CONSOLIDATED TOMOKA LAND CO - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
___ OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

___ TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___

Commission file number 0-5556

CONSOLIDATED-TOMOKA LAND CO.

(Exact name of registrant as specified in its charter)

Florida 59-0483700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

149 South Ridgewood Avenue
Daytona Beach, Florida 32114
(Address of principal executive offices) (Zip Code)

(386) 255-7558
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days.

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

Yes X No
------ ------

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

Class of Common Stock Outstanding
August 1, 2003
$1.00 par value 5,619,799

1

CONSOLIDATED-TOMOKA LAND CO.

INDEX

Page No.
--------

PART I - FINANCIAL INFORMATION

Consolidated Condensed Balance Sheets -
June 30, 2003 and December 31, 2002 3

Consolidated Condensed Statements of Income -
Three-Months Ended and Six-Months Ended
June 30, 2003 and 2002 4

Consolidated Statement of Shareholders' Equity -
Six-Months Ended June 30, 2003 5

Consolidated Condensed Statements of Cash Flows -
Six-Months Ended June 30, 2003 and 2002 6

Notes to Consolidated Condensed Financial Statements 7-10

Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-17

PART II -- OTHER INFORMATION 18

SIGNATURES 19

2

PART I -- FINANCIAL INFORMATION
CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)
June 30, December 31,
2003 2002
----------- -----------

ASSETS
Cash $ 125,405 $ 1,019,976
Restricted Cash 2,743,161 12,339,527
Investment Securities 4,651,317 5,013,224
Notes Receivable 8,816,626 9,640,676
Real Estate Held for Development and Sale 9,721,955 7,453,628
Refundable Income Taxes 671,564 815,503
Other Assets 3,184,615 3,684,860
---------- ----------
$29,914,643 $39,967,394
---------- ----------
Property, Plant and Equipment:
Land, Timber and Subsurface Interests $ 2,020,190 $ 1,958,550
Golf Buildings, Improvements and Equipment 11,274,870 11,259,631
Income Properties Land, Buildings and Improvements 35,862,821 22,964,712
Other Furnishings and Equipment 900,482 886,767
---------- ----------
Total Property, Plant and Equipment 50,058,363 37,069,660
Less Accumulated Depreciation and Amortization (3,261,160) (2,710,992)
---------- ----------
Net - Property, Plant and Equipment 46,797,203 34,358,668
---------- ----------
TOTAL ASSETS $76,711,846 $74,326,062
========== ==========
LIABILITIES
Accounts Payable $ 194,557 $ 304,480
Accrued Liabilities 3,828,378 3,085,131
Deferred Income Taxes 9,536,079 8,843,728
Notes Payable 9,129,971 9,235,072
---------- ----------
TOTAL LIABILITIES 22,688,985 21,468,411
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock 5,618,903 5,615,579
Additional Paid in Capital 1,190,333 835,750
Retained Earnings 48,110,534 47,171,449
Accumulated Other Comprehensive Loss ( 896,909) ( 765,127)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 54,022,861 52,857,651
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $76,711,846 $74,326,062
========== ==========

See accompanying Notes to Consolidated Condensed Financial Statements.

3

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------

Income
Real Estate Operations:
Sales and Other Income $ 720,303 $5,280,343 $4,038,772 $6,007,175
Costs and Expenses ( 574,176) ( 890,198) (1,237,037) (1,365,158)
--------- --------- --------- ---------
146,127 4,390,145 2,801,735 4,642,017
--------- --------- --------- ---------
Income Properties
Leasing Revenues and Other Income 826,385 464,434 1,542,122 929,418
Costs and Other Expenses ( 147,161) ( 97,357) ( 277,631) ( 200,108)
--------- --------- --------- ---------
679,224 367,077 1,264,491 729,310
--------- --------- --------- ---------
Golf Operations
Sales and Other Income 1,173,970 1,142,487 2,446,688 2,432,699
Costs and Other Expenses (1,471,569) (1,393,440) (2,833,357) (2,716,034)
--------- --------- --------- ---------
( 297,599) ( 250,953) ( 386,669) ( 283,335)
--------- --------- --------- ---------
Total Real Estate Operations 527,752 4,506,269 3,679,557 5,087,992

