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, 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
November 9, 2004

$1.00 par value 5,636,936

1

CONSOLIDATED-TOMOKA LAND CO.

INDEX

Page No.
--------

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 2004 and December 31, 2003 3

Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended
September 30, 2004 and 2003 4

Consolidated Statement of Shareholders' Equity -
Nine Months Ended September 30, 2004 5

Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 2004 and 2003 6

Notes to Consolidated Condensed Financial Statements 11

Item 2. Management's Discussion & Analysis of
Financial Condition and Results of Operations 12-18

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 18

Item 4. Controls and Procedures 19

PART II -- OTHER INFORMATION 20

SIGNATURES 21

2

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED BALANCE SHEET

(Unaudited)
September 30, December 31,
2004 2003
------------ -----------

ASSETS
Cash $ 923,143 $ 1,026,210
Restricted Cash 1,590,973 19,359,098
Investment Securities 3,128,029 3,891,697
Notes Receivable 6,617,918 9,150,217
Real Estate Held for Development and Sale 13,037,190 11,659,581
Intangible Assets 2,765,904 1,270,307
Other Assets 2,365,659 2,665,653
---------- ----------
$30,428,816 $49,022,763
---------- ----------
Property, Plant and Equipment:
Land, Timber and Subsurface Interests $ 1,997,085 $ 1,984,529
Golf Buildings, Improvements and Equipment 11,320,964 11,277,853
Income Properties Land, Buildings and Improvements 58,708,711 38,442,481
Other Furnishings and Equipment 960,346 954,575
---------- ----------
Total Property, Plant and Equipment 72,987,106 52,659,438
Less Accumulated Depreciation and Amortization (4,450,490) (3,776,223)
---------- ----------
Net - Property, Plant and Equipment 68,536,616 48,883,215
---------- ----------
TOTAL ASSETS $98,965,432 $97,905,978
========== ==========
LIABILITIES
Accounts Payable $ 176,125 $ 105,922
Accrued Liabilities 4,378,941 3,510,824
Income Taxes Payable 469,127 25,868
Deferred Income Taxes 17,591,256 17,344,499
Deferred Profit 1,131,135 1,131,135
Notes Payable 9,255,460 10,129,951
---------- ----------
TOTAL LIABILITIES 33,002,044 32,248,199
---------- ----------
SHAREHOLDERS' EQUITY
Common Stock 5,636,936 5,623,442
Additional Paid in Capital 1,751,612 1,514,339
Retained Earnings 59,152,036 59,129,692
Accumulated Other Comprehensive Loss ( 577,196) ( 609,694)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 65,963,388 65,657,779
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $98,965,432 $97,905,978
========== ==========

3

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
--------------------------- -----------------------
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
--------------------------- -----------------------

$ $ $ $
INCOME:

Real Estate Operations:
Real Estate Sales
Sales and Other Income 1,949,400 807,471 4,937,891 4,846,243
Costs and Expenses ( 676,455) (443,087) (2,209,006) (1,680,124)
--------- --------- ---------- ----------
1,272,945 364,384 2,728,885 3,166,119
--------- --------- ---------- ----------
Income Properties
Leasing Revenues and Other Income 1,330,986 877,368 3,441,446 2,419,490
Costs and Other Expenses ( 219,327) (145,132) (605,048) (422,763)
--------- --------- ---------- ----------
1,111,659 732,236 2,836,398 1,996,727
--------- --------- ---------- ----------
Golf Operations
Sales and Other Income 710,610 847,139 3,335,126 3,293,827
Costs and Other Expenses (1,303,469)(1,345,242) (4,206,995) (4,178,599)
--------- --------- ---------- ----------
(592,859) (498,103) (871,869) (884,772)
--------- --------- ---------- ----------
Total Real Estate Operations 1,791,745 598,517 4,693,414 4,278,074

Profit on Sales of Other
Real Estate Interests 38,975 12,500 92,527 535,651
--------- --------- ---------- ----------
Interest and Other Income 164,760 209,393 538,087 694,983
--------- --------- ---------- ----------
Operating Income 1,995,480 820,410 5,324,028 5,508,708

General and Administrative Expenses ( 814,493) ( 997,333) (3,561,892) (3,265,940)
--------- --------- ---------- ----------

