EXHIBIT 99.3
CLEVELAND-CLIFFS INC
AND CONSOLIDATED SUBSIDIARIES
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1993
AND
SEPTEMBER 30, 1994
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PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
CLEVELAND-CLIFFS INC
The accompanying pro forma combined statements of operations for the
year ended December 31, 1993 and the nine months ended September 30, 1994 give
effect to the acquisition of all of the outstanding shares of stock of Cyprus
Northshore Mining Corporation (renamed Northshore Mining Company) and its
consolidated subsidiary, Cyprus Silver Bay Power Corporation (renamed Silver
Bay Power Company) by Cliffs Minnesota Minerals Company, a wholly-owned
subsidiary of Cleveland-Cliffs Inc, from Cyprus Amax Minerals Company
("Cyprus") on September 30, 1994. The pro forma information is based on the
historic financial statements of Cleveland-Cliffs Inc and Cyprus Northshore
Mining Corporation giving effect to the transaction under the purchase method
of accounting and the assumptions and adjustments in the accompanying notes to
the pro forma combined financial statements.
The pro forma combined statements of operations have been prepared by
the management of Cleveland-Cliffs Inc based upon the financial statements of
Cyprus Northshore Mining Corporation. The pro forma adjustments are based upon
the preliminary estimate of the fair value of the assets acquired and
liabilities assumed. The final allocation of the purchase price will be made
when the complete study of the fair value of the assets and liabilities has
been finalized. The pro forma combined financial statements may not be
indicative of the results that actually would have occurred if the combination
had occurred on January 1, 1993 or which may occur in the future. The pro
forma combined financial statements and notes should be read in conjunction
with the audited financial statements of Cleveland-Cliffs Inc included in the
annual report on Form 10-K and Cyprus Northshore Mining Corporation contained
elsewhere herein for the year ended December 31, 1993 and the unaudited interim
financial statements of Cleveland-Cliffs Inc included in Form 10-Q and Cyprus
Northshore Mining Corporation contained elsewhere herein for the nine months
ended September 30, 1994. A pro forma statement of financial position has not
been included since the transaction has been recorded in the unaudited
consolidated financial statements of Cleveland-Cliffs Inc as reported in Form
10-Q for the nine months ended September 30, 1994.
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PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
CLEVELAND-CLIFFS INC
Year Ended December 31, 1993
(In Millions, Except Per Share Amounts)
-------------------------------------------------------------
Cleveland- Northshore Pro Forma Pro Forma
Cliffs (1) Mining (2) Adjustments Combined
---------- ---------- ----------- ---------
REVENUES:
Product sales and services $268.1 $98.2 $ -- $366.3
Royalties and management fees 39.7 -- -- 39.7
------ ----- ----- ------
Total operating revenues 307.8 98.2 -- 406.0
Recovery on bankruptcy claim 35.7 -- -- 35.7
Investment income (securities) 9.1 -- (3.6) (a) 5.5
Other income 3.3 .6 (.4) (b) 3.5
------ ----- ----- ------
TOTAL REVENUES 355.9 98.8 (4.0) 450.7
COST AND EXPENSES:
Cost of goods sold and
operating expenses 252.8 78.8 1.2 (c) 332.8
Administrative, selling
and general expenses 15.2 1.3 -- 16.5
Interest Expense 6.6 -- -- 6.6
Other expenses 5.6 5.9 -- 11.5
------ ----- ----- ------
TOTAL COST AND EXPENSES 280.2 86.0 1.2 367.4
------ ----- ----- ------
INCOME BEFORE INCOME TAXES 75.7 12.8 (5.2) 83.3
INCOME TAXES (CREDITS) 21.1 4.5 (2.0) (d) 23.6
------ ----- ----- ------
NET INCOME $ 54.6 $ 8.3 $(3.2) $ 59.7
====== ===== ===== ======
INCOME PER COMMON SHARE $ 4.55 $ 4.98
====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES ISSUED
AND OUTSTANDING 12.0 12.0
====== ======
(1) Derived from Cleveland-Cliffs Inc audited statement of consolidated
income for the year ended December 31, 1993.