Profit on Sales of Other
Real Estate Interests 164,039 149,866 523,151 149,866

Interest and Other Income 228,583 236,995 485,590 465,968
--------- --------- ---------- ---------
Operating Income 920,374 4,893,130 4,688,298 5,703,826

General and Administrative Expenses (1,291,073) ( 791,927) (2,268,607) (1,790,681)
--------- --------- --------- ---------

Income (Loss) Before Income Taxes ( 370,699) 4,101,203 2,419,691 3,913,145

Income Taxes 138,643 (1,515,830) ( 919,048) (1,447,001)
--------- --------- --------- ---------
Net Income (Loss) ( 232,056) 2,585,373 1,500,643 2,466,144
========= ========= ========= =========
PER SHARE INFORMATION:
Basic and Diluted
Net Income (Loss) $(0.04) $0.46 $0.27 $.044
===== ==== ==== ====
Dividends $ 0.05 $0.05 $0.10 $0.10
===== ==== ==== ====

See accompanying Notes to Consolidated Condensed Financial Statements.

4

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Shareholders' Comprehensive
Stock Capital Earnings Income Equity Income
---------- ---------- ----------- ----------- ------------ -------------

Balance, December 31, 2002 $5,615,579 $ 835,750 $47,171,449 $( 765,127) $ 52,857,651

Net Income 1,500,643 1,500,643 $ 1,500,643

Other Comprehensive Loss:
Cash Flow Hedging Derivative,
Net of Tax ( 131,782) ( 131,782) ( 131,782)
-----------
Comprehensive Income $1,368,861
===========
Stock Options 3,324 354,583 357,907

Cash Dividends ($.10 per share) ( 561,558) ( 561,558)
--------- --------- ---------- ---------- ----------
Balance, June 30, 2003 $5,618,903 $1,190,333 $48,110,534 $( 896,909) $54,022,861
========= ========= ========== ========== ==========

See accompanying Notes to Consolidated Condensed Financial Statements.

5

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)
Six Months Ended
--------------------------
June 30, June 30,
2003 2002
---------- -----------

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,500,643 $ 2,466,144

Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Depreciation and Amortization 550,178 398,068
Loss on Sale of Property, Plant and Equipment -- 12,596
Non Cash Compensation 354,583 --

Decrease (Increase) in Assets:
Notes Receivable 824,050 426,851
Real Estate Held for Development (2,268,327) 331,897
Refundable Income Taxes 143,939 ( 963,662)
Other Assets 500,235 ( 507,490)

(Decrease) Increase in Liabilities:
Accounts Payable ( 109,923) ( 21,648)
Accrued Liabilities 611,465 (1,796,417)
Deferred Income Taxes 692,351 2,192,299
--------- ---------
Net Cash Provided By Operating Activities $ 2,799,194 $ 2,538,638
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant and Equipment (12,988,703) ( 88,908)
Decrease (Increase) in Restricted Cash for Acquisitions
Through the Like-Kind Exchange Process 9,596,366 (2,236,636)
Net Decrease in Investment Securities 361,907 54,968
---------- ----------
Net Cash Used In Investing Activities ( 3,030,430) (2,270,576)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 2,535,000 1,295,000
Payments on Notes Payable ( 2,640,101) (1,479,375)
Cash Proceeds from Exercise of Stock Options 3,324 --
Dividends Paid ( 561,558) ( 561,558)
---------- ----------
Net Cash Used in Financing Activities ( 663,335) ( 745,933)
---------- ----------

Net Decrease In Cash ( 894,571) ( 477,871)
Cash, Beginning of Year 1,019,976 2,042,631
---------- ---------
Cash, End of Period $ 125,405 $ 1,564,760
========== =========

See accompanying Notes to Consolidated Condensed Financial Statements.

