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Diamond Manufacturing Company, a wholly owned subsidiary of Reliance Steel & Aluminum Co. (RS - Analyst Report), acquired New Berlin based McKey Perforating Co. Inc. and its subsidiary McKey Perforated Products Co. Inc. for an undisclosed amount.

McKey, a contract manufacturer serving mostly U.S. customers, will become a part of Reliance's Diamond Manufacturing Co. However, the company’s current management will remain in place.

For full-year 2011, McKey’s net sales were approximately $18 million.

Reliance typically continues to operate businesses it acquired while retaining their names. The company has acquired more than 45 firms since going public in 1994.

Reliance owns Liebovich Steel and Aluminum Co. in Kaukauna and 10 plants in northern Illinois.

Reliance Steel reported net income of $84.9 million or $1.13 per share in the third quarter of 2011 compared with $48.7 million or 65 cents per share in the prior-year quarter. Results exceeded the Zacks Consensus Estimate of $1.11 per share.

Quarterly sales were $2.14 billion, up 29% year over year.

Reliance Steel entered 2010 with a solid balance sheet and exited the year on an even stronger financial footing. Net debt-to-total-capital ratio was 23.5% as of December 31, 2010 and about $860 million was available on its $1.1 billion credit facility.  The company’s net debt-to-total capital was 31.0% as of September 30, 2011.

Even after borrowing to fund the acquisition of Continental in 2011, the company had a substantial remaining borrowing capacity with only $790 million of outstanding borrowings on its $1.5 billion credit facility as of September 30, 2011. This provides ample funds for the company to continue its growth initiatives through both acquisitions and internal activities.

Reliance Steel faces stiff competition from Metals USA Holdings Corp. (MUSA - Snapshot Report) and Worthington Industries Inc. (WOR - Snapshot Report).

We maintain our Neutral recommendation on Reliance Steel. Currently, it has a Zacks #3 Rank (Hold).

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