Income (Loss) Before Income Taxes 1,180,987 (176,923) 1,762,136 2,242,768
Income Taxes (448,452) 66,323 (669,607) (852,725)
--------- --------- ---------- ----------
Net Income (Loss) 732,535 (110,600) 1,092,529 1,390,043
========= ========= ========== ==========
PER SHARE INFORMATION:
Basic and Diluted
Net Income (Loss) $0.13 ($0.02) $0.19 $0.25
========= ========= ========== ==========
Dividends $0.07 $0.06 $0.19 $0.16
========= ========= ========== ==========

4

CONSOLIDATED-TOMOKA LAND CO.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

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

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

Net Income 1,092,529 1,092,529 $1,092,529

Other Comprehensive Income:
Cash Flow Hedging
Derivative, Net of Tax 32,498 32,498 32,498
---------
Comprehensive Income $1,125,027
=========
Stock Options 13,494 237,273 250,767

Cash Dividends
($.19 per share) (1,070,185) (1,070,185)

--------- --------- ---------- ---------- -----------
Balance,
September 30, 2004 $5,636,936 $1,751,612 $59,152,036 ($577,196) $65,963,388
========== ========== =========== ========== ===========

5

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

(Unaudited)
Nine Months Ended
-----------------------------
September 30, September 30,
2004 2003
------------ ------------

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,092,529 $ 1,390,043

Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Depreciation and Amortization 964,412 802,215
Deferred Income Taxes 246,757 933,422
Loss on Sale of Property, Plant and Equipment 15,146 --
Non Cash Compensation 237,273 498,919

Decrease (Increase) in Assets:
Notes Receivable 2,532,299 909,118
Real Estate Held for Development ( 1,377,609) ( 2,986,039)
Refundable Income Taxes - ( 51,344)
Other Assets 299,994 491,999

Increase (Decrease) in Liabilities:
Accounts Payable 70,203 205,355
Accrued Liabilities 900,615 929,087
Income Tax Payable 443,259 --
---------- ---------
Net Cash Provided By Operating Activities 5,424,878 3,122,775
---------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant, and Equipment (20,539,475) (16,019,849)
Intangible Assets ( 1,589,081) --
Decrease in Restricted Cash for Acquisitions
Through the Like-Kind Exchange Process, Net 17,768,125 11,389,527
Proceeds from Calls or Maturities of Investment Securities 763,668 943,910
---------- ----------
Net Cash Used In Investing Activities ( 3,596,763) ( 3,686,412)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 2,252,000 5,015,000
Payments on Notes Payable ( 3,126,491) ( 4,404,105)
Cash Proceeds from Exercise of Stock Options 13,494 7,863
Dividends Paid ( 1,070,185) ( 898,746)
---------- ----------
Net Cash Used in Financing Activities ( 1,931,182) ( 279,988)
---------- ----------
Net Decrease In Cash ( 103,067) ( 843,625)
Cash, Beginning of Year 1,026,210 1,019,976
---------- ----------
Cash, End of Period $ 923,143 $ 176,351
========== ==========

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 accounting
principles generally accepted in the United States of America, 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 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,
2004 2003 2004 2003
------------ ------------ ------------ ------------

Income Available to Common
Shareholders:
Net Income (Loss) $ 732,535 $(110,600) $1,092,529 $1,390,043
========= ========= ========== ==========
Weighted Average Shares Outstanding 5,636,687 5,621,305 5,633,878 5,617,831

Common Shares Applicable to Stock
Options Using the Treasury Stock Method 59,913 -- 57,034 29,703
--------- --------- ---------- ----------
Total Shares Applicable to Diluted
Earnings Per Share 5,696,600 5,621,305 5,690,912 5,647,534
========= ========= ========== ==========
Basic and Diluted Earnings Per Share:
Net Income (Loss) $0.13 $(0.02) $0.19 $0.25
========= ========= ========== ==========

7

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

September 30, 2004
------------------------------
Due Within
Total One Year
------------------------------

$10,000,000 Line of Credit $ 486,096 $ 486,096
Mortgage Notes Payable 8,769,364 215,200
---------- ---------
$9,255,460 $ 701,296
========== =========

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

Year Ending September 30
------------------------

2005 $ 701,296
2006 1,431,677
2007 249,718
2008 268,359
2009 304,489
2010 & thereafter 6,299,921
---------
$9,255,460
==========
In the first nine months of 2004 and 2003, interest expensed and paid
totaled $519,528 and $532,235 respectively.

