##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q


|    |  |                                                                                             
|--- |  | --------------------------------------------------------------------------------------------
|[X] |  | Quarterly Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934 
|    |  | For the quarterly period ended December 31, 2006                                            
|   
|[ ] |  | Transition Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934
|    |  | For the transition period from ________________________
    to ________________________     

Commission file number 1-33044





METAL MANAGEMENT, INC.







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 94-2835068                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

|                                                  |  |           
|------------------------------------------------- |  | ----------
|325 N. LaSalle Street, Suite 550, Chicago,
    IL |  | 60610     
|(Address of Principal Executive Offices)          |  | (Zip Code)

(312) 645-0700





X


12b-2




|                        |                     |                      
|----------------------- | ------------------- | ---------------------
|Large accelerated filer | Accelerated filer X | Non-accelerated filer

12b-2  X












---



##### 



INDEX







|                                  |  |                                                                                           |  |                                                                                                                    |    |  |   | 
|--------------------------------- |  | ----------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ | -- |  | - | 
|                                  |  |                                                                                           |  | Page                                                                                                               |   
|PART I: FINANCIAL
    INFORMATION
|                                 
|Item 1.                           |  | Financial Statements                                                                      |  |                                                                                                                    |    | 
|                                  |  |                                                                                           |  | Consolidated Statements of
    Operations  three and nine months ended
    December 31, 2006 and 2005 (unaudited) |    |  | 1 | 
|                                  |  |                                                                                           |  | Consolidated Balance Sheets 
    December 31, 2006 and March 31, 2006 (unaudited)                                 |    |  | 2 | 
|                                  |  |                                                                                           |  | Consolidated Statements of Cash
    Flows  nine months ended December 31, 2006 and
    2005 (unaudited)           |    |  | 3 | 
|                                  |  |                                                                                           |  | Consolidated Statement of
    Stockholders Equity  nine months ended
    December 31, 2006 (unaudited)           |    |  | 4 | 
|                                  |  |                                                                                           |  | Notes to Consolidated Financial Statements
    (unaudited)                                                         |    |  | 5 | 
|                                 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |  |                                                                                                                    | 21 | 
|                                 
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    about Market Risk                            |  |                                                                                                                    | 29 | 
|                                 
|Item 4.                           |  | Controls and Procedures                                                                   |  |                                                                                                                    | 30 | 
|PART II: OTHER INFORMATION       
|                                 
|Item 1.                           |  | Legal Proceedings                                                                         |  |                                                                                                                    | 31 | 
|                                 
|Item 1A.                          |  | Risk Factors                                                                              |  |                                                                                                                    | 32 | 
|                                 
|Item 2.                           |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                           |  |                                                                                                                    | 32 | 
|                                 
|Item 6.                           |  | Exhibits                                                                                  |  |                                                                                                                    | 33 | 
|                                 
|Signatures                        |  |                                                                                           |  |                                                                                                                    | 34 | 
|302 Certification                
|302 Certification                
|Section 1350 Certifications      





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##### Table of Contents






PART I: FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements




METAL MANAGEMENT, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited, in thousands, except per share amounts)


|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |           |        |   |           |           |        | 
|------------------------------------------- | -------------------------------------- | ------------------ | ------- | ------- | ----------------- | - | ------- | ------------ | ------ | - | ------------ | --------- | ------ | - | --------- | --------- | ------ | 
|                                            |                                        | Three Months Ended |         |         | Nine Months Ended |  
|                                            |                                        |                    |         |         |                   |  
|                                            |                                        | December 31,       |         |         | December 31,      |   |         | December 31, |        |   | December 31, |          
|                                            |                                        | 2006               |         |         | 2005              |   |         | 2006         |        |   | 2005         |          
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|Net sales                                   |                                        | $                  | 523,965 |         |                   | $ | 395,090 |              |        | $ | 1,604,585    |           |        | $ | 1,155,025 |          
|Operating expenses:                         |                                        |                    |         |         |                   |   |         |              |        |   |              |           |        |   |           |          
|                                            | Cost of sales (excluding depreciation) |                    |         | 471,702 |                   |   |         | 345,984      |        |   |              | 1,401,886 |        |   |           | 1,025,411 |       
|                                            | General and administrative             |                    |         | 21,913  |                   |   |         | 20,469       |        |   |              | 65,560    |        |   |           | 58,711    |       
|                                            | Depreciation and amortization          |                    |         | 7,131   |                   |   |         | 4,891        |        |   |              | 21,322    |        |   |           | 13,868    |       
|                                            | Severance and other charges            |                    |         | 490     |                   |   |         | 995          |        |   |              | 932       |        |   |           | 995       |       
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|                                           
|Operating income                            |                                        |                    | 22,729  |         |                   |   | 22,751  |              |        |   | 114,885      |           |        |   | 56,040    |          
|Income from joint ventures                  |                                        |                    | 357     |         |                   |   | 2,964   |              |        |   | 2,771        |           |        |   | 6,466     |          
|Interest expense                            |                                        |                    | (373    | )       |                   |   | (418    | )            |        |   | (979         | )         |        |   | (1,176    | )        
|Interest and other income, net              |                                        |                    | 969     |         |                   |   | 376     |              |        |   | 1,913        |           |        |   | 1,433     |          
|Gain on sale of joint venture interest      |                                        |                    | 0       |         |                   |   | 0       |              |        |   | 26,362       |           |        |   | 0         |          
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|                                           
|Income before income taxes                  |                                        |                    | 23,682  |         |                   |   | 25,673  |              |        |   | 144,952      |           |        |   | 62,763    |          
|Provision for income taxes                  |                                        |                    | 8,103   |         |                   |   | 10,327  |              |        |   | 55,411       |           |        |   | 25,050    |          
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|Net income                                  |                                        | $                  | 15,579  |         |                   | $ | 15,346  |              |        | $ | 89,541       |           |        | $ | 37,713    |          
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|Earnings per share:                         |                                        |                    |         |         |                   |   |         |              |        |   |              |           |        |   |           |          
|                                            |                                        | Basic              |         | $       | 0.61              |   |         | $            | 0.63   |   |              | $         | 3.48   |   |           | $         | 1.54   | 
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|                                            |                                        | Diluted            |         | $       | 0.60              |   |         | $            | 0.60   |   |              | $         | 3.40   |   |           | $         | 1.48   | 
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|Cash dividends declared per share           |                                        | $                  | 0.075   |         |                   | $ | 0.075   |              |        | $ | 0.225        |           |        | $ | 0.225     |          
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|Weighted average common shares outstanding: |                                        |                    |         |         |                   |   |         |              |        |   |              |           |        |   |           |          
|                                            |                                        | Basic              |         |         | 25,532            |   |         |              | 24,556 |   |              |           | 25,733 |   |           |           | 24,429 | 
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          
|                                            |                                        | Diluted            |         |         | 26,095            |   |         |              | 25,733 |   |              |           | 26,357 |   |           |           | 25,533 | 
|                                            |                                        |                    |         |         |                   |   |         |              |        |   |              |          



1



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##### Table of Contents






METAL MANAGEMENT, INC.