6

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Principles of Interim Statements. The foregoing unaudited
consolidated condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures
which are normally included in annual financial statements
prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted
pursuant to those rules and regulations. The consolidated
condensed financial statements reflect all adjustments which are,
in the opinion of management, necessary to present fairly the
Company's financial position and the results of operations for
the interim periods. The consolidated condensed format is
designed to be read in conjunction with the last annual report.
For further information refer to the consolidated financial
statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002.

The consolidated condensed financial statements include the
accounts of the Company and its wholly owned subsidiaries.
Inter-company balances and transactions have been eliminated
in consolidation.

Certain reclassifications were made to the 2002 accompanying
consolidated financial statements to conform to the 2003
presentation.

2. Common Stock and Earnings Per common Share. Basic earnings per
common share are computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding
during the period. Diluted earnings per common share are
determined based on the assumption of the conversion of stock
options at the beginning of each period using the treasury stock
method at average cost for the periods.

7

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. Common Stock and Earnings Per Common Share (Continued)

Three Months Ended Six Month Ended
---------------------- ---------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
--------- -------- ---------- ----------

Income Available to Common Shareholders:
Net Income (Loss) $( 232,056) $2,585,373 $1,500,643 $2,466,144
========= ========= ========= =========
Weighted Average Shares Outstanding 5,616,545 5,615,579 5,616,065 5,615,579

Common Shares Applicable to Stock
Options Using the Treasury Stock Method -- 15,624 22,730 14,579
--------- --------- --------- ---------
Total Shares Applicable to Diluted
Earnings Per Share $5,616,545 $5,631,203 $5,638,795 $5,630,158
========= ========= ========= =========
Basic and Diluted Loss Per Share:
Net Income (Loss) $(0.04) $0.46 $0.27 $0.44
========= ========= ========= =========

3. Notes Payable. Notes payable consist of the following:

June 30, 2003
------------------------------
Due Within
Total One Year
------------------------------

$ 7,000,000 Line of Credit $ 49,000 $ 49,000
Mortgage Notes Payable 9,017,340 196,347
Industrial Revenue Bond 63,631 63,631
---------- ---------
$ 9,129,971 $ 308,978
========== =========

Payments applicable to reduction of principal amounts will be
required as follows:

Year Ending June 30, 2003
-------------------------
2004 $ 308,978
2005 211,490
2006 1,427,790
2007 244,871
2008 & Thereafter 6,936,842
---------
$9,129,971
=========

In the first six months of 2003 and 2002, interest totaled $354,435
and $408,639 respectively.

8

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

4. Stock Options. In December 2002, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" (SFAS 148). SFAS 148 provides alternative
methods of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), to require more
prominent and frequent disclosures in financial statements about the
effects of stock-based compensation. The transition guidance and
annual disclosure provisions of SFAS 148 are effective for fiscal
years ending after December 15, 2002, and interim disclosure
provisions are effective for periods beginning after December 15,
2002. As permitted under SFAS 123 and SFAS 148, the Company will
continue to follow the accounting guidelines pursuant to Accounting
Principles Board Option No. 25, "Accounting for Stock Issued to
Employees" (APB 25), for stock-based compensation and to furnish the
pro forma disclosures as required under SFAS 148. The Company
accounts for its stock-based compensation plans under the recognition
and measurement principles of APB 25, and related interpretations,
requiring that compensation expense be recorded equal to the intrinsic
value of the award at the measurement date.