4. Stock Options.

In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS"),
"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 as a variable plan 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:

8

4. Stock Options (Continued).

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 Periodic Benefit Cost:

Three Months Ended Nine Months Ended
----------------------- -------------------------
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------

Service Cost $ 56,988 $ 48,045 $ 170,964 $144,135
Interest Cost 77,416 75,164 232,248 225,492
Expected Return on
Plan Assets (111,056) (223,538) (333,168) (670,614)
Net Amortization 3,433 127,580 10,299 382,740
-------- --------- --------- --------
Net Periodic
Benefit Cost $ 26,781 $ 27,251 $ 80,343 $ 81,753
========= ========= ========= ========

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.

9

6. Business Segment Data. Information about the Company's operations in
different segments, is as follows (amounts in thousands):

Nine Months Ended
-----------------------------
September 30, September 30,
2004 2003
------------ ------------

Revenues:
Real Estate $ 4,938 $ 4,846
Income Properties 3,441 2,419
Golf 3,335 3,294
General, Corporate and Other 631 1,231
------ ------
$12,345 $11,790
====== =======
Income (Loss):
Real Estate $ 2,729 $ 3,166
Income Properties 2,836 1,997
Golf ( 872) ( 885)
General, Corporate and Other ( 2,931) ( 2,035)
------ ------
$ 1,762 $ 2,243
====== ======
Identifiable Assets:
Real Estate $21,484 $19,700
Income Properties 62,689 41,743
Golf 9,656 10,064
General, Corporate and Other 5,136 6,496
------ ------
$98,965 $78,003
====== ======
Depreciation and Amortization:
Real Estate $ 31 $ 80
Income Properties 575 372
Golf 310 308
General, Corporate and Other 48 42
------ ------
$ 964 $ 802
====== ======
Capital Expenditures:
Real Estate $ 38 $ 79
Income Properties 20,266 15,909
Golf 43 17
General, Corporate and Other 192 15
------ ------
$20,539 $16,020
====== ======

Income represents income before income taxes. Identifiable assets by
industry are those assets that are used by the Company's operations in
each industry. General corporate assets that are used in the Company's
other operations consist primarily of cash, investment securities, and
property, plant and equipment.

10

7. Income Taxes.

The Company's 2002 Federal Income Tax Return has been examined by the
Internal Revenue Service (IRS). A 'Notice of Proposed Adjustment' has
been received by the Company. The IRS is questioning the deferral of
gains for tax purposes on three transactions, which took place on lands
within the Company's Development of Regional Impact. Nine additional
2002 sales transactions, on which the Company deferred gains were not
contested by the IRS. The proposed adjustment totals approximately $7.7
million of taxable income. If the IRS prevails, the adjustment would
result in federal and state income taxes becoming currently due in the
amount of approximately $2.9 million. The adjustment would not have an
impact on earnings as it would be a balance sheet reclassification from
deferred income taxes payable to current income taxes payable. The
Company and its tax advisors feel that the income tax treatment for these
transactions was appropriate and intend to dispute the proposed
adjustment.

11

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 such forward-looking statements 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 the conversion of the Company's timber lands to income properties,
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.

During the first nine months of 2004, the development of Cornerstone
Office Park was completed, with the first office building opened in
January. Development of the Gateway Commerce Park, a 250-acre industrial,
warehouse and distribution park located on the east side of Interstate 95
in Daytona Beach, has commenced with the completion of the first phase
forecast to occur prior to year end. The first sale within the
development closed in February 2004, with construction of a 60,000 square

12

foot manufacturing and distribution facility near completion. Two
additional 2004 sales in the Gateway Commerce Park, include an 11-acre
site for a 100,000 square-foot office and manufacturing facility and a
10-acre site for a 65,000 square-foot distribution facility. Construction
of the latter two projects is expected to commence in the first quarter
2005. 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
commencement of development of the second phase of the Grand Preserve
residential community, construction of a fourth professional office
building north of the surgical and imaging center, continued construction
of the middle school, and the future relocation of Halifax Medical Center,
all in the LPGA Boulevard corridor, tend to create additional buyer
interest and sales opportunities.

On October 22, 2004, the Company closed on the sale of most of the
remaining land (over 1,000 acres) within the LPGA International community.
The sale to MSKP Volusia Partners, LLC (MSKP), which had previously
purchased 261 acres within the development, was for a sales price
approximating $18,000,000. The sale included acreage around the Legends
golf course, several commercial parcels fronting International Speedway
Boulevard and LPGA Boulevard, and a hotel/resort parcel adjacent to the
LPGA International Clubhouse. MSKP will become the community's master
developer, and a subsidiary of the Company will continue to operate the
golf facilities.