CONSOLIDATED BALANCE SHEETS


(unaudited, in thousands)


|                                           |                                      |                             |         |         |           |   |         |         |         | 
|------------------------------------------ | ------------------------------------ | --------------------------- | ------- | ------- | --------- | - | ------- | ------- | ------- | 
|                                           |                                      | December 31,                |         |         | March 31, |  
|                                           |                                      | 2006                        |         |         | 2006      |  
|                                           |                                      |                             |         |         |           |  
|ASSETS                                     |                                      |                             |         |         |           |   |         |        
|Current assets:                            |                                      |                             |         |         |           |   |         |        
|                                           | Cash and cash equivalents            |                             | $       | 79,810  |           |   | $       | 37,717  |        
|                                           | Short-term investments               |                             |         | 26,480  |           |   |         | 36,035  |        
|                                           | Accounts receivable, net             |                             |         | 141,497 |           |   |         | 168,025 |        
|                                           | Inventories                          |                             |         | 179,494 |           |   |         | 100,683 |        
|                                           | Deferred income taxes                |                             |         | 4,425   |           |   |         | 4,842   |        
|                                           | Prepaid expenses and other assets    |                             |         | 11,526  |           |   |         | 7,848   |        
|                                           |                                      |                             |         |         |           |  
|                                           |                                      | Total current assets        |         |         | 443,232   |   |         |         | 355,150 | 
|Property and equipment, net                |                                      |                             | 167,127 |         |           |   | 134,674 |        
|Goodwill                                   |                                      |                             | 6,058   |         |           |   | 2,078   |        
|Intangible assets, net                     |                                      |                             | 16,218  |         |           |   | 5,376   |        
|Deferred income taxes, net                 |                                      |                             | 9,527   |         |           |   | 10,306  |        
|Investments in joint ventures              |                                      |                             | 20,862  |         |           |   | 45,487  |        
|Other assets                               |                                      |                             | 3,337   |         |           |   | 2,246   |        
|                                           |                                      |                             |         |         |           |  
|Total assets                               |                                      | $                           | 666,361 |         |           | $ | 555,317 |        
|                                           |                                      |                             |         |         |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                      |                             |         |         |           |   |         |        
|Current liabilities:                       |                                      |                             |         |         |           |   |         |        
|                                           | Current portion of long-term debt    |                             | $       | 63      |           |   | $       | 1,164   |        
|                                           | Accounts payable                     |                             |         | 152,762 |           |   |         | 119,477 |        
|                                           | Income taxes payable                 |                             |         | 11,711  |           |   |         | 6,526   |        
|                                           | Other accrued liabilities            |                             |         | 31,534  |           |   |         | 37,037  |        
|                                           |                                      |                             |         |         |           |  
|                                           |                                      | Total current liabilities   |         |         | 196,070   |   |         |         | 164,204 | 
|Long-term debt, less current portion       |                                      |                             | 211     |         |           |   | 2,084   |        
|Other liabilities                          |                                      |                             | 4,516   |         |           |   | 5,140   |        
|                                           |                                      |                             |         |         |           |  
|                                           |                                      | Total long-term liabilities |         |         | 4,727     |   |         |         | 7,224   | 
|                                          
|Stockholders equity:                      |                                      |                             |         |         |           |   |         |        
|                                           | Preferred stock                      |                             |         | 0       |           |   |         | 0       |        
|                                           | Common stock                         |                             |         | 271     |           |   |         | 260     |        
|                                           | Warrants                             |                             |         | 0       |           |   |         | 179     |        
|                                           | Additional paid-in capital           |                             |         | 197,582 |           |   |         | 183,529 |        
|                                           | Deferred stock-based compensation    |                             |         | 0       |           |   |         | (5,045  | )      
|                                           | Accumulated other comprehensive loss |                             |         | (2,046  | )         |   |         | (2,046  | )      
|                                           | Retained earnings                    |                             |         | 290,588 |           |   |         | 207,012 |        
|                                           | Treasury stock, at cost              |                             |         | (20,831 | )         |   |         | 0       |        
|                                           |                                      |                             |         |         |           |  
|                                           |                                      | Total stockholders equity  |         |         | 465,564   |   |         |         | 383,889 | 
|                                           |                                      |                             |         |         |           |  
|Total liabilities and stockholders equity |                                      | $                           | 666,361 |         |           | $ | 555,317 |        
|                                           |                                      |                             |         |         |           |  



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METAL MANAGEMENT, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited, in thousands)


|                                                                                     |                                                         |                                                      |         |   |              |   |         |   |          |  
|------------------------------------------------------------------------------------ | ------------------------------------------------------- | ---------------------------------------------------- | ------- | - | ------------ | - | ------- | - | -------- | -
|                                                                                     |                                                         | Nine months ended                                    |        
|                                                                                     |                                                         |                                                      |        
|                                                                                     |                                                         | December 31,                                         |         |   | December 31, |  
|                                                                                     |                                                         | 2006                                                 |         |   | 2005         |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|Cash flows from operating activities:                                                |                                                         |                                                      |         |   |              |   |         |  
|Net income                                                                           |                                                         | $                                                    | 89,541  |   |              | $ | 37,713  |  
|Adjustments to reconcile net income to cash flows from
    operating
    activities: |                                                         |                                                      |         |   |              |   |         |  
|                                                                                     |                                                         | Depreciation and amortization                        |         |   | 21,322       |   |         |   | 13,868   |  
|                                                                                     |                                                         | Deferred income taxes                                |         |   | 1,327        |   |         |   | 2,350    |  
|                                                                                     |                                                         | Income from joint ventures                           |         |   | (2,771       | ) |         |   | (6,259   | )
|                                                                                     |                                                         | Gain on sale of joint venture interest               |         |   | (26,362      | ) |         |   | 0        |  
|                                                                                     |                                                         | Distributions of earnings from joint ventures        |         |   | 8,748        |   |         |   | 4,360    |  
|                                                                                     |                                                         | Stock-based compensation expense                     |         |   | 4,978        |   |         |   | 5,545    |  
|                                                                                     |                                                         | Asset impairment charge                              |         |   | 0            |   |         |   | 995      |  
|                                                                                     |                                                         | Excess tax benefit from stock-based compensation     |         |   | (759         | ) |         |   | 170      |  
|                                                                                     |                                                         | Other                                                |         |   | 949          |   |         |   | 1,626    |  
|                                                                                     | Changes in assets and liabilities, net of acquisitions: |                                                      |         |   |              |   |         |   |         
|                                                                                     |                                                         | Accounts receivable                                  |         |   | 26,594       |   |         |   | 19,502   |  
|                                                                                     |                                                         | Inventories                                          |         |   | (78,025      | ) |         |   | (15,171  | )
|                                                                                     |                                                         | Accounts payable                                     |         |   | 33,899       |   |         |   | (12,477  | )
|                                                                                     |                                                         | Income taxes payable                                 |         |   | 7,229        |   |         |   | 380      |  
|                                                                                     |                                                         | Other accrued liabilities                            |         |   | (1,729       | ) |         |   | (6,140   | )
|                                                                                     |                                                         | Other assets                                         |         |   | (3,293       | ) |         |   | (4,860   | )
|                                                                                     |                                                         | Other liabilities                                    |         |   | (1,052       | ) |         |   | 468      |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|Net cash provided by operating activities                                            |                                                         |                                                      | 80,596  |   |              |   | 42,070  |  
|                                                                                    
|Cash flows from investing activities:                                                |                                                         |                                                      |         |   |              |   |         |  
|                                                                                     |                                                         | Purchases of property and equipment                  |         |   | (48,073      | ) |         |   | (22,065  | )
|                                                                                     |                                                         | Proceeds from sale of property and equipment         |         |   | 1,658        |   |         |   | 798      |  
|                                                                                     |                                                         | Purchases of short-term investments                  |         |   | (99,600      | ) |         |   | (116,620 | )
|                                                                                     |                                                         | Sales of short-term investments                      |         |   | 109,155      |   |         |   | 86,285   |  
|                                                                                     |                                                         | Investments in joint ventures                        |         |   | (2,500       | ) |         |   | 0        |  
|                                                                                     |                                                         | Distributions of capital from joint ventures         |         |   | 1,300        |   |         |   | 1,250    |  
|                                                                                     |                                                         | Proceeds from sale of joint venture interest         |         |   | 46,005       |   |         |   | 0        |  
|                                                                                     |                                                         | Acquisitions, net of cash acquired                   |         |   | (28,591      | ) |         |   | 0        |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|Net cash used in investing activities                                                |                                                         |                                                      | (20,646 | ) |              |   | (50,352 | )
|                                                                                    
|Cash flows from financing activities:                                                |                                                         |                                                      |         |   |              |   |         |  
|                                                                                     |                                                         | Issuances of long-term debt                          |         |   | 10,373       |   |         |   | 427,809  |  
|                                                                                     |                                                         | Repayments of long-term debt                         |         |   | (13,361      | ) |         |   | (428,013 | )
|                                                                                     |                                                         | Proceeds from exercise of stock options and warrants |         |   | 11,776       |   |         |   | 5,678    |  
|                                                                                     |                                                         | Repurchases of common stock                          |         |   | (20,831      | ) |         |   | 0        |  
|                                                                                     |                                                         | Excess tax benefit from stock-based compensation     |         |   | 759          |   |         |   | 0        |  
|                                                                                     |                                                         | Cash dividends paid to stockholders                  |         |   | (5,965       | ) |         |   | (5,694   | )
|                                                                                     |                                                         | Fees paid to issue long-term debt                    |         |   | (608         | ) |         |   | 0        |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|Net cash used in financing activities                                                |                                                         |                                                      | (17,857 | ) |              |   | (220    | )
|                                                                                     |                                                         |                                                      |         |   |              |  
|Net increase (decrease) in cash and cash equivalents                                 |                                                         |                                                      | 42,093  |   |              |   | (8,502  | )
|Cash and cash equivalents at beginning of period                                     |                                                         |                                                      | 37,717  |   |              |   | 52,821  |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|Cash and cash equivalents at end of period                                           |                                                         | $                                                    | 79,810  |   |              | $ | 44,319  |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|                                                                                    
|Supplemental disclosures of cash flow information:                                   |                                                         |                                                      |         |   |              |   |         |  
|Cash interest paid                                                                   |                                                         | $                                                    | 646     |   |              | $ | 690     |  
|                                                                                     |                                                         |                                                      |         |   |              |  
|Cash income taxes paid, net of refunds                                               |                                                         | $                                                    | 46,855  |   |              | $ | 22,523  |  
|                                                                                     |                                                         |                                                      |         |   |              |  