(2) Derived from Cyprus Northshore Mining Corporation audited statement of
consolidated income for the year ended December 31, 1993.
See notes to pro forma combined financial statements (unaudited).
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PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
CLEVELAND-CLIFFS INC
Nine Months Ended September 30, 1994
(In Millions, Except Per Share Amounts)
-------------------------------------------------------------
Cleveland- Northshore Pro Forma Pro Forma
Cliffs (1) Mining (2) Adjustments Combined
----------- ---------- ----------- ---------
REVENUES:
Product sales and services $205.6 $77.6 $ -- $283.2
Royalties and management fees 33.3 -- -- 33.3
------ ----- ------ ------
Total operating revenues 238.9 77.6 -- 316.5
Investment income (securities) 5.8 -- -- 5.8
Other income .8 .2 -- 1.0
------ ----- ------ ------
TOTAL REVENUE 245.5 77.8 -- 323.3
COST AND EXPENSES:
Cost of goods sold and
operating expenses 187.1 65.2 .7 (e) 253.0
Administrative, selling
and general expenses 12.9 1.0 -- 13.9
Interest expense 4.9 -- -- 4.9
Other expenses 4.2 5.4 -- 9.6
------ ----- ------ ------
TOTAL COST AND EXPENSES 209.1 71.6 .7 281.4
------ ----- ------ ------
INCOME BEFORE INCOME TAXES 36.4 6.2 (.7) 41.9
INCOME TAXES (CREDITS) 9.0 1.6 (.3) (f) 10.3
------ ----- ------ ------
NET INCOME $ 27.4 $ 4.6 $ (.4) $ 31.6
====== ===== ====== ======
INCOME PER COMMON SHARE $ 2.27 $ 2.62
====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES ISSUED
AND OUTSTANDING 12.1 12.1
====== ======
(1) Derived from Cleveland-Cliffs Inc unaudited statement of consolidated income for the nine months ended September 30, 1994.
(2) Derived from Cyprus Northshore Mining Corporation unaudited statement of consolidated income for the nine months ended
September 30, 1994.
See notes to pro forma combined financial statements (unaudited).
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NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
CLEVELAND-CLIFFS INC
December 31, 1993 and September 30, 1994
NOTE A - PRO FORMA ADJUSTMENTS
Pro forma adjustments relating to the pro forma combined statements of
operations have been provided assuming the acquisition was consummated on
January 1, 1993. The pro forma adjustments for the year ended December 31,
1993 are as follows:
(a) Elimination of investment income on acquisition cash purchase
price, $3.6 million.
(b) Elimination of a non-recurring recovery on a casualty loss,
$.4 million.
(c) Depreciation expense increased to reflect the fair value of
the assets acquired, $.5 million. Write-off of deferred
maintenance, $.7 million.
(d) Favorable tax effect of pro forma adjustments, $2.0 million.
The pro forma adjustments for the nine months ended September 30, 1994 are as
follows:
(e) Depreciation expense increased to reflect the fair value of
the assets acquired, $.2 million. Write-off of deferred
maintenance, $.5 million.
(f) Favorable tax effect of pro forma adjustments, $.3 million.
NOTE B - ADMINISTRATIVE EXPENSE
The pro forma combined statements of operations include administrative
expense charges for the year ended December 31, 1993, and the nine months ended
September 30, 1994, by Cyprus Amax Minerals Company, parent of Cyprus
Northshore Mining Corporation, which have been considered by management of
Cleveland-Cliffs Inc to be comparable to administrative expense charges which
would have been incurred by Cyprus Northshore Mining Corporation if the
acquisition by Cleveland-Cliffs Inc had taken place January 1, 1993.
NOTE C - INVESTMENT INCOME
Income from Cleveland-Cliffs Inc investments has been adjusted for the
year ended December 31, 1993 for the effect of the acquisition cash purchase
price, and has not been adjusted for the nine months ended September 30, 1994
in the pro forma combined statements of operations. Management believes there
was no investment income in 1994 attributable to cash that would have been
invested in the acquisition.
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