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 March 31, 2004

___ 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.)

1530 Cornerstone Blvd., Suite 100
Daytona Beach, Florida 32117
(Address of principal executive offices) (Zip Code)

(386) 274-2202
(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
May 3, 2004

$1.00 par value 5,635,894

1

CONSOLIDATED-TOMOKA LAND CO.

INDEX

Page No.
--------

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 2004 and December 31, 2003 3

Consolidated Condensed Statements of Income -
Three Months Ended March 31, 2004 and 2003 4

Consolidated Statement of Shareholders' Equity -
Three Months Ended March 31, 2004 5

Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 2004 and 2003 6

Notes to Consolidated Condensed Financial Statements 7-10

Item 2. Management's Discussion & Analysis of
Financial Condition and Results of Operations 11-15

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 16

Item 4. Controls and Procedures 16

PART II -- OTHER INFORMATION 17

SIGNATURES 18

2

CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31, December 31,
2004 2003
--------------------------

ASSETS
Cash $ 261,321 $ 1,026,210
Restricted Cash 6,580,093 19,359,098
Investment Securities 5,398,158 3,891,697
Notes Receivable 6,617,918 9,150,217
Real Estate Held for Development and Sale 12,124,324 11,659,581
Intangible Assets 2,183,985 1,270,307
Other Assets 2,344,923 2,665,653
---------- ----------
35,510,722 49,022,763
---------- ----------
Property, Plant and Equipment:
Land, Timber and Subsurface Interests 1,984,529 1,984,529
Golf Buildings, Improvements and Equipment 11,306,356 11,277,853
Income Properties Land, Buildings and Improvements 50,933,591 38,442,481
Other Furnishings and Equipment 882,429 954,575
---------- ----------
Total Property, Plant and Equipment 65,106,905 52,659,438
Less Accumulated Depreciation and Amortization (3,847,970) (3,776,223)
---------- ----------
Net - Property, Plant and Equipment 61,258,935 48,883,215
---------- ----------
TOTAL ASSETS $96,769,657 $97,905,978
========== ==========
LIABILITIES
Accounts Payable $ 183,322 $ 105,922
Accrued Liabilities 3,926,431 3,510,824
Income Taxes Payable 282,827 25,868
Deferred Income Taxes 16,924,209 17,344,499
Deferred Profit 1,131,135 1,131,135
Notes Payable 9,118,287 10,129,951
---------- ----------
TOTAL LIABILITIES 31,566,211 32,248,199
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock 5,634,662 5,623,442
Additional Paid in Capital 1,647,352 1,514,339
Retained Earnings 58,661,208 59,129,692
Accumulated Other Comprehensive Loss (739,776) (609,694)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 65,203,446 65,657,779
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $96,769,657 $97,905,978
========== ==========

3

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)
Three Months Ended
---------------------------
March 31, March 31,
2004 2003
---------------------------

$ $
INCOME:

Real Estate Operations:
Real Estate Sales
Sales and Other Income 1,037,003 3,318,469
Costs and Expenses (719,157) (662,861)
--------- ---------
317,846 2,655,608
--------- ---------
Income Properties
Leasing Revenues and Other Income 900,014 715,737
Costs and Other Expenses (172,480) (130,470)
--------- ---------
727,534 585,267
--------- ---------
Golf Operations
Sales and Other Income 1,391,802 1,272,718
Costs and Other Expenses (1,411,975) (1,361,788)
--------- ---------
(20,173) (89,070)
--------- ---------
Total Real Estate Operations 1,025,207 3,151,805

Profit on Sales of Other Real Estate Interests 36,327 359,112

Interest and Other Income 210,999 257,007
--------- ---------
Operating Income 1,272,533 3,767,924

General and Administrative Expenses (1,485,212) (977,534)
--------- ---------

Income (Loss) Before Income Taxes (212,679) 2,790,390
Income Taxes 81,640 (1,057,691)
--------- ---------
Net Income (Loss) (131,039) 1,732,699
========= =========
PER SHARE INFORMATION:
Basic and Diluted
Net Income (Loss) ($0.02) $0.31
========= =========
Dividends $0.06 $0.05
========= =========

4

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)

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

Balance,
December 31, 2003 $5,623,442 $1,514,339 $59,129,692 ($609,694) $65,657,779

Net Loss (131,039) (131,039) (131,039)

Other Comprehensive Loss:
Cash Flow Hedging
Derivative, Net of Tax (130,082) (130,082) (130,082)
---------
Comprehensive Loss ($261,121)
=========
Stock Options 11,220 133,013 144,233

Cash Dividends
($.06 per share) (337,445) (337,445)

--------- --------- ---------- ---------- -----------
Balance,
March 31, 2004 $5,634,662 $1,647,352 $58,661,208 ($739,776) $65,203,446
========= ========= ========== ========== ===========