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METAL MANAGEMENT, INC.


CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY


( unaudited, in thousands)


|                                                                |  |              |        |  |                |   |     |        |  |            |        |             |             |          |         |               |         |   |          |              |  |   |         |   |  |          |        |   |       |   |        |   |  |   |         |   |  |   |         |  
|--------------------------------------------------------------- |  | ------------ | ------ |  | -------------- | - | --- | ------ |  | ---------- | ------ | ----------- | ----------- | -------- | ------- | ------------- | ------- | - | -------- | ------------ |  | - | ------- | - |  | -------- | ------ | - | ----- | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                |  |              |        |  |                |   |     |        |  |            |        | Accumulated |             |          |         |               |        
|                                                                |  | Common Stock |        |  | Treasury Stock |   |     |        |  | Additional |        |             | Deferred    |          |         | Other         |         |   |          |              | 
|                                                                |  |              |        |  |                |   |     |        |  | Paid-In    |        |             | Stock-based |          |         | Comprehensive |         |   | Retained |              |  |  
|                                                                |  | Shares       |        |  | Amount         |   |     | Shares |  |            | Amount |             |             | Warrants |         |               | Capital |   |          | Compensation |  |   | Loss    |   |  | Earnings |        |   | Total |  
|                                                                |  |              |        |  |                |   |     |        |  |            |        |             |             |          |         |               |         |   |          |              |  |   |         |   |  |          |        |   |       |  
|Balance at March 31, 2006                                       |  |              | 25,987 |  |                | $ | 260 |        |  |            | 0      |             |             | $        | 0       |               |         | $ | 179      |              |  | $ | 183,529 |   |  | $        | (5,045 | ) |       | $ | (2,046 | ) |  | $ | 207,012 |   |  | $ | 383,889 |  
|Net income                                                      |  |              | 0      |  |                |   | 0   |        |  |            | 0      |             |             |          | 0       |               |         |   | 0        |              |  |   | 0       |   |  |          | 0      |   |       |   | 0      |   |  |   | 89,541  |   |  |   | 89,541  |  
|                                                                |  |              |        |  |                |   |     |        |  |            |        |             |             |          |         |               |         |   |          |              |  |   |         |   |  |          |        |   |       |  
|Total comprehensive income                                      |  |              |        |  |                |   |     |        |  |            |        |             |             |          |         |               |         |   |          |              |  |   |         |   |  |          |        |   |       |   |        |   |  |   |         |   |  |   | 89,541  |  
|Reclassification of deferred stock-based compensation           |  |              | 0      |  |                |   | 0   |        |  |            | 0      |             |             |          | 0       |               |         |   | 0        |              |  |   | (5,045  | ) |  |          | 5,045  |   |       |   | 0      |   |  |   | 0       |   |  |   | 0       |  
|Issuance of restricted stock (net of cancellations)             |  |              | 238    |  |                |   | 2   |        |  |            | 0      |             |             |          | 0       |               |         |   | 0        |              |  |   | 0       |   |  |          | 0      |   |       |   | 0      |   |  |   | 0       |   |  |   | 2       |  
|Issuance of stock under employee stock purchase plan            |  |              | 13     |  |                |   | 1   |        |  |            | 0      |             |             |          | 0       |               |         |   | 0        |              |  |   | 304     |   |  |          | 0      |   |       |   | 0      |   |  |   | 0       |   |  |   | 305     |  
|Exercise of stock options and warrants and related tax benefits |  |              | 843    |  |                |   | 8   |        |  |            | 0      |             |             |          | 0       |               |         |   | (157     | )            |  |   | 13,664  |   |  |          | 0      |   |       |   | 0      |   |  |   | 0       |   |  |   | 13,515  |  
|Repurchase of common stock                                      |  |              | 0      |  |                |   | 0   |        |  |            | (763   | )           |             |          | (20,831 | )             |         |   | 0        |              |  |   | 0       |   |  |          | 0      |   |       |   | 0      |   |  |   | 0       |   |  |   | (20,831 | )
|Cash dividends paid to stockholders                             |  |              | 0      |  |                |   | 0   |        |  |            | 0      |             |             |          | 0       |               |         |   | 0        |              |  |   | 0       |   |  |          | 0      |   |       |   | 0      |   |  |   | (5,965  | ) |  |   | (5,965  | )
|Other                                                           |  |              | 0      |  |                |   | 0   |        |  |            | 0      |             |             |          | 0       |               |         |   | (22      | )            |  |   | 152     |   |  |          | 0      |   |       |   | 0      |   |  |   | 0       |   |  |   | 130     |  
|Stock-based compensation expense                                |  |              | 0      |  |                |   | 0   |        |  |            | 0      |             |             |          | 0       |               |         |   | 0        |              |  |   | 4,978   |   |  |          | 0      |   |       |   | 0      |   |  |   | 0       |   |  |   | 4,978   |  
|                                                                |  |              |        |  |                |   |     |        |  |            |        |             |             |          |         |               |         |   |          |              |  |   |         |   |  |          |        |   |       |  
|Balance at December 31, 2006                                    |  |              | 27,081 |  |                | $ | 271 |        |  |            | (763   | )           |             | $        | (20,831 | )             |         | $ | 0        |              |  | $ | 197,582 |   |  | $        | 0      |   |       | $ | (2,046 | ) |  | $ | 290,588 |   |  | $ | 465,564 |  
|                                                                |  |              |        |  |                |   |     |        |  |            |        |             |             |          |         |               |         |   |          |              |  |   |         |   |  |          |        |   |       |  



4



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##### Table of Contents






METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)