Had compensation expense for these options been determined in
accordance with SFAS No. 123, the Company's net income (loss) and
income (loss) per share would have been as follows:

9
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

5. In April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS
149"). This Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
Statement is effective for contracts entered into or modified after
June 30, 2003, and for hedging relationships designated after June 30,
2003. The adoption of the Statement had no effect on the Company's
financial statements as of June 30, 2003 and the Company does not
anticipate material impact on future financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity" ("SFAS 150"). This Statement improves the accounting for
certain financial instruments that, under previous guidance, issuers
could account for as equity. The new Statement requires that those
instruments be classified as liabilities in statements of financial
position. Most of the guidance in SFAS 150 is effective for all
financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS 150 had no effect
on the Company's financial statements as of June 30, 2003 and the
Company does not anticipate material impact on future financial
statements.

10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The Management's Discussion and Analysis of Financial Condition and
Results of Operations is designed to be read in conjunction with the
financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations in the last annual
report.

"Safe Harbor"
STATEMENT UNDER THE SECURITIES REFORM ACT OF 1995

Certain statements contained in this report (other than the financial
statements and statements of historical fact) are forward-looking
statements. The words "believe," "estimate," "expect," "intend,"
"anticipate," "will," "could," "may," "should," "plan," "potential,"
"predict," "forecast," and similar expressions and variations thereof
identify certain of such forward-looking statements, which speak only
as of the dates on which they were made. Forward-looking statements
are made based upon management's expectations and beliefs concerning
future developments and their potential effect upon the Company.
There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management.

The Company wishes to caution readers that the assumptions which form
the basis for forward-looking statements with respect to or that may
impact earnings for the year ended December 31, 2003, and thereafter
include many factors that are beyond the Company's ability to control
or estimate precisely. These risks and uncertainties include, but
are not limited to, the market demand for the Company's real estate
parcels, golf activities, income properties, timber and other
products; the impact of competitive real estate; changes in pricing by
the Company or its competitors; the costs and other effects of
complying with environmental and other regulatory requirements; losses
due to natural disasters; and changes in national, regional or local
economic and political conditions, such as inflation, deflation, or
fluctuation in interest rates.

While the Company periodically reassesses material trends and
uncertainties affecting its results of operations and financial
condition, the Company does not intend to review or revise any
particular forward-looking statement referenced herein in light of
future events.

RESULTS OF OPERATIONS
The Three- and Six-Months Ended June 30, 2003
Compared to
The Three- and Six-Months Ended June 30, 2002

Real Estate Operations
- ----------------------
Real Estate Sales
-----------------
For the three months ended June 30, 2003, the sale of six acres of
property produced gross profits of $420,000 and resulted in net
profits from real estate operations of $146,127. These profits
represented a significant downturn from the $4,390,145 net profit
posted during 2002's second quarter on the sale of 119 acres of land.
11

Real estate operations realized net profits of $2,801,735 for the
first six months of 2003 on the sale of 380 acres of property.
Profits for the first half of 2003 represented a 40% decline from
2002's first six month period. During 2002's same period, profits of
$4,642,017 were recorded on the sale of 139 acres. Per acre sales
prices and gross profits vary from parcel to parcel depending on
location, use and size of the parcel.

Income Properties
-----------------
The addition of four new properties during the first quarter of 2003
and one property in the fourth quarter of 2002 provided a 78% gain in
revenues from income properties to $826,385 in 2003's second quarter.
Income properties costs and expenses increased 51% during the period
to $147,161 from depreciation associated with the new properties.
Profits generated from income properties totaled $679,224 for the
three-month period, an 85% increase over the prior year's second
three month period.

Year to date through June 30, 2003, profits of $1,264,491 were
generated on revenues totaling $1,542,122. These results compare
favorably to 2002's first half profits of $729,310 on revenues of
$929,418. These improvements, 73% for profits and 66% for revenues,
were again achieved due to the addition of the new properties.