5

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

(Unaudited)

Three Months Ended
--------------------------
March 31, March 31,
2004 2003
---------- -----------

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (131,039) $ 1,732,699

Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By Operating Activities:
Depreciation and Amortization 285,459 292,352
Loss on sale of Property, Plant & Equipment 1,410 --
Non Cash Compensation 133,013 51,797

Decrease (Increase) in Assets:
Notes Receivable 2,532,299 153,870
Real Estate Held for Development (464,743) (1,459,397)
Refundable Income Taxes - 96,645
Other Assets 320,730 398,267

Increase (Decrease) in Liabilities:
Accounts Payable 77,400 (172,914)
Accrued Liabilities 285,525 54,389
Income Taxes Payable 256,959 --
Deferred Income Taxes (420,290) 960,262
--------- ---------
Net Cash Provided By Operating Activities 2,876,723 2,107,970
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment (12,643,655) (13,088,017)
Acquisition of Intangible Assets (932,612) --
Decrease in Restricted Cash for Acquisitions
Through the Like-Kind Exchange Process 12,779,005 9,605,234
Net (Increase) Decrease in Investment Securities (1,506,461) 189,808
---------- ----------
Net Cash Used In Investing Activities (2,303,723) (3,292,975)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 1,349,000 1,364,000
Payments on Notes Payable (2,360,664) (847,011)
Cash Proceeds from Exercise of Stock Options 11,220 --
Dividends Paid (337,445) (280,779)
---------- ----------
Net Cash Provided by Financing Activities (1,337,889) 236,210
---------- ----------
Net Decrease In Cash (764,889) (948,795)
Cash, Beginning of Year 1,026,210 1,019,976
---------- ----------
Cash, End of Period $ 261,321 $ 71,181
========== ==========

6

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Principles of Interim Statements. The 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 generally accepted accounting
principles, 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, 2003.

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 Share. Basic earnings (loss) 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 (loss) 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

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

Three Months Ended
March 31, March 31,
2004 2003
---------- ----------

Income (Loss) Available to Common Shareholder:
Net Income (Loss) $ (131,039) $1,732,699
========= =========
Weighted Average Shares Outstanding 5,629,347 5,615,579

Common Shares Applicable to Stock
Options Using the Treasury Stock Method - 12,718
--------- ---------
Total Shares Applicable to Diluted Earnings Per Share 5,629,347 5,628,297
========= =========
Basic and Diluted Income (Loss) Per Share:
Net Income (Loss) ($0.02) $0.31
========= =========

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

March 31, 2004
------------------------------
Due Within
Total One Year
------------------------------

$10,000,000 Line of Credit $ 247,000 $ 247,000
Mortgage Notes Payable 8,871,287 207,451
---------- ---------
$ 9,118,287 $ 454,451
========== =========

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

Year Ending March 31,
---------------------

2005 $ 454,451
2006 1,423,439
2007 240,646
2008 258,705
2009 294,100
2010 & thereafter 6,446,946
----------
$ 9,118,287
==========
In the first three months of 2004 and 2003, interest totaled $173,229
and $177,131 respectively.

8

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. 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

5. Pension Plan. The Company maintains a defined benefit pension
plan. The pension benefits are based primarily on years of service
and average compensation. The benefit formula provides for a life
annuity benefit.

Following are the components of the Net Period Benefit Cost:

Three Months Ended
March 31, March 31,
2004 2003
-------- --------

Service Cost $ 56,988 $ 48,045
Interest Cost 77,416 75,164
Expected Return on Plan Assets (111,056) (223,538)
Net Amortization 3,433 127,580
-------- ---------
Net Periodic Benefit Cost $ 26,781 $ 27,251
========= =========

As previously disclosed in the Company's financial statements for
the year ended December 31, 2003 the Company expects the plan
to be fully funded for 2004. As a result, no contribution is
anticipated for this period.

6. Business Segment Data. Other than the acquisition of income
properties at a cost approximating $13,400,000 and the revenues and
income as herein presented on the Consolidated Condensed Statements
of Income the business segment data has not materially changed from
that presented in the financial statements dated December 31, 2003.

10

ITEM 2. 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
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, 2004, 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.

OPERATIONS OVERVIEW

Consolidated-Tomoka Land Co. (the "Company")is primarily engaged in
real estate land sales and development, investment in income property
and golf operations. The Company has substantial land holdings in the
Daytona Beach, Florida area, including its golf operations. The
Company has property available for the entire spectrum of real estate
uses. Along with land sales, selective parcels are developed
primarily for commercial uses. Over the last two years, sales and
development activity on and around Company owned land has been strong.