NOTE 1  Basis of Presentation


Organization and Business






Basis of Presentation




10-K


Reclassifications




Revenue Recognition




5



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |           |                    |         |         |                   |   |         |              |  |   |              |           |  |   |         |           | 
|----------------------- | --------- | ------------------ | ------- | ------- | ----------------- | - | ------- | ------------ |  | - | ------------ | --------- |  | - | ------- | --------- | 
|                        |           | Three Months Ended |         |         | Nine Months Ended |  
|                        |           |                    |         |         |                   |  
|                        |           | December 31,       |         |         | December 31,      |   |         | December 31, |  |   | December 31, |          
|                        |           | 2006               |         |         | 2005              |   |         | 2006         |  |   | 2005         |          
|                        |           |                    |         |         |                   |   |         |              |  |   |              |          
|Ferrous metals          |           | $                  | 300,432 |         |                   | $ | 255,731 |              |  | $ | 946,543      |           |  | $ | 747,482 |          
|Non-ferrous metals      |           |                    | 182,680 |         |                   |   | 116,177 |              |  |   | 558,704      |           |  |   | 344,650 |          
|Brokerage  ferrous     |           |                    | 35,116  |         |                   |   | 15,437  |              |  |   | 78,020       |           |  |   | 42,925  |          
|Brokerage  non-ferrous |           |                    | 1,391   |         |                   |   | 1,513   |              |  |   | 6,865        |           |  |   | 5,040   |          
|Other                   |           |                    | 4,346   |         |                   |   | 6,232   |              |  |   | 14,453       |           |  |   | 14,928  |          
|                        |           |                    |         |         |                   |   |         |              |  |   |              |          
|                        | Net sales |                    | $       | 523,965 |                   |   | $       | 395,090      |  |   | $            | 1,604,585 |  |   | $       | 1,155,025 | 
|                        |           |                    |         |         |                   |   |         |              |  |   |              |          

Recently Issued Accounting Pronouncements


.










6



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




NOTE 2  Stock-Based Compensation










7



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                          |                                                      |              |       |       |              |   |       |        |  
|--------------------------------------------------------- | ---------------------------------------------------- | ------------ | ----- | ----- | ------------ | - | ----- | ------ | -
|                                                          |                                                      | Three months |       |       | Nine months  |  
|                                                          |                                                      | ended        |       |       | ended        |  
|                                                          |                                                      | December 31, |       |       | December 31, |  
|                                                          |                                                      | 2006         |       |       | 2006         |  
|                                                          |                                                      |              |       |       |              |  
|Cost of sales (excluding depreciation)                    |                                                      | $            | 51    |       |              | $ | 147   |       
|General and administrative                                |                                                      |              | 1,768 |       |              |   | 4,652 |       
|Severance and other charges (See Note 4)                  |                                                      |              | 0     |       |              |   | 179   |       
|                                                          |                                                      |              |       |       |              |  
|                                                          | Stock-based compensation expense before income taxes |              |       | 1,819 |              |   |       | 4,978  |  
|                                                          | Income tax benefit                                   |              |       | (486  | )            |   |       | (1,361 | )
|                                                          |                                                      |              |       |       |              |  
|Total stock-based compensation expense after income taxes |                                                      | $            | 1,333 |       |              | $ | 3,617 |       
|                                                          |                                                      |              |       |       |              |  







|                        |                                                                                                                                          |              |        |        |              |   |        |        |  
|----------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ------ | ------ | ------------ | - | ------ | ------ | -
|                        |                                                                                                                                          | Three months |        |        | Nine months  |  
|                        |                                                                                                                                          | ended        |        |        | ended        |  
|                        |                                                                                                                                          | December 31, |        |        | December 31, |  
|                        |                                                                                                                                          | 2005         |        |        | 2005         |  
|                        |                                                                                                                                          |              |        |        |              |  
|Net income, as reported |                                                                                                                                          | $            | 15,346 |        |              | $ | 37,713 |       
|                        | Add: Stock-based compensation
    expense included in reported net income,
    net of related tax effects                                |              |        | 1,305  |              |   |        | 3,332  |  
|                        | Deduct: Total stock-based compensation
    expense determined under the fair value
    method for all awards, net of related tax effects |              |        | (1,547 | )            |   |        | (4,002 | )
|                        |                                                                                                                                          |              |        |        |              |  
|Pro forma net income    |                                                                                                                                          | $            | 15,104 |        |              | $ | 37,043 |       
|                        |                                                                                                                                          |              |        |        |              |  
|Earnings per share:     |                                                                                                                                          |              |        |        |              |   |        |       
|                        | Basic  as reported                                                                                                                      |              | $      | 0.63   |              |   | $      | 1.54   |  
|                        |                                                                                                                                          |              |        |        |              |  
|                        | Basic  pro forma                                                                                                                        |              | $      | 0.62   |              |   | $      | 1.52   |  
|                        |                                                                                                                                          |              |        |        |              |  
|                        | Diluted  as reported                                                                                                                    |              | $      | 0.60   |              |   | $      | 1.48   |  
|                        |                                                                                                                                          |              |        |        |              |  
|                        | Diluted  pro forma                                                                                                                      |              | $      | 0.59   |              |   | $      | 1.45   |  
|                        |                                                                                                                                          |              |        |        |              |  

Valuation Assumptions for Stock Options




8



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                |  |                   |      |   |              |   |      |  
|------------------------------- |  | ----------------- | ---- | - | ------------ | - | ---- | -
|                                |  | Nine months ended |     
|                                |  |                   |     
|                                |  | December 31,      |      |   | December 31, |  
|                                |  | 2006              |      |   | 2005         |  
|                                |  |                   |      |   |              |  
|Expected life (years)           |  |                   | 2    |   |              |   | 2    |  
|Expected volatility             |  |                   | 47.1 | % |              |   | 49.5 | %
|Expected dividend yield         |  |                   | 0.96 | % |              |   | 1.30 | %
|Risk-free interest rate         |  |                   | 4.93 | % |              |   | 3.52 | %
|Grant date fair value per share |  | $                 | 8.92 |   |              | $ | 7.13 |  

Stock Plans




|                                 |  |        |          |          |       |          |             |           |  |           |            |  |  |   |       | 
|-------------------------------- |  | ------ | -------- | -------- | ----- | -------- | ----------- | --------- |  | --------- | ---------- |  |  | - | ----- | 
|                                 |  |        |          |          |       | Weighted |             |           | 
|                                 |  |        |          | Weighted |       |          | Average     |           |  | Aggregate |           
|                                 |  |        |          | Average  |       |          | Remaining   |           |  | Intrinsic |           
|                                 |  |        |          | Exercise |       |          | Contractual |           |  | Value     |           
|                                 |  | Shares |          |          | Price |          |             | Life(Yrs) |  |           | (in 000s) | 
|                                 |  |        |          |          |       |          |             |           |  |           |            | 
|Outstanding at March 31, 2006    |  |        | 796,210  |          |       | $        | 22.08       |           |  |           |            |  |  |   |       | 
|Granted                          |  |        | 120,000  |          |       |          | 31.33       |           |  |           |            |  |  |   |       | 
|Exercised                        |  |        | (330,878 | )        |       |          | 18.30       |           |  |           |            |  |  |   |       | 
|Expired/forfeited                |  |        | 0        |          |       |          | 0.00        |           |  |           |            |  |  |   |       | 
|                                 |  |        |          |          |       |          |             |           |  |           |            | 
|Outstanding at December 31, 2006 |  |        | 585,332  |          |       | $        | 26.12       |           |  |           | 5.48       |  |  | $ | 6,868 | 
|                                 |  |        |          |          |       |          |             |           |  |           |            | 
|Exercisable at December 31, 2006 |  |        | 415,334  |          |       | $        | 24.51       |           |  |           | 5.63       |  |  | $ | 5,542 | 
|                                 |  |        |          |          |       |          |             |           |  |           |            | 



