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 September 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
November 1, 2003
$1.00 par value 5,623,342

1

CONSOLIDATED-TOMOKA LAND CO.

INDEX

Page No.
--------

PART I - FINANCIAL INFORMATION

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

Consolidated Condensed Statements of Income -
Three-Months and Nine-Months Ended
September 30, 2003 and 2002 4

Consolidated Statement of Shareholders' Equity -
Nine-Months Ended September 30, 2003 5

Consolidated Condensed Statements of Cash Flows -
Nine-Months Ended September 30, 2003 and 2002 6

Notes to Consolidated Condensed Financial Statements 7-9

Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16

PART II -- OTHER INFORMATION 17

SIGNATURES 18

2

PART I -- FINANCIAL INFORMATION

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED BALANCE SHEETS

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

ASSETS
Cash $ 176,351 $ 1,019,976
Restricted Cash 950,000 12,339,527
Investment Securities 4,069,314 5,013,224
Notes Receivable 8,731,558 9,640,676
Real Estate Held for Development and Sale 10,439,667 7,453,628
Refundable Income Taxes 866,847 815,503
Other Assets 3,192,861 3,684,860
---------- ----------
28,426,598 39,967,394
---------- ----------
Property, Plant, and Equipment:
Land, Timber and Subsurface Interests 2,034,291 1,958,550
Golf Buildings, Improvements & Equipment 11,276,679 11,259,631
Income Properties, Land, Buildings & Improvements 38,876,843 22,964,712
Other Furnishings and Equipment 901,696 886,767
---------- ----------
Total Property, Plant & Equipment 53,089,509 37,069,660
Less Accumulated Depreciation and Amortization ( 3,513,207) ( 2,710,992)
---------- ----------
Net - Property, Plant & Equipment 49,576,302 34,358,668
---------- ----------
TOTAL ASSETS $78,002,900 $74,326,062
========== ==========

LIABILITIES
Accounts Payable $ 509,835 $ 304,480
Accrued Liabilities 3,967,479 3,085,131
Deferred Income Taxes 9,777,150 8,843,728
Notes Payable 9,845,967 9,235,072
---------- ----------
TOTAL LIABILITIES 24,100,431 21,468,411
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock 5,623,442 5,615,579
Additional Paid in Capital 1,334,669 835,750
Retained Earnings 47,662,746 47,171,449
Accumulated Other Comprehensive Loss ( 718,388) ( 765,127)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 53,902,469 52,857,651
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $78,002,900 $74,326,062
========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements.

3

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited) (Unaudited)
Quarter Ended Nine Months Ended
------------------------- --------------------------
September 30,September 30, September 30, September 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------

Income
Real Estate Operations
Sales and Other Income $ 807,471 $7,211,979 $4,846,243 $13,219,154
Costs and Other Expenses ( 443,087) (1,237,675) (1,680,124) ( 2,602,833)
--------- --------- --------- ----------
364,384 5,974,304 3,166,119 10,616,321
--------- --------- --------- ----------

Income Properties
Leasing Revenues and Other Income 877,368 619,900 2,419,490 1,549,318
Costs and Other Expenses ( 145,132) ( 97,694) ( 422,763) ( 297,802)
--------- --------- --------- ----------
732,236 522,206 1,996,727 1,251,516
--------- --------- --------- ----------

Golf Operations
Sales and Other Income 847,139 822,747 3,293,827 3,255,446
Costs and Other Expenses (1,345,242) (1,285,171) (4,178,599) ( 4,001,205)
--------- --------- --------- ----------
( 498,103) ( 462,424) ( 884,772) ( 745,759)
--------- --------- --------- ----------

Total Real Estate Operations 598,517 6,034,086 4,278,074 11,122,078

Profit on Sales of Other
Real Estate Interests 12,500 1,000 535,651 150,866
--------- --------- --------- ----------
Interest and Other Income 209,393 244,286 694,983 710,254
--------- --------- --------- ----------

Operating Income 820,410 6,279,372 5,508,708 11,983,198
General and Administrative Expenses ( 997,333) ( 738,023) (3,265,940) ( 2,528,704)
--------- --------- --------- ----------
Income (Loss) Before Income Taxes ( 176,923) 5,541,349 2,242,768 9,454,494

Income Taxes 66,323 (2,082,945) ( 852,725) ( 3,529,946)
--------- --------- --------- ----------
Net Income (Loss) $( 110,600) $3,458,404 $1,390,043 $ 5,924,548
========= ========= ========= ==========
Per Share Information:
Basic and Diluted
Net Income (Loss) $(0.02) $0.62 $0.25 $1.06
========= ========= ========= ==========