11
During the first quarter of 2004, the development of Cornerstone
Office Park was completed with the first office building opened in
January. Development of the Gateway Commerce Center, a 250-acre
industrial, warehouse and distribution park, located east of
Interstate 95 in Daytona Beach, has commenced with the first phase
forecasted for completion prior to year end. The first sale within
the development closed in February 2004. Development, by a third
party, of the second phase of Daytona Beach Auto Mall also commenced
in the first quarter of 2004. These development and sales activities,
along with additional activities such as a development of a
residential community, construction of a surgical and imaging center,
and the relocation of the Halifax Medical Center in future years, on
Company owned or surrounding lands, tend to spur additional buyer
interest and sales opportunities.

A strong backlog of contracts is in place for closing in 2004 and
future years. Management's priority is to convert this backlog into
closings. As closings occur, the Company intends to reinvest proceeds
into income properties. At March 31, 2004, the Company had an
inventory of fourteen income properties with an approximate value of
$52 million, including the value of in place leases. Twelve of these
properties are located throughout central and north Florida with two
properties located in the Atlanta, Georgia market. Two additional
properties valued at $8.4 million are under contract to close in the
second quarter of 2004. As the inventory of these income properties
grows, management will look to diversify through other real estate
investments as opportunities arise.

RISKS AND COMPETITION

The real estate business is subject to a number of economic factors
including the impact of rising and falling interest rates, which
affect the ability of purchasers to obtain financing and population
growth, which impacts supply and demand for new homes, as well as
goods and services; and hence land to meet those needs. Also
impacting the ability to sell land are the availability of roads and
utilities, environmental impacts, density limitations, urban growth
boundaries, and other factors associated with national, regional, or
local economic and political conditions. All of these factors have an
impact on the Company's three lines of business and their success.
Most directly impacted is the real estate sales and development
business currently centered in the Daytona Beach market. Pricing
levels and changes by the Company and its immediate competitors can
affect sales, although the Company generally enjoys a competitive edge
due to low costs associated with long time land ownership and a
significant ownership position in the immediate market.

RESULTS OF OPERATIONS

Summary of Operating Results

For the quarter ended March 31, 2004, the Company posted a loss of
$131,039, equivalent to $.02 per share. This loss compares to the
profit of $1,732,699, equivalent to $.31 per share, reported in the
prior year's same period. The downturn in profitability was primarily
the result of lower land sales volume and higher general and
administrative expenses, substantially due to higher costs associated
with stock option and compensation expense. Real estate sales in
2003's first period included the sale of 365 acres of land for a
residential development. On the positive side, improved results from
income properties, with the addition of new properties throughout
2003, and improved golf operating results were experienced in first
quarter 2004.

12
The Company also uses Earnings Before Depreciation, Amortization 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
-----------------------------------
March 31, March 31,
2004 2003
-----------------------------------

Net Income (Loss) $ (131,039) $1,732,699
Add Back:
Depreciation and Amortization 285,459 292,352
Deferred Taxes (420,290) 960,262
---------- ----------
Earnings (Loss)Before Depreciation, Amortization
and Deferred Taxes $ (265,870) $2,985,313
========== ==========

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, amortization and deferred
income taxes to net income(loss) as they represent non-cash charges.

EBDDT was down for first quarter in 2004 when compared to 2003's same
period 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 2004.
In addition, the collection of a note receivable, which originally had
been treated as an installment sale for tax purposes, triggered the
reversal of a deferred tax item.

RESULTS OF OPERATIONS
The Three Months Ended March 31, 2004
Compared to
The Three Months Ended March 31, 2003

Real Estate Operations
- ----------------------
Real Estate Sales
- -----------------
For the quarter ended March 31, 2004, real estate operating income
totaled $317,846. This income was primarily generated on the sale of
8 acres of land during the period which produced revenues totaling
$1,037,003. During 2003's first quarter, the sale of 374 acres of
land produced income of $2,655,608 on revenues totaling $3,318,469.
The land sales in 2003's first period included the sale of 365 acres
of the Company's western Daytona Beach land holdings to a single buyer
to be used for residential development.

13

Income Properties
- -----------------
Income properties revenues grew 26% in the first quarter of 2004 when
compared to the prior year. This revenue growth, to $900,014, along
with a corresponding 24% growth in profits to $727,534, was primarily
due to the addition of five new properties throughout the year in
2003. Income properties costs and expenses increased 32% during the
period on higher depreciation associated with the new properties.
Revenues and income for 2003's first quarter totaled $715,737 and
$585,267, respectively. The Company acquired three properties at the
end of the first quarter 2004, which had no material effect on
operating results due to the timing of the acquisitions.