9



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |  |        |         |               |                 |   |       | 
|-------------------------------- |  | ------ | ------- | ------------- | --------------- | - | ----- | 
|                                 |  |        |         | Weighted-     |                
|                                 |  |        |         | Average Grant |                
|                                 |  | Shares |         |               | Date Fair Value |  
|                                 |  |        |         |               |                 |  
|Outstanding at March 31, 2006    |  |        | 523,227 |               |                 | $ | 20.40 | 
|Granted                          |  |        | 241,391 |               |                 |   | 29.05 | 
|Vested                           |  |        | (23,707 | )             |                 |   | 22.51 | 
|Cancelled                        |  |        | (3,350  | )             |                 |   | 26.94 | 
|                                 |  |        |         |               |                 |  
|Outstanding at December 31, 2006 |  |        | 737,561 |               |                 | $ | 23.13 | 
|                                 |  |        |         |               |                 |  



Employee Stock Purchase Plan




|                                |  |   |      |  
|------------------------------- |  | - | ---- | -
|Expected life (years)           |  |   | 0.25 |  
|Expected volatility             |  |   | 41.0 | %
|Expected dividend yield         |  |   | 0.25 | %
|Risk-free interest rate         |  |   | 4.90 | %
|Grant date fair value per share |  | $ | 7.21 |  

NOTE 3  Earnings Per Share




10



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              |  |  |   |        | 
|--------------------------------------------------------------------------------- |  | ------------------ | ------ |  | ----------------- | - | ------ | ------------ |  | - | ------------ |  |  | - | ------ | 
|                                                                                  |  | Three months ended |        |  | Nine months ended |  
|                                                                                  |  |                    |        |  |                   |  
|                                                                                  |  | December 31,       |        |  | December 31,      |   |        | December 31, |  |   | December 31, | 
|                                                                                  |  | 2006               |        |  | 2005              |   |        | 2006         |  |   | 2005         | 
|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              | 
|Numerator:                                                                        |  |                    |        |  |                   |   |        |              |  |   |              |  |  |   |        | 
|Net income                                                                        |  | $                  | 15,579 |  |                   | $ | 15,346 |              |  | $ | 89,541       |  |  | $ | 37,713 | 
|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              | 
|Denominator:                                                                      |  |                    |        |  |                   |   |        |              |  |   |              |  |  |   |        | 
|Weighted average common shares, outstanding, basic                                |  |                    | 25,532 |  |                   |   | 24,556 |              |  |   | 25,733       |  |  |   | 24,429 | 
|Incremental common shares attributable to dilutive stock options
    and warrants |  |                    | 170    |  |                   |   | 786    |              |  |   | 286          |  |  |   | 806    | 
|Incremental common shares attributable to unvested restricted
    stock           |  |                    | 393    |  |                   |   | 391    |              |  |   | 338          |  |  |   | 298    | 
|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              | 
|Weighted average common shares outstanding, diluted                               |  |                    | 26,095 |  |                   |   | 25,733 |              |  |   | 26,357       |  |  |   | 25,533 | 
|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              | 
|Basic income per share                                                            |  | $                  | 0.61   |  |                   | $ | 0.63   |              |  | $ | 3.48         |  |  | $ | 1.54   | 
|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              | 
|Diluted income per share                                                          |  | $                  | 0.60   |  |                   | $ | 0.60   |              |  | $ | 3.40         |  |  | $ | 1.48   | 
|                                                                                  |  |                    |        |  |                   |   |        |              |  |   |              | 



NOTE 4  Other Balance Sheet Information


Short-term investments




11



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Inventories




|                   |  |              |         |  |           |   |         | 
|------------------ |  | ------------ | ------- |  | --------- | - | ------- | 
|                   |  | December 31, |         |  | March 31, |  
|                   |  | 2006         |         |  | 2006      |  
|                   |  |              |         |  |           |  
|Ferrous metals     |  | $            | 89,172  |  |           | $ | 43,574  | 
|Non-ferrous metals |  |              | 90,053  |  |           |   | 56,841  | 
|Other              |  |              | 269     |  |           |   | 268     | 
|                   |  |              |         |  |           |  
|                   |  | $            | 179,494 |  |           | $ | 100,683 | 
|                   |  |              |         |  |           |  

Property and Equipment




|                                         |  |              |         |   |           |   |         |  
|---------------------------------------- |  | ------------ | ------- | - | --------- | - | ------- | -
|                                         |  | December 31, |         |   | March 31, |  
|                                         |  | 2006         |         |   | 2006      |  
|                                         |  |              |         |   |           |  
|Land and improvements                    |  | $            | 47,631  |   |           | $ | 34,069  |  
|Buildings and improvements               |  |              | 29,139  |   |           |   | 26,524  |  
|Operating machinery and equipment        |  |              | 147,056 |   |           |   | 126,322 |  
|Automobiles and trucks                   |  |              | 15,063  |   |           |   | 11,691  |  
|Furniture, office equipment and software |  |              | 5,619   |   |           |   | 3,232   |  
|Construction in progress                 |  |              | 13,731  |   |           |   | 7,469   |  
|                                         |  |              |         |   |           |  
|                                         |  |              | 258,239 |   |           |   | 209,307 |  
|Less  accumulated depreciation          |  |              | (91,112 | ) |           |   | (74,633 | )
|                                         |  |              |         |   |           |  
|                                         |  | $            | 167,127 |   |           | $ | 134,674 |  
|                                         |  |              |         |   |           |  

Other Accrued Liabilities




|                                               |  |              |        |  |           |   |        | 
|---------------------------------------------- |  | ------------ | ------ |  | --------- | - | ------ | 
|                                               |  | December 31, |        |  | March 31, |  
|                                               |  | 2006         |        |  | 2006      |  
|                                               |  |              |        |  |           |  
|Accrued employee compensation and benefits     |  | $            | 18,088 |  |           | $ | 22,137 | 
|Accrued insurance                              |  |              | 5,572  |  |           |   | 5,118  | 
|Accrued equipment and land purchase commitment |  |              | 1,370  |  |           |   | 4,000  | 
|Other                                          |  |              | 6,504  |  |           |   | 5,782  | 
|                                               |  |              |        |  |           |  
|                                               |  | $            | 31,534 |  |           | $ | 37,037 | 
|                                               |  |              |        |  |           |  

Accrued Severance and Other Charges




|                                      |  |   |       |  
|------------------------------------- |  | - | ----- | -
|Reserve balances at March 31, 2006    |  | $ | 1,254 |  
|Charge to income                      |  |   | 932   |  
|Cash payments                         |  |   | (140  | )
|Non-cash application                  |  |   | (179  | )
|                                      |  |   |      
|Reserve balances at December 31, 2006 |  | $ | 1,867 |  
|                                      |  |   |      



12



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






NOTE 5  Acquisitions






|                                |                       |   |        |        | 
|------------------------------- | --------------------- | - | ------ | ------ | 
|Property and equipment acquired |                       | $ | 8,827  |       
|Other tangible assets acquired  |                       |   | 1,998  |       
|Amortizable intangible assets   |                       |   | 12,640 |       
|Goodwill                        |                       |   | 3,641  |       
|                                |                       |   |       
|                                | Total assets acquired |   |        | 27,106 | 
|Liabilities assumed             |                       |   | (419   | )     
|                                |                       |   |       
|                                | Total purchase price  |   | $      | 26,687 | 
|                                |                       |   |       



NOTE 6  Goodwill and Other Intangible
Assets




|                                |  |   |       | 
|------------------------------- |  | - | ----- | 
|Balance at March 31, 2006       |  | $ | 2,078 | 
|Purchase accounting adjustments |  |   | 339   | 
|Acquisitions (see Note 5)       |  |   | 3,641 | 
|                                |  |   |      
|Balance at December 31, 2006    |  | $ | 6,058 | 
|                                |  |   |      