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 September 30, 2004, the Company had an portfolio of
sixteen income properties with an approximate value of $61 million.
Fourteen of these properties are located throughout Florida with two
properties located in the Atlanta, Georgia market. Acquisition of five
of these properties, valued at $21.8 million, closed in the first half of
2004. As the portfolio of these income properties grows, management will
look to diversify through other real estate investments as opportunities
arise.

During August and September 2004, the State of Florida experienced
several hurricanes. The Company's properties experienced minimal damage
from the severe weather. Damage was primarily limited to cosmetic and
tree damage and the temporary interruption of electric and phone service.

During the third quarter of 2004, CVS Corp. (CVS) completed the
acquisition of a portion of the Eckerd pharmacy chain, including all of
the Florida stores. As part of the integration of the Eckerd chain into
its system, some of the newly acquired stores have been or will be closed.

Four of the seven stores owned by the Company have been closed by CVS. The
tenant is obligated on the leases and continues to make lease
payments.

The Company's 2002 Federal Income Tax Return has been examined by the
Internal Revenue Service (IRS). A 'Notice of Proposed Adjustment' has
been received by the Company. The IRS is questioning the deferral of
gains for tax purposes on three transactions, which took place on lands
within the Company's Development of Regional Impact. Nine additional 2002
sales transactions, on which the Company deferred gains were not contested
by the IRS. The proposed adjustment totals approximately $7.7 million of
taxable income. If the IRS prevails, the adjustment would result in
federal and state income taxes becoming currently due in the amount of
approximately $2.9 million. The adjustment would not have an impact on
earnings as it would be a balance sheet reclassification from deferred
income taxes payable to current income taxes payable. The adjustment
would have an impact on earnings before depreciation amortization and
deferred taxes. The Company and its tax advisors feel that the income tax
treatment for these transactions was appropriate and intend to dispute the
proposed adjustment.
13
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

The Three and Nine-Months Ended September 30, 2004 Compared to
The Three and Nine-Months Ended September 30, 2003

Summary of Operating Results

For the quarter ended September 30, 2004, the Company posted a profit of
$732,535, equivalent to $.13 per share. This profit compares to the loss
of $110,600, equivalent to $.02 per share, reported in the prior year's
same period. The upturn in profitability was primarily the result of
higher land sales volume and increased profits from income properties due
to the addition of five new properties in the first half of
2004.

For the first nine months of 2004, profits of $1,092,529, equivalent
to $.19 per share, were realized. Profits of $1,390,043, equivalent to
$.25 per share, were recognized in 2003's same period. Lower land sales
volume in the first six months of the nine month period, offset by
increased profitability from income properties, resulted in the 21%
decrease in profits for the first nine months of 2004. Real estate sales
in 2003's first nine months included the sale of 365 acres of land for a
residential development.

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.

14

Following is the calculation of EBDDT:

Quarter Ended
-----------------------------------
September 30, September 30,
2004 2003
-----------------------------------

Net Income $ 732,535 $ (110,600)
Add Back:
Depreciation and Amortization 348,465 252,037
Deferred Taxes 39,425 241,071
---------- ----------
Earnings Before Depreciation, Amortization
and Deferred Taxes $ 1,120,425 $ 382,508
========== ==========

Nine Months Ended
----------------------------------
September 30, September 30,
2004 2003
----------------------------------

Net Income $ 1,092,529 $ 1,390,043
Add Back:
Depreciation and Amortization 964,412 802,215
Deferred Taxes 246,757 933,422
----------- ----------
Earnings Before Depreciation, Amortization
and Deferred Taxes $ 2,303,698 $ 3,125,680
=========== ==========

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 rose during the third quarter of 2004 when compared to 2003's same
period not only due to improved earnings but also due to the increased
add back of depreciation, with the addition of properties during the year.

Year-to-date through September 30, 2004, EBDDT compared to 2003's same
period was reduced on lower earnings along with the reduced add back of
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 at lower levels 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 in 2004.
Increased depreciation in 2004, with the addition of the income
properties during the year, somewhat offset the lower earnings and
deferred income tax add back.

15

Real Estate Operations
- ----------------------
Real Estate Sales
- -----------------
During the third quarter of 2004, profits from real estate sales
increased 249% over 2003's third quarter results. Profits of $1,272,945
were realized on revenues of $1,949,400 generated on the sale of 56 acres
of land during 2004's third period. This compares to the sale of 8 acres
of property during the prior year's same period, which produced revenues
of $807,471 and profits totaling $364,384.