Golf Operations
-----------------
For the three months ended June 30, 2003 golf operations posted a
loss of $297,599. This loss represented a 19% downturn from the
$250,953 loss posted in 2002's same period. Revenues increased 3%
during the period as a 7% increase in average greens fees per round
offset a 5% decrease in rounds played. The increase in revenues was
offset by a 6% rise in costs and expenses. Food and beverage cost of
sales and wages increased during the three month period, along with
insurance costs and land lease expense.

A loss of $386,669 was recorded for the first six months of 2003, a
36% increase over the $283,335 loss realized in the prior year's
first half. Revenues of $2,446,688 represented a modest 1% increase
on slightly higher food and beverage revenues. A 4% rise in costs
and expenses was again caused by higher food and beverage cost of
sales and wages along with increased insurance and land lease
expenses.

General Corporate and Other
- ---------------------------
Profits on the sale of other real estate interests totaled $164,039
and $523,151 for the second quarter and first six months of 2003,
respectively. These profits were generated on the release of
subsurface interests on 8,175 acres, of which 5,225 acres were
released during the second quarter. During 2002 profits on the sale
of other real estate interests amounted to $149,866 for both the six
months and second quarter. The release of subsurface interests on 4
acres along with the sale of 7 acres of land generated these profits
in 2002.

Interest and other income decreased 4% in 2003's second quarter when
compared to the prior year. The decline, to $228,583, was the result
12

of lower interest earned on investments. For the six month period
interest and other income totaling $485,590 represented a 4% gain from
the prior year's interest and other income of $465,968. This gain was
due to higher earnings on funds held to invest in income properties.

For the three month and six month periods of 2003 general and
administrative expenses posted significant increases over the prior
year. These increases, 63% for the second quarter and 27% for the six
months, were the direct result of expenses associated with stock
options due to an increase of approximately 20% in the Company's stock
price during the second quarter.

Net Income and Earnings Before Depreciation and Deferred Taxes
- --------------------------------------------------------------
For the six months ended June 30, 2003 net income totaled $1,500,643,
equivalent to $.27 per share. This profit represents a 39% decrease
from the net income of $2,466,144, equivalent to $.44 per share,
recorded in 2002's first six months. This downturn was primarily the
result of lower land sales activity realized during 2003 along with
higher general and administrative costs. This lower land sales
activity was partially offset by a 73% gain in profits from income
properties with the addition of the five new properties.

The Company also uses Earnings Before Depreciation and Deferred Taxes
("EBDDT") as a performance measure. The Company's strategy of
investing in income properties through the deferred tax like-kind
exchange process produces significant amounts of depreciation and
deferred taxes. This measure tracks results in this area.

Following is the calculation of EBDDT:
Quarter Ended
---------------------------
June 30, June 30,
2003 2002
---------------------------

Net Income (Loss) $(232,056) $2,585,373
Add Back:
Depreciation 257,822 199,446
Deferred Taxes (267,911) 2,277,274
------- ---------
Earnings Before Depreciation and Deferred Taxes $(242,145) $5,062,093
======= =========

Six Months Ended
---------------------------
June 30, June 30,
2003 2002
---------------------------

Net Income $1,500,643 $2,466,144
Add Back:
Depreciation 550,178 398,068
Deferred Taxes 692,351 2,192,299
--------- ---------
Earnings Before Depreciation and Deferred Taxes $2,743,172 $5,056,511
========= =========

13

EBDDT is not a measure of operating results or cash flows from
operating activities as defined by generally accepted accounting
principles. Further, EBDDT is not necessarily indicative of cash
availability to fund cash needs and should not be considered as an
alternative to cash flow as a measure of liquidity. The Company
believes, however, that EBDDT provides relevant information about
operations and is useful, along with net income (loss), for an
understanding of the Company's operating results.

EBDDT is calculated by adding depreciation and deferred income taxes
to net income (loss) as they represent non-cash charges.

EBDDT was down for both periods not only due to the reduced earnings
but also due to the reduction of the add back from deferred income
taxes. The add back for deferred income taxes was not as great as
gains on land sales deferred through the like-kind exchange process
were reduced in 2003. The higher accrual for stock options expenses
resulted in a reduction in deferred taxes for the second quarter of
2003. The addition of new income properties during the year resulted
in higher depreciation for both periods of 2003.