13



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                 |                        |                   |        |        |                |   |        |          |   |   |              |       |  |   |      |      |  
|---------------- | ---------------------- | ----------------- | ------ | ------ | -------------- | - | ------ | -------- | - | - | ------------ | ----- |  | - | ---- | ---- | -
|                 |                        | December 31, 2006 |        |        | March 31, 2006 |  
|                 |                        |                   |        |        |                |  
|                 |                        | Gross             |        |        |                |   | Gross  |          |   |  
|                 |                        | Carrying          |        |        | Accumulated    |   |        | Carrying |   |   | Accumulated  |      
|                 |                        | Amount            |        |        | Amortization   |   |        | Amount   |   |   | Amortization |      
|                 |                        |                   |        |        |                |   |        |          |   |   |              |      
|Amortizable:     |                        |                   |        |        |                |   |        |          |   |   |              |       |  |   |      |     
|                 | Customer lists         |                   | $      | 12,710 |                |   | $      | (1,266   | ) |   | $            | 4,900 |  |   | $    | (313 | )
|                 | Non-compete agreements |                   |        | 5,779  |                |   |        | (1,009   | ) |   |              | 1,025 |  |   |      | (240 | )
|                 |                        |                   |        |        |                |   |        |          |   |   |              |      
|                 |                        |                   | 18,489 |        |                |   | (2,275 | )        |   |   | 5,925        |       |  |   | (553 | )   
|                 |                        |                   |        |        |                |   |        |          |   |   |              |      
|Non-amortizable: |                        |                   |        |        |                |   |        |          |   |   |              |       |  |   |      |     
|                 | Pension intangible     |                   |        | 4      |                |   |        | 0        |   |   |              | 4     |  |   |      | 0    |  
|                 |                        |                   |        |        |                |   |        |          |   |   |              |      
|                 |                        | $                 | 18,493 |        |                | $ | (2,275 | )        |   | $ | 5,929        |       |  | $ | (553 | )   
|                 |                        |                   |        |        |                |   |        |          |   |   |              |      



|                         |  |   |       | 
|------------------------ |  | - | ----- | 
|Remainder of fiscal 2007 |  | $ | 655   | 
|Fiscal 2008              |  |   | 2,643 | 
|Fiscal 2009              |  |   | 2,453 | 
|Fiscal 2010              |  |   | 2,413 | 
|Fiscal 2011              |  |   | 2,380 | 
|Thereafter               |  |   | 5,670 | 

NOTE 7  Investments in Joint Ventures






NOTE 8  Long-term Debt




|                                                        |  |              |     |   |           |   |        |  
|------------------------------------------------------- |  | ------------ | --- | - | --------- | - | ------ | -
|                                                        |  | December 31, |     |   | March 31, |  
|                                                        |  | 2006         |     |   | 2006      |  
|                                                        |  |              |     |   |           |  
|Mortgage loan (interest rate of 5.50%) due January 2009 |  | $            | 0   |   |           | $ | 1,920  |  
|Other debt, due 2010                                    |  |              | 274 |   |           |   | 1,328  |  
|                                                        |  |              |     |   |           |  
|                                                        |  |              | 274 |   |           |   | 3,248  |  
|Less  current portion of long-term debt                |  |              | (63 | ) |           |   | (1,164 | )
|                                                        |  |              |     |   |           |  
|                                                        |  | $            | 211 |   |           | $ | 2,084  |  
|                                                        |  |              |     |   |           |  

14



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Credit Agreement






NOTE 9  Employee Benefit Plans




|                                   |  |                    |      |   |                   |   |      |              |  |   |              |   |  |   |      |  
|---------------------------------- |  | ------------------ | ---- | - | ----------------- | - | ---- | ------------ |  | - | ------------ | - |  | - | ---- | -
|                                   |  | Three Months Ended |      |   | Nine Months Ended |  
|                                   |  |                    |      |   |                   |  
|                                   |  | December 31,       |      |   | December 31,      |   |      | December 31, |  |   | December 31, |  
|                                   |  | 2006               |      |   | 2005              |   |      | 2006         |  |   | 2005         |  
|                                   |  |                    |      |   |                   |   |      |              |  |   |              |  
|Service cost                       |  | $                  | 44   |   |                   | $ | 41   |              |  | $ | 131          |   |  | $ | 124  |  
|Interest cost                      |  |                    | 176  |   |                   |   | 174  |              |  |   | 529          |   |  |   | 524  |  
|Expected return on plan assets     |  |                    | (184 | ) |                   |   | (174 | )            |  |   | (552         | ) |  |   | (523 | )
|Amortization of prior service cost |  |                    | 2    |   |                   |   | 24   |              |  |   | 7            |   |  |   | 71   |  
|Recognized net actuarial loss      |  |                    | 47   |   |                   |   | 49   |              |  |   | 141          |   |  |   | 147  |  
|                                   |  |                    |      |   |                   |   |      |              |  |   |              |  
|Net periodic benefit cost          |  | $                  | 85   |   |                   | $ | 114  |              |  | $ | 256          |   |  | $ | 343  |  
|                                   |  |                    |      |   |                   |   |      |              |  |   |              |  



Other Plans




15



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


NOTE 10  Commitments and Contingencies


Environmental and Labor Matters










(MM-Connecticut), MM-Connecticuts MM-Connecticut MM-Connecticut MM-Connecticut MM-Connecticut.


16



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METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


MM-Connecticuts MM-Connecticut MM-Connecticut MM-Connecticut


MM-Connecticut MM-Connecticut MM-Connecticut, MM-Connecticut, MM-Connecticut MM-Connecticut




MM-Connecticuts




(MM-Midwest), MM-Midwest


17



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


MM-Midwest MM-Midwest MM-Midwests MM-Midwest MM-Midwest


(MM-Aerospace), MM-Aerospaces


MM-Aerospace MM-Aerospaces MM-Aerospaces MM-Aerospace


(MM-Alabama), MM-Alabama MM-Alabama MM-Alabama


Legal Proceedings




18



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




MM-Midwest




NOTE 11  Stockholders Equity




Stock Repurchase Program




Series A Warrants


debtor-in


19



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##### Table of Contents



METAL MANAGEMENT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






20



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##### Table of Contents



This Form 10-Q
includes certain statements that may be deemed to be
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements in
this Form 10-Q
which address activities, events or developments that Metal
Management, Inc. (herein, Metal Management, the
Company, we, us,
our or other similar terms) expects or anticipates
will or may occur in the future, including such things as future
acquisitions (including the amount and nature thereof), business
strategy, expansion and growth of our business and operations,
general economic and market conditions and other such matters
are forward-looking statements. Although we believe the
expectations expressed in such forward-looking statements are
based on reasonable assumptions within the bounds of our
knowledge of our business, a number of factors could cause
actual results to differ materially from those expressed in any
forward-looking statements. These and other risks, uncertainties
and other factors are discussed under Risk Factors
appearing in our Annual Report on
Form 10-K for the
year ended March 31, 2006, as the same may be amended from
time to time.







