeting of Stockholders was held on September 17, 2003 in New
York, New York. At the meeting, our stockholders elected five members to our
board of directors pursuant to the following votes:

<Table>
<Caption>
                                                   VOTES IN       VOTES
NAME                                                 FAVOR      WITHHELD
----                                                 -----      --------
<S>                                                <C>          <C>
Daniel W. Dienst                                   8,493,247       25,651
Albert A. Cozzi                                    7,899,219      619,679
John T. DiLacqua                                   8,499,741       19,157
Kevin P. McGuinness                                7,975,199      543,699
Harold J. Rouster                                  7,975,422      543,476
</Table>

     In addition to electing directors, our stockholders approved the proposal
to ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending March 31, 2004 by the vote of
8,410,149 in favor, 106,212 against and 2,537 abstentions.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a) Exhibits

      See Exhibit Index

  (b) Reports on Form 8-K

      We filed a Current Report on Form 8-K on September 9, 2003, which
announced that the Company entered into a confidentiality and standstill
agreement with European Metal Recycling Ltd.

      We filed a Current Report on Form 8-K on September 5, 2003, which
announced that the Company retained Deutsche Bank Securities, Inc. to serve as a
financial advisor to its Board of Directors.

      We filed a Current Report on Form 8-K on August 15, 2003, which announced
that the Company entered into an amended and restated credit facility with
Deutsche Bank Trust Company Americas, as agent and the other lenders party
thereto.

                                        27
<PAGE>

                                   SIGNATURES

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

                                             METAL MANAGEMENT, INC.

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

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

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

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

                                             Date: October 30, 2003

                                        28
<PAGE>

                             METAL MANAGEMENT, INC.
                                 EXHIBIT INDEX

<Table>
<Caption>
         NUMBER AND DESCRIPTION OF EXHIBIT
         ---------------------------------
<C>      <S>

 2.1     Disclosure Statement with respect to First Amended Joint
         Plan of Reorganization of Metal Management, Inc. and its
         Subsidiary Debtors, dated May 4, 2001 (incorporated by
         reference to Exhibit 2.1 of the Company's Annual Report on
         Form 10-K for the year ended March 31, 2001).

 3.1     Second Amended and Restated Certificate of Incorporation of
         the Company, as filed with the Secretary of State of the
         State of Delaware on June 29, 2001 (incorporated by
         reference to Exhibit 3.1 of the Company's Annual Report on
         Form 10-K for the year ended March 31, 2001).

 3.2     Amended and Restated By-Laws of the Company adopted as of
         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 August
         13, 2003 by and among the Company and its subsidiaries named
         therein and Deutsche Bank Trust Company Americas, as Agent
         and the financial institutions parties thereto (incorporated
         by reference to Exhibit 4.1 of the Company's Current Report
         on Form 8-K dated August 11, 2003).

31.1     Certification of Albert A. Cozzi pursuant to Section
         240.13a-14 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 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 Albert A. Cozzi pursuant to 18 U.S.C. 1350,
         as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
         of 2002.

32.2     Certification of Robert C. Larry pursuant to 18 U.S.C. 1350,
         as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
         of 2002.

99.1     Confidentiality and Standstill Agreement dated September 8,
         2003 between the Company and European Metal Recycling Ltd.
         (incorporated by reference to Exhibit 10.1 of the Company's
         Current Report on Form 8-K dated September 8, 2003).
</Table>

                                        29