Liquidity and Capital Resources
- -------------------------------
Cash, restricted cash and investment securities totaled $7,519,883 at
June 30, 2003, of which $2,743,161 was being held for the acquisition
of income properties through the like-kind exchange process. This
represented a significant decline from the cash, restricted cash and
investment securities of $18,372,727 held at December 31, 2002. The
primary use of these funds was the acquisition of four income
properties for approximately $13,000,000 along with the acquisition of
950 acres of mitigation lands during the first quarter. Also
contributing to the cash outflow was $1,200,000 spent on the
development of the Cornerstone Office Park at the Interstate 95/LPGA
Blvd. interchange. Offsetting these cash outflows was cash provided
from operating activities.

Capital expenditures for the remainder of 2003 are projected to
approximate $5,000,000. These expenditures include $1,400,000 for the
remaining site development of the Cornerstone Office Park at the
Interstate 95 interchange at LPGA Boulevard, and $3,300,000 for road
construction on Company-owned lands adjacent to Interstate 95.
Capital to fund these requirements will be provided by cash and
investment securities on hand, operating activities and financing
sources in place. Additionally, as funds become available from
qualified sales, triple-net lease income properties will be acquired
through the like-kind exchange process. Currently, the income
properties owned by the Company are free of debt. The Company has the
ability to borrow against these properties on a non-recourse basis.

At this time, buyer interest remains relatively strong on Company-
owned lands, with a backlog of contracts in place for closing in 2003
and future years; however, national and local economic and political
issues can effect prospective development and sales. Management
continues to focus its efforts on converting its contract backlog to
closings while developing new contracts. As closings occur, gains
will continue to be deferred for income tax purposes with the
acquisition of triple-net-lease properties through the like-kind
exchange process.
14

In the event such closings on replacement properties do not occur
within the required time frames, income taxes relative to the gains
experienced would become currently payable. As the inventory of
income properties grows management will look to continue to diversify
the Company through other real estate investments as opportunities
arise.

Critical Accounting Policies
- ----------------------------
The profit on sales of real estate is accounted for in accordance with
the provisions of SFAS No. 66, "Accounting for Sales of Real Estate"
("SFAS 66"). The Company recognizes revenue from the sale of real
estate at the time the sale is consummated unless the property is sold
on a deferred payment plan and the initial payment does not meet
criteria established under SFAS 66, or the Company retains some form
of continuing involvement with the property. No income was deferred
for the first six months of 2003 or 2002 as sales have met the
established criteria.

In accordance with SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," the Company has reviewed the
recoverability of long-lived assets, including real estate held for
development and sale and property, plant and equipment for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may or may not be recoverable. There has been no
material impairment of long-lived assets reflected in the consolidated
financial statements.

The Company refinanced its debt during 2002, and at that time the
Company entered into an interest rate swap agreement. This swap
arrangement changes the variable-rate cash flow exposure on the debt
obligations to fixed cash flows so that the Company can manage
fluctuations in cash flows resulting from interest rate risk. This
swap arrangement essentially creates the equivalent of fixed-rate
debt. The above referenced transaction is accounted for under SFAS
No. 133, "Accounting for Derivative Instruments and Certain Hedging
Activities" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activity, an Amendment of SFAS 133."
The accounting requires the derivative to be recognized on the balance
sheet at its fair value and the changes in fair value to be accounted
for as other comprehensive income or loss. At June 2003, a liability
of $1,460,167 had been established on the Company's balance sheet.
Other comprehensive loss of $896,909 ($1,460,167 net of income taxes
of $563,258) has also been recorded to date.