|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

10-K


Overview








Results of Operations




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22



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##### Table of Contents









|                                       |                         |                                 |         |         |                                |  |       |      |  |   |         |         |  |      |       |      |   |   |           |         |  |  |       |      |  |   |           |         |  |  |       |      |  
|-------------------------------------- | ----------------------- | ------------------------------- | ------- | ------- | ------------------------------ |  | ----- | ---- |  | - | ------- | ------- |  | ---- | ----- | ---- | - | - | --------- | ------- |  |  | ----- | ---- |  | - | --------- | ------- |  |  | ----- | ---- | -
|                                       |                         | Three Months Ended December 31, |         |         | Nine Months Ended December 31, | 
|                                       |                         |                                 |         |         |                                | 
|                                       |                         | 2006                            |         |         | %                              |  |       | 2005 |  |   | %       |         |  | 2006 |       |      | % |   |           | 2005    |  |  | %     |     
|                                       |                         |                                 |         |         |                                |  |       |      |  |   |         |         |  |      |       |      |   |   |           |         |  |  |       |     
|Sales by commodity:                    |                         |                                 |         |         |                                |  |       |      |  |   |         |         |  |      |       |      |   |   |           |         |  |  |       |      |  |   |           |         |  |  |       |     
|                                       | Ferrous metals          |                                 | $       | 300,432 |                                |  |       | 57.3 |  |   | $       | 255,731 |  |      |       | 64.7 | % |   | $         | 946,543 |  |  |       | 59.0 |  |   | $         | 747,482 |  |  |       | 64.7 | %
|                                       | Non-ferrous metals      |                                 |         | 182,680 |                                |  |       | 34.9 |  |   |         | 116,177 |  |      |       | 29.4 |   |   |           | 558,704 |  |  |       | 34.8 |  |   |           | 344,650 |  |  |       | 29.8 |  
|                                       | Brokerage  ferrous     |                                 |         | 35,116  |                                |  |       | 6.7  |  |   |         | 15,437  |  |      |       | 3.9  |   |   |           | 78,020  |  |  |       | 4.9  |  |   |           | 42,925  |  |  |       | 3.7  |  
|                                       | Brokerage  non-ferrous |                                 |         | 1,391   |                                |  |       | 0.3  |  |   |         | 1,513   |  |      |       | 0.4  |   |   |           | 6,865   |  |  |       | 0.4  |  |   |           | 5,040   |  |  |       | 0.4  |  
|                                       | Other                   |                                 |         | 4,346   |                                |  |       | 0.8  |  |   |         | 6,232   |  |      |       | 1.6  |   |   |           | 14,453  |  |  |       | 0.9  |  |   |           | 14,928  |  |  |       | 1.4  |  
|                                       |                         |                                 |         |         |                                |  |       |      |  |   |         |         |  |      |       |      |   |   |           |         |  |  |       |     
|Net sales                              |                         |                                 | 523,965 |         |                                |  | 100.0 | %    |  |   | 395,090 |         |  |      | 100.0 | %    |   |   | 1,604,585 |         |  |  | 100.0 | %    |  |   | 1,155,025 |         |  |  | 100.0 | %   
|                                      
|Cost of sales (excluding depreciation) |                         |                                 | 471,702 |         |                                |  | 90.0  |      |  |   | 345,984 |         |  |      | 87.6  |      |   |   | 1,401,886 |         |  |  | 87.4  |      |  |   | 1,025,411 |         |  |  | 88.8  |     
|General and administrative expense     |                         |                                 | 21,913  |         |                                |  | 4.2   |      |  |   | 20,469  |         |  |      | 5.2   |      |   |   | 65,560    |         |  |  | 4.1   |      |  |   | 58,711    |         |  |  | 5.1   |     
|Depreciation and amortization expense  |                         |                                 | 7,131   |         |                                |  | 1.4   |      |  |   | 4,891   |         |  |      | 1.2   |      |   |   | 21,322    |         |  |  | 1.3   |      |  |   | 13,868    |         |  |  | 1.2   |     
|Severance and other charges            |                         |                                 | 490     |         |                                |  | 0.1   |      |  |   | 995     |         |  |      | 0.3   |      |   |   | 932       |         |  |  | 0.1   |      |  |   | 995       |         |  |  | 0.1   |     
|Income from joint ventures             |                         |                                 | 357     |         |                                |  | 0.1   |      |  |   | 2,964   |         |  |      | 0.8   |      |   |   | 2,771     |         |  |  | 0.2   |      |  |   | 6,466     |         |  |  | 0.6   |     
|Interest expense                       |                         |                                 | (373    | )       |                                |  | 0.1   |      |  |   | (418    | )       |  |      | 0.1   |      |   |   | (979      | )       |  |  | 0.0   |      |  |   | (1,176    | )       |  |  | 0.1   |     
|Interest and other income, net         |                         |                                 | 969     |         |                                |  | 0.2   |      |  |   | 376     |         |  |      | 0.1   |      |   |   | 1,913     |         |  |  | 0.1   |      |  |   | 1,433     |         |  |  | 0.1   |     
|Gain on sale of joint venture interest |                         |                                 | 0       |         |                                |  | 0.0   |      |  |   | 0       |         |  |      | 0.0   |      |   |   | 26,362    |         |  |  | 1.6   |      |  |   | 0         |         |  |  | 0.0   |     
|Provision for income taxes             |                         |                                 | 8,103   |         |                                |  | 1.5   |      |  |   | 10,327  |         |  |      | 2.6   |      |   |   | 55,411    |         |  |  | 3.4   |      |  |   | 25,050    |         |  |  | 2.1   |     
|                                       |                         |                                 |         |         |                                |  |       |      |  |   |         |         |  |      |       |      |   |   |           |         |  |  |       |     
|Net income                             |                         | $                               | 15,579  |         |                                |  | 3.0   | %    |  | $ | 15,346  |         |  |      | 3.9   | %    |   | $ | 89,541    |         |  |  | 5.6   | %    |  | $ | 37,713    |         |  |  | 3.3   | %   
|                                       |                         |                                 |         |         |                                |  |       |      |  |   |         |         |  |      |       |      |   |   |           |         |  |  |       |     

|                               |  |      |         |  |  |  |      |  |  |  |         |      |  |  |  |  |      |  |         |  |  |  |  |  |  |  |         |  |  |  |  | 
|------------------------------ |  | ---- | ------- |  |  |  | ---- |  |  |  | ------- | ---- |  |  |  |  | ---- |  | ------- |  |  |  |  |  |  |  | ------- |  |  |  |  | 
|                               |  | 2006 |         |  |  |  | 2005 |  |  |  |         | 2006 |  |  |  |  | 2005 |  |         | 
|Sales volume by commodity      |  |      |         |  |  |  |      |  |  |  |         |      |  |  |  |  |      |  |         | 
|(In thousands):                |  |      |         |  |  |  |      |  |  |  |         |      |  |  |  | 
|Ferrous metals (tons)          |  |      | 1,176   |  |  |  |      |  |  |  | 1,060   |      |  |  |  |  |      |  | 3,514   |  |  |  |  |  |  |  | 3,210   |  |  |  |  | 
|Non-ferrous metals (lbs.)      |  |      | 126,712 |  |  |  |      |  |  |  | 124,334 |      |  |  |  |  |      |  | 392,024 |  |  |  |  |  |  |  | 355,784 |  |  |  |  | 
|Brokerage  ferrous (tons)     |  |      | 146     |  |  |  |      |  |  |  | 69      |      |  |  |  |  |      |  | 312     |  |  |  |  |  |  |  | 207     |  |  |  |  | 
|Brokerage  non-ferrous (lbs.) |  |      | 969     |  |  |  |      |  |  |  | 1,478   |      |  |  |  |  |      |  | 3,882   |  |  |  |  |  |  |  | 4,720   |  |  |  |  | 

Net Sales




Ferrous Sales




23



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##### Table of Contents







Non-ferrous Sales








Brokerage Ferrous Sales




24



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##### Table of Contents



Cost of Sales (excluding Depreciation)






General and Administrative Expense






Depreciation and Amortization






Severance and Other Charges






25



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##### Table of Contents



Income from Joint Ventures




Interest Expense




Gain on Sale of Joint Venture Interest




Income Taxes




Net Income




Liquidity and Capital Resources


day-to






26



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##### Table of Contents







Cash Flows


|                                          |  |                   |         |   |              |   |         |  
|----------------------------------------- |  | ----------------- | ------- | - | ------------ | - | ------- | -
|                                          |  | Nine Months Ended |        
|                                          |  |                   |        
|                                          |  | December 31,      |         |   | December 31, |  
|                                          |  | 2006              |         |   | 2005         |  
|(in thousands)                            |  |                   |         |   |              |  
|Net cash provided by operating activities |  | $                 | 80,596  |   |              | $ | 42,070  |  
|Net cash used in investing activities     |  | $                 | (20,646 | ) |              | $ | (50,352 | )
|Net cash used in financing activities     |  | $                 | (17,857 | ) |              | $ | (220    | )