Dividends $ 0.06 $0.05 $0.16 $0.15
========= ========= ========= ==========
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 -- -- 1,390,043 -- 1,390,043 1,390,043

Other Comprehensive
Gain:
Cash Flow Hedging
Derivative,
Net of Tax -- -- -- 46,739 46,739 46,739
---------
Comprehensive Income -- -- -- -- - $1,436,782
=========
Stock Options 7,863 498,919 506,782

Cash Dividends
($.16 per share) -- -- ( 898,746) -- ( 898,746)
--------- --------- ---------- ------- ----------
Balance,
September 30, 2003 $5,623,442 $1,334,669 $47,662,746 $(718,388) $53,902,469
========= ========= ========== ======= ==========

5

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

(Unaudited)
Nine Months Ended
----------------------------
September 30, September 30,
2003 2002
------------ ------------

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,390,043 $ 5,924,548

Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Depreciation and Amortization 802,215 599,496
Loss on Sale of Property, Plant and Equipment -- 11,262
Non Cash Compensation 498,919 --

Decrease (Increase) in Assets:
Notes Receivable 909,118 453,459
Real Estate Held for Development ( 2,986,039) 1,138,000
Refundable Income Taxes ( 51,344) ( 1,259,275)
Other Assets 491,999 ( 665,362)

Increase (Decrease) in Liabilities:
Accounts Payable 205,355 ( 132,421)
Accrued Liabilities 929,087 ( 1,022,261)
Deferred Income Taxes 933,422 4,459,523
---------- ----------
Net Cash Provided By Operating Activities 3,122,775 9,506,969
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment (16,019,849) ( 199,245)
Decrease (Increase) in Restricted Cash for Acquisitions
Through the Like-Kind Exchange Process 11,389,527 ( 9,824,855)
Net Decrease (Increase) in Investment Securities 943,910 ( 114,804)
Proceeds from Sale of Property, Plant and Equipment -- 14,500
---------- ----------
Net Cash Used In Investing Activities ( 3,686,412) (10,124,404)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 5,015,000 9,295,000
Payments on Notes Payable ( 4,404,105) ( 9,430,702)
Cash Proceeds from Exercise of Stock Options 7,863 --
Dividends Paid ( 898,746) ( 842,337)
---------- ----------
Net Cash Used In Financing Activities ( 279,988) ( 978,039)
---------- ----------
Net Decrease in Cash ( 843,625) ( 1,595,474)
Cash, Beginning of Year 1,019,976 2,797,868
---------- ----------
Cash, End of Period $ 176,351 $ 1,202,394
========== ==========

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.

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.

Three Months Ended Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------

Income Available to Common
Shareholders:
Net Income (Loss) $( 110,600) $3,458,404 $1,390,043 $5,924,548
========= ========= ========= =========
Weighted Average Shares Outstanding 5,621,305 5,615,579 5,617,831 5,615,579

Common Shares Applicable to Stock
Options Using the Treasury
Stock Method -- 12,135 29,703 8,896
--------- --------- --------- ---------
Total Shares Applicable to Diluted
Earnings Per Share 5,621,305 5,627,714 5,647,534 5,624,475
========= ========= ========= =========
Basic and Diluted Loss Per Share:
Net Income (Loss) $(0.02) $0.62 $0.25 $1.06
========= ========= ========= =========

7

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

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

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

$ 7,000,000 Line of Credit $ 844,266 $ 844,266
Mortgage Notes Payable 8,969,544 199,981
Industrial Revenue Bond 32,157 32,157
--------- ---------
$9,845,967 $1,076,404
========= =========

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

Year Ending September 30,
------------------------
2004 $1,076,404
2005 215,400
2006 1,431,997
2007 249,398
2008 & Thereafter 6,872,768
---------
$9,845,967
=========

In the first nine months of 2003 and 2002, interest totaled $532,235
and $588,632, respectively.

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.

8

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

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:

5. Recent Accounting Pronouncements. In January 2003, the FASB issued
Interpretation No. 46, "Consolidation of Variable Interest Entities,"
an Interpretation of ARB No. 51 ("FIN46"). This Interpretation
addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The
Interpretation applies immediately to interests in variable interest
entities created after January 31, 2003. For public enterprises, such
as before February 1, 2003, the Interpretation is applied to the
enterprise beginning December 15, 2003. The application of this
Interpretation requires certain disclosures in financial statements
issued after January 31, 2003, if it is reasonably possible that the
Company will consolidate or disclose information about variable
interest entities when the Interpretation become effective. The
Company is currently in the process of reviewing their subsidiaries,
but does not expect the adoption of this Interpretation to have a
material impact on the Company's financial statements.