Golf Operations
- -----------------
Results from golf operations improved 77% compared to the prior year's
same period results, with a loss of $20,173 posted in 2004's first
three month period. Improvements were made in both golf activities
and food and beverage activities which combined for a 9% growth in
revenues to $1,391,802. A 5% increase in rounds played during the
quarter coupled with a 4% rise in the average greens fee per round
along with improved merchandise sales produced an 11% increase in
revenues from golf activities. Revenues from golf operations in
2003's first quarter totaled $1,272,718 and produced a loss of
$89,070. Golf operations costs and expenses rose 4% for the period on
the increased activity.

General Corporate and Other
- ---------------------------
The release of subsurface rights on 462 acres of land generated
profits of $36,237 during 2004's first three months. For the first
quarter of 2003, releases on 2,950 acres of property produced profits
of $359,112.

Interest and other income totaling $210,999 represents an 18% downturn
when compared to prior year's first quarter interest and other income
of $257,007. This downturn resulted from lower interest earned on
mortgage notes receivable, on lower outstanding balances, and lower
income earned on the sale of fill dirt. Somewhat offsetting these
declines was higher interest earned on funds held for investment in
income properties.

Compensation expenses associated with stock options and stock
appreciation rights were the principal cause of the 52% increase in
general and administrative expenses during the period. Also
contributing to the rise in expenses were costs related to corporate
governance including the documentation of internal controls.

Liquidity and Capital Resources
- -------------------------------
At March 31, 2004, the Company's balance sheet reflected cash of
$6,841,414, of which $6,580,093 was being held for investment in
income properties. This cash represented a decrease of $13,543,894
from the balance held at December 31, 2004. The primary use of these
funds was the purchase of three income properties at a cost
approximating $13,400,000 during the quarter. A portion of the
purchase price was allocated to the value of leases in place on these
properties and is reflected as intangible assets on the balance sheet.

14
Other sources and uses of cash during the quarter included the
collection of notes receivable totaling $2,532,299 and a net
$1,011,684 pay down of notes payable. Dividends of $337,445,
equivalent to $.06 per share were paid during the period. Investment
securities rose $1,506,461 as a significant portion of the funds
collected on the notes receivable were invested in short-term
securities.

Capital requirements for the remainder of 2004 approximate
$10,800,000, including $8,400,000 for the purchase of two additional
income properties, one of which was closed in April. The remainder of
these capital expenditures is planned for development activities
including the continued construction of roads on Company owned lands.
Capital to fund these planned expenditures will be provided from cash
and investment securities on hand, as they mature, operating
activities and existing financing sources currently in place. In
addition to these sources the Company has the ability to borrow
against its income properties, as they are currently free of debt. As
additional funds become available through qualified sales, the Company
expects to invest in additional income properties.

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 quarter of 2004 or 2003 as sales 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 its fair value and the changes in fair value to accounted for as
other comprehensive income or loss. At March 31, 2004, a liability of
$1,204,354 had been established on the Company's balance sheet. Other
comprehensive loss of $739,776 ($1,204,354 net of income taxes of
$464,578) has also been recorded to date.

15

ITEM 3. 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 objective of the Company's asset management
activities is to provide an adequate level of liquidity to fund
operations and capital expansion, while minimizing market risk. The
Company utilizes overnight sweep accounts and short-term investments
to minimize the interest rate risk. The Company does not actively
invest or trade in equity securities. The Company does not believe
that its interest rate risk related to cash equivalents and short-term
investments is material due to the nature of the investments.

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 a $7,671,287 long-term
mortgage note. 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 rate swap agreement during the second quarter
of 2002.

ITEM 4. 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
Company's 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 first fiscal quarter covered by this
report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial
reporting.

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Item 1. Legal Proceedings.

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

Item 2 through 3.

Not Applicable

Item 4. Submission of matters to a vote of security holders.

The annual meeting of the Company's Shareholders was held
on April 28, 2004. The following votes were received for
each of the three nominees for Class I directors, each of
which was elected to a three-year term:

Number of Number of Votes
Nominee votes for Withheld
----------------- --------- ---------------
John C. Adams, Jr. 4,852,696 21,949
Bob D. Allen 4,836,982 37,663
David D. Petersen 4,832,547 42,098

The following votes were received for the nominee for the
Class III Director whose term will run until the 2006
Annual Meeting:
Number of Number of Votes
Nominee votes for Withheld
----------------- --------- ---------------
Gerald L. DeGood 4,840,315 34,330

Item 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 the 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 April 20, 2004, a Form 8-K was furnished
reporting under Item 12 "Results of Operations
and Financial Condition," the Company's earning
release for the quarter ended March 31, 2004.

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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 there
unto duly authorized.

CONSOLIDATED-TOMOKA LAND CO.
(Registrant)

Date: May 7, 2004 By:/s/ William H. McMunn
----------------------------
William H. McMunn, President
and Chief Executive Officer

Date: May 7, 2004 By:/s/ Bruce W. Teeters
----------------------------
Bruce W. Teeters, Senior
Vice President - Finance
and Treasurer

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