Future Capital Requirements






27



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##### Table of Contents









Off-Balance Sheet Arrangements, Contractual Obligations and
Other Commitments


Off-Balance Sheet Arrangements




Contractual Obligations






|                                   |  |       |        |           |          |   |        |             |  |          |            |  |  |            |       |  |  |   |        | 
|---------------------------------- |  | ----- | ------ | --------- | -------- | - | ------ | ----------- |  | -------- | ---------- |  |  | ---------- | ----- |  |  | - | ------ | 
|                                   |  |       |        | Less than |          |   | One to |             |  | Three to |            |  | 
|                                   |  | Total |        |           | One Year |   |        | Three Years |  |          | Five Years |  |  | Thereafter |      
|                                   |  |       |        |           |          |   |        |             |  |          |            |  |  |            |      
|Long-term debt and capital leases  |  | $     | 324    |           |          | $ | 83     |             |  | $        | 166        |  |  | $          | 75    |  |  | $ | 0      | 
|Operating leases                   |  |       | 60,555 |           |          |   | 14,094 |             |  |          | 21,413     |  |  |            | 9,834 |  |  |   | 15,214 | 
|Pension funding obligations        |  |       | 855    |           |          |   | 641    |             |  |          | 214        |  |  |            | 0     |  |  |   | 0      | 
|Other contractual obligations      |  |       | 3,299  |           |          |   | 2,889  |             |  |          | 260        |  |  |            | 60    |  |  |   | 90     | 
|                                   |  |       |        |           |          |   |        |             |  |          |            |  |  |            |      
|Total contractual cash obligations |  | $     | 65,033 |           |          | $ | 17,707 |             |  | $        | 22,053     |  |  | $          | 9,969 |  |  | $ | 15,304 | 
|                                   |  |       |        |           |          |   |        |             |  |          |            |  |  |            |      

Other Commitments




Critical Accounting Policies






Stock-Based Compensation




28



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##### Table of Contents





Recent Accounting Pronouncements

















|        |                                                           
|------- | ----------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market Risk



29



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Evaluation of our Disclosure Controls and Procedures.


13a-15(e) 15d-15(e)






CEO and CFO Certifications.




Limitations on the Effectiveness of Controls.




30



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##### Table of Contents






PART II: OTHER INFORMATION





Item 1. Legal Proceedings


(MM-Connecticut), MM-Connecticuts MM-Connecticut MM-Connecticut MM-Connecticut MM-Connecticut. MM-Connecticuts MM-Connecticut MM-Connecticut MM-Connecticut


MM-Connecticut MM-Connecticut MM-Connecticut, MM-Connecticut, MM-Connecticut MM-Connecticut




MM-Connecticuts


31



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##### Table of Contents







MM-Midwest





Item 1A. Risk Factors.


10-K







|        |                                                                
|------- | ---------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of
    Proceeds



|                                     |  |           |         |  |            |                 |                  |                     |                |                    |                  |  |  |  |           | 
|------------------------------------ |  | --------- | ------- |  | ---------- | --------------- | ---------------- | ------------------- | -------------- | ------------------ | ---------------- |  |  |  | --------- | 
|                                     |  |           |         |  |            | Total Number of |                  |                     | Maximum Number |                   
|                                     |  | Total     |         |  |            |                 | Shares Purchased |                     |                | of Shares that May |                 
|                                     |  | Number of |         |  | Average    |                 |                  | as Part of Publicly |                |                    | Yet be Purchased | 
|                                     |  | Shares    |         |  | Price Paid |                 |                  | Announced           |                |                    | Under the        | 
|Period                               |  | Purchased |         |  | per Share  |                 |                  | Programs            |                |                    | Programs         | 
|                                     |  |           |         |  |            |                 |                  |                     |                |                    |                  | 
|October 1, 2006  October 31, 2006   |  |           | 112,000 |  |            | $               | 27.55            |                     |                |                    | 112,000          |  |  |  | 2,056,700 | 
|November 1, 2006  November 30, 2006 |  |           | 70,000  |  |            |                 | 27.88            |                     |                |                    | 70,000           |  |  |  | 1,986,700 | 
|December 1, 2006  December 31, 2006 |  |           | 50,100  |  |            |                 | 37.04            |                     |                |                    | 50,100           |  |  |  | 1,936,600 | 
|                                     |  |           |         |  |            |                 |                  |                     |                |                    |                  | 
|Total                                |  |           | 232,100 |  |            | $               | 29.70            |                     |                |                    | 232,100          |  |  |  |           | 
|                                     |  |           |         |  |            |                 |                  |                     |                |                    |                  | 

32



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##### Table of Contents








|        |         
|------- | --------
|Item 6. | Exhibits

Number and Description of Exhibit


| |    |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1 |  | Second Amended and Restated Certificate of Incorporation of the
    Company, as filed with the Secretary of State of the State of
    Delaware on June 29, 2001 (incorporated by reference to
    Exhibit 3.1 of the Companys Annual Report on
    Form 10-K for the year ended March 31, 2001).                                                                                                                                                                
| | 3  | .2 |  | Amended and Restated By-Laws of the Company adopted as of
    April 29, 2003 (incorporated by reference to
    Exhibit 3.2 of the Companys Annual Report on
    Form 10-K for the year ended March 31, 2003).                                                                                                                                                                                                                                                   
| | 4  | .1 |  | Amended and Restated Credit Agreement, dated as of May 9,
    2006, among Metal Management, Inc. and certain subsidiaries of
    Metal Management, Inc. specified therein, as borrowers, the
    lenders party thereto and LaSalle Bank National Association, in
    its capacity as agent for the lenders (incorporated by reference
    to Exhibit 4.1 of the Companys Current Report on
    Form 8-K dated May 9, 2006).                                     
| | 4  | .2 |  | Amendment No. 1 to the Amended and Restated Credit
    Agreement, dated as of October 13, 2006, among Metal
    Management, Inc. and certain subsidiaries of Metal Management,
    Inc. specified therein, as borrowers, the lenders party thereto
    and LaSalle Bank National Association, in its capacity as agent
    for the lenders (incorporated by reference to Exhibit 4.1
    of the Companys Current Report on Form 8-K dated
    October 13, 2006).
| | 4  | .3 |  | Amendment No. 2 to the Amended and Restated Credit
    Agreement, dated as of January 12, 2007, among Metal
    Management, Inc. and certain subsidiaries of Metal Management,
    Inc. specified therein, as borrowers, the lenders party thereto
    and LaSalle Bank National Association, in its capacity as agent
    for the lenders (incorporated by reference to Exhibit 4.1
    of the Companys Current Report on Form 8-K dated
    January 12, 2007).
| | 31 | .1 |  | Certification of Daniel W. Dienst pursuant to
    Section 240.13a-14(a) and Section 240.15d-14(a) of the
    Securities Exchange Act of 1934, as amended, as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                              
| | 31 | .2 |  | Certification of Robert C. Larry pursuant to
    Section 240.13a-14(a) and Section 240.15d-14(a) of the
    Securities Exchange Act of 1934, as amended, as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                               
| | 32 | .1 |  | Certification of Daniel W. Dienst and Robert C. Larry pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                          

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SIGNATURES






| |                       
| | ----------------------
| | METAL MANAGEMENT, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ Daniel W. Dienst

| |                              
| | -----------------------------
| |                              
| | Daniel W. Dienst             
| | Chairman of the Board,       
| | Chief Executive Officer      
| | and President                
| | (Principal Executive Officer)



| |     |                    
| | --- | -------------------
| | By: | /s/ Robert C. Larry

| |                                 
| | --------------------------------
| |                                 
| | Robert C. Larry                 
| | Executive Vice President,       
| | Finance, Chief Financial        
| | Officer, Treasurer and Secretary
| | (Principal Financial Officer)   



| |     |                  
| | --- | -----------------
| | By: | /s/ Amit N. Patel

| |                               
| | ------------------------------
| |                               
| | Amit N. Patel                 
| | Vice President, Finance       
| | and Controller                
| | (Principal Accounting Officer)
|
| | Date: February 6, 2007        

34