9

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," "project," 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.

10

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

RESULTS OF OPERATIONS
The Three- and Nine-Months ended September 30, 2003
Compared to
The Three- and Nine-Months ended September 30, 2002

Real Estate Operations
- ----------------------
During the third quarter of 2003 the sale of eight acres of property
generated gross profits of $710,000 and resulted in net profit from
real estate operations of $364,384. These profits from real estate
operations represented a substantial downturn from 2002's third
quarter profits of $5,974,304 earned on the sale of 301 acres,
including the sale of 261 acres of residential property around the
southern golf course within the LPGA mixed-use development.

For the nine-months ended September 30, 2003, profit from real estate
operations totaled $3,166,119 on the sale of 388 acres of property.
This profit also represented a falloff from the corresponding period
of the prior year when the sale of 440 acres of land produced profits
from real estate operations totaling $10,616,321.

Income Properties
- -----------------
Revenues from income properties increased 42% during the third period
of 2003 to $877,368. This compares to $619,900 in 2002's same period.
The increase was the result of the investment in five new properties
in 2003 and one new property in the fourth quarter of 2002. Profits
from income properties rose 40% to $732,236, with profits during
2002's third quarter amounting to $522,206. Costs and expenses
increased 49% to $145,132 in the third period of 2003 as a result of
higher depreciation associated with the new properties.

For the first nine months of 2003, profits from income properties
totaled $1,996,727, a 60% gain over 2002's first nine-month's profits,
which totaled $1,251,516. This gain, along with the corresponding 56%
rise in revenues and 42% climb in costs and expenses, was also
associated with the addition of the five new properties.

Golf Operations
- ---------------
For the three months ended September 30, 2003, golf operations posted
a loss of $498,103. This loss represented an 8% increase over the
loss of $462,424 recorded in 2002's same period. Revenues rose 3% to
$847,139 during the period on higher food and beverage sales and a 6%
increase in average rate per round played. These revenue gains were
offset by a 5% rise in golf costs and expenses. The increase in
expenses was attributable to higher golf course maintenance costs,
along with increased payroll costs from food and beverage activities.

11

Golf Operations (Continued)
- --------------------------
Losses from golf operations rose 19% for the first nine months of 2003
to $884,772. This loss compares to losses amounting to $745,759
during 2002's first nine-month period. Revenues during 2003 totaled
$3,293,827, a modest 1% gain over 2002's revenues amounting to
$3,255,446. This revenue gain was generated from increased food and
beverage activities. Higher food and beverage cost of sales, combined
with increased golf course maintenance, insurance, and land-lease
expenses, resulted in a 4% rise in golf operations costs and expenses
for the nine-month period when compared to the prior year.

General Corporate and Other
- ---------------------------
Profits on the sale of other real estate interests totaled $535,651
for the first nine months of 2003, on the release of subsurface rights
on 8,243 acres. During 2002's same period, profits of $150,866 were
recorded on the sale of seven acres of land and the release of
subsurface interests on 2,500 acres. Profits on the sale of other
real estate interests were minimal for the third quarter of both 2003
and 2002.

A 14% decrease in interest and other income for the third quarter of
2003 and a 2% decline for the nine-month period resulted from lower
interest on investable funds, mortgage notes receivable, and funds
held for investment in like-kind exchange properties.

Higher costs associated with stock options, due to a 51% increase in
the Company's stock price during the first nine months of 2003,
resulted in increases of 35% and 29% in general and administrative
expenses for the quarter and nine-months ended September 30, 2003,
respectively, when compared to the prior year's same periods. Lower
interest expense on lower rates and lower outstanding balances
somewhat offset the increases for both periods.

Net Income and Earnings Before Depreciation and Deferred Taxes
- --------------------------------------------------------------
For the nine-months ended September 30, 2003, net income totaled
$1,390,043, equivalent to $.25 per share. This profit represented a
77% decrease from the net income of $5,924,548, equivalent to $1.06
per share, recorded in 2002's first nine 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 60% gain in profits from
income properties with the addition of 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.

12

Net Income and Earnings Before Depreciation and Deferred Taxes
- --------------------------------------------------------------
Following is the calculation of EBDDT:

Quarter Ended
-------------------------------
September 30, September 30,
2003 2002
------------ ------------

Net Income $(110,600) $3,458,404
Add Back:
Depreciation 252,037 201,428
Deferred Taxes 241,071 2,267,224
-------- ---------
Earnings Before Depreciation and Deferred Taxes $ 382,508 $5,927,056
======== =========

Nine-Months Ended
-------------------------------
September 30, September 30,
2003 2002
------------ ------------
Net Income $1,390,043 $ 5,924,548
Add Back:
Depreciation 802,215 599,496
Deferred Taxes 933,422 4,459,523
--------- ----------
Earnings Before Depreciation and Deferred Taxes $3,125,680 $10,983,567
========= ==========

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, for an understanding
of the Company's operating results.