Recent Accounting Pronouncements
- --------------------------------
In December 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure"
(SFAS 148). SFAS 148 provides alternative methods of accounting for
stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), to require more prominent and frequent
disclosures in financial statements about the effects of stock-based
compensation. The transition guidance and annual disclosure
provisions of SFAS 148 are effective for fiscal years ending after
December 15, 2002, and interim disclosure provisions are effective
15

for periods beginning after December 15, 2002. As permitted under
SFAS 123 and SFAS 148, the Company will continue to follow the
accounting guidelines pursuant to Accounting Principles Board Option
No. 25, "Accounting for Stock Issued to Employees" (APB 25), for
stock-based compensation and to furnish the pro forma disclosures as
required under SFAS 148. The Company accounts for its stock-based
compensation plans under the recognition and measurement principles of
APB 25, and related interpretations, requiring that compensation
expense be recorded equal to the intrinsic value of the award at the
measurement date.

In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" (FIN 45).
FIN 45 elaborates on the disclosures to be made by the guarantor in
its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing
the guarantee. FIN 45 does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the
term of the related guarantee. It also incorporates, without change,
the guidance in FASB Interpretation No. 34, "Disclosure of Indirect
Guarantees of Indebtedness of Others," which is being superseded. The
Company will apply the recognition and measurement provisions of FIN
45 on a prospective basis to guarantees issued or modified after
December 31, 2002.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." This Statement
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for
hedging activities under FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement is
effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The
adoption of the Statement had no effect on the financial statements as
of June 30, 2003 and the Company does not anticipate material impact
on future financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity." This Statement improves the accounting for certain financial
instruments that, under previous guidance, issuers could account for
as equity. The new Statement requires that those instruments be
classified as liabilities in statements of financial position. Most
of the guidance in Statement 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of the Statement had no effect on
the financial statements as of June 30, 2003 and the Company does not
anticipate material impact on future financial statements.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risk (i.e., the risk of loss arising from adverse
changes in market rates and prices) to which the Company is exposed is
interest rates.

The Company manages its debt, considering investment opportunities and
risk, tax consequences and overall financial strategies. The Company
is primarily exposed to interest rate risk on its $8,000,000 long-term
mortgage. The borrowing bears a variable rate of interest based on
market rates. Management's objective is to limit the impact of
interest rate changes on earnings and cash flows and to lower the
overall borrowing costs. To achieve this objective the Company
entered into an interest swap agreement during the second quarter of
2002.

CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the
participation of the Company's management, including the Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of our disclosure controls and procedures. Based on
that evaluation, the CEO and CFO have concluded that the Company's
disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it
files or submits under the Securities and Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of their evaluation, there were no significant
changes in the Company's internal controls or in other factors that
could significantly affect the disclosure controls, including any
corrective actions with regard to significant deficiencies and
material weaknesses.

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PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which
the Company or its subsidiaries is a party.

Items 2 through 5.

Not Applicable

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit 11 - Incorporated by Reference on Page 8
of this 10-Q report.

Exhibit 31.1 - Certification furnished pursuant to
Section 302 of Sarbanes-Oxley Act of
2002.

Exhibit 31.2 - Certification furnished pursuant to
Section 302 of Sarbanes-Oxley Act of
2002.

Exhibit 32.1 - Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley
Act Of 2002.

Exhibit 32.2 - Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002.

(b) Reports on Form 8-K

On July 17, 2003, a Form 8-K was furnished
reporting under Item 9, "Regulation FD Disclosure"
and Item 12, "Results of Operations and Financial
Condition," the Company's earning release for the
quarter ended June 30, 2003.

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SIGNATURES

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

CONSOLIDATED-TOMOKA LAND CO.
(Registrant)

Date: August 7, 2003 By:/s/ William H. McMunn
----------------------------
William H. McMunn, President
and Chief Executive Officer

Date: August 7, 2003 By:/s/ Bruce W. Teeters
----------------------------
Bruce W. Teeters, Senior
Vice President - Finance
and Treasurer

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