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

EBDDT was down for both periods of 2003 when compared to 2002 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 it was for the corresponding periods during
2002, as gains on land sales deferred through the like-kind exchange
process were lower in 2003, when compared to 2002's same periods.
The addition of new income properties during the year resulted in
higher depreciation for both periods of 2003.

13

Liquidity and Capital Resources
- -------------------------------
Cash, restricted cash, and investment securities (to the extent they
matured) decreased $13,177,062 during the nine-month period to
$5,195,665 at September 30, 2003. The primary uses of these funds
were $15,900,000 for the acquisition of five income properties, along
with $2,000,000 expended on development of the Cornerstone Office Park
at the Interstate 95/LPGA Boulevard Interchange, and the acquisition
of 950 acres of mitigation lands at a cost of approximately
$1,000,000. Offsetting these cash outflows was approximately
$3,100,000 of cash provided from operating activities. A balance of
$844,265 was outstanding on the Company's $10,000,000 line of credit
at September 30, 2003.

Capital expenditures for the remainder of 2003 are projected to
approximate $1,600,000. These expenditures include $700,000 for the
completion of the site development of the Cornerstone Office Park and
$800,000 for road construction on Company-owned lands adjacent to
Interstate 95. Capital to fund these requirements will be provided by
cash and investment securities (expected to mature), operating
activities, and financing sources in place. Additionally, as funds
become available from qualified sales, triple-net lease income
properties are expected to 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, although national and local economic and political
issues affect prospective development and sales, interest in Company-
owned lands remains relatively strong. Management continues to
focus its efforts on converting its contract backlog to closings,
while developing new contracts.

Included in contract backlog for closing in 2003 is the previously
announced sale to Halifax Medical Center. This contract, which has
been approved by the Board of Directors of both Halifax Medical Center
and the Company, continues to be in the inspection period with
contingencies to be satisfied. The acreage and sales price have been
adjusted to approximately 209 acres at a price of $15,550,471. Per
the contract, the inspection period ends December 1, 2003, with
closing to take place on or before December 30, 2003.

As closings occur, gains will continue to be deferred for income tax
purposes with the investment in triple-net-lease properties through
the like-kind exchange process. In the event such closings on
replacement properties do not occur within the required time frames or
meet other requirements, income taxes relative to the gains
experienced would become currently payable. As the investment in
income properties grows, management will look to diversify the Company
through other real estate investments as opportunities arise.

14

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."
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 No. 66, or the Company retains some form of
continuing involvement with the property. No income was deferred for
the first nine months of 2003 or 2002, as sales have met the
established criteria.

In accordance with SFAS No. 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 September 30, 2003, a
liability of $1,169,534 had been established on the Company's balance
sheet. Other comprehensive loss of $718,388 ($1,169,534 net of income
taxes of $451,146) has also been recorded to date.

Recent Accounting Pronouncements
- --------------------------------
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51 ("FIN
46"). This Interpretation addresses the consolidation by business
enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies immediately to interests
in variable interest entities created after January 31, 2003. For
public enterprises, such as the Company, with a variable interest in a
variable interest entity created before February 1, 2003, the
Interpretation is applied to the enterprise beginning December 15,
2003. The application of this Interpretation requires certain
disclosures in financial statements issued after January 31, 2003, if
it is reasonably possible that the Company will consolidate or
disclose information about variable interest entities when the
Interpretation becomes effective. The Company is currently in the
process of reviewing its subsidiaries, but does not expect the
adoption of this interpretation to have a material impact on the
Company's financial statements.

15

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

As of the end of the period covered by 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 the
design and operation of our disclosure controls and procedures (as
defined in rules 13a-15(e) or 15d-15(e)). 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. There were no changes in the
Company's internal control over financial reporting (as defined in
Rules 13a-15(f) or 15d-15(f)) during the quarter covered by this
report that have materially effected, or are reasonably likely to
materially effect, the Company's internal control over financial
reporting.

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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 October 16, 2003, a Form 8-K was furnished
reporting under Item 12, "Results of Operations
and Financial Condition," the Company's earnings
release for the quarter ended September 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: November 11, 2003 By:/s/ William H. McMunn
----------------------------
William H. McMunn, President
and Chief Executive Officer

Date: November 11, 2003 By:/s/ Bruce W. Teeters
----------------------------
Bruce W. Teeters, Senior
Vice President - Finance
and Treasurer

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