The Company sold 75 acres of land during 2004's first nine months
compared to the sale of 388 acres of property during 2003's same period.
These sales produced revenues of $4,937,891 and $4,846,243 for 2004 and
2003, respectively, with profits realized totaling $2,728,885 and
$3,166,119, respectively. The profits for 2004 represented a 14%
downturn from the prior year. Sales for 2003 included the sale of 365
aces of the Company's western Daytona land holdings to a single buyer to
be used for residential development.

Income Properties
- -----------------
Income properties produced revenues totaling $1,330,986 and profits
amounting to $1,111,659 during 2004's third period. These amounts
represented a 52% increase over 2003's same period revenues and profits
totaling $877,368 and $732,236, respectively. These gains were the
result of the addition of five new properties during the first half of
2004. Income properties costs and expenses rose 51% on higher
depreciation expense associated with the new properties.

For the nine month period, the addition of the five new properties again
resulted in improved results from income properties. Revenues and profits
rose 42% to $3,441,446 and $2,836,398 in 2004, respectively.
During 2003's first nine months profits totaled $1,996,727 on revenues
amounting to $2,419,490. Depreciation of the new properties accounted
for the 43% increase in income properties costs and expenses.

Golf Operations
- -----------------
During the third quarter of 2004, golf operations experienced a 19%
downturn in profitability, with losses of $592,859 posted during the
period. In 2003's third quarter a loss of $498,103 was recorded. This
downturn can primarily be attributed to the severe weather experienced
in the Daytona Beach area during the months of August and September, as
three hurricanes passed through the area. As a result, revenues declined
16% to $710,610. This compares to revenues of $847,139 recorded in
2003's same period. Both golf and food and beverage activities
experienced the decrease with golf revenues falling 13% and food and
beverage revenues declining 22%. The number of golf rounds played fell
14%, while the average green fee per round played remained constant.
Golf operations costs and expenses decreased 3% during the period on the
lower activity. Only minimal property damage was experienced from the
hurricanes.

Golf operating losses totaled $871,869 during the first nine months of
2004. These losses represented a 1% improvement over the $884,772 loss
for 2003's corresponding period despite the downturn in the third quarter
due to the hurricanes. A 1% increase in revenues was posted in the nine
months with revenue of $3,335,126 recorded in 2004 and revenue of
$3,293,827 generated in 2003's same period. Revenues from golf
activities increased 3% on a 3% rise in the number or rounds played and
stable average green fees per round. Food and beverage revenues fell 3%
during the nine month period as a result of the downturn experienced in
the third quarter.

16

General Corporate and Other
- ---------------------------
Profits on the sale of other real estate interests totaled $38,975 and
$92,527 for the third quarter and first nine months of 2004,
respectively. These profits were generated on the release of subsurface
interests on 1,954 acres of which 875 were released in the third
quarter. During 2003's first nine months, profits on the sale of other
real estate interests amounted to $535,651, of which $12,500 was realized
in the third quarter. The release of subsurface interests on 68 acres
in the third period and 8,243 acres during the nine-month period
generated these profits in 2003.

Lower interest earned on mortgage notes receivable resulted in decreases
from interest and other income of 21% and 23% for the third quarter and
nine months, respectively. Interest income totaled $164,760 for the
quarter and $538,087 year to date through September 2004. These earnings
compared to interest and other income amounting to $209,393 and $694,983
for the corresponding periods of 2003, respectively.

General and administrative expenses decreased 18% for the third quarter
of 2004, primarily the result of lower stock option expenses. This
decline was somewhat offset by increased compensation related expenses.

For the nine-month period, general and administrative expenses rose 9%.
This increase was due to higher costs related to compensation, corporate
governance and depreciation, somewhat offset by lower costs associated
with stock options.

Liquidity and Capital Resources
- -------------------------------
Operating activities provided cash totaling $5,424,878 during the first
nine months of 2004. This cash activity included the collection of notes
receivable amounting to $2,532,299. Investing activities used net funds
of $3,596,763 during the period, including the acquisition of five income
properties for approximately $21.8 million (including $1.6 million of
value associated with the leases in place and shown as intangible
assets on the balance sheet). Funds totaling $19,359,098 on hand at
December 31, 2003 were used to acquire these properties. An additional
$1,590,973 was being held at September 30, 2004, to fund future
acquisitions through the like-kind exchange process. A net debt
reduction of $874,491, along with the payment of dividends totaling
$1,070,185, equivalent to $.19 per share, resulted in the use of funds
from financing activities amounting to $1,931,182. Debt totaled
$9,255,460 at September 30, 2004, including $486,096 outstanding on the
Company's $10,000,000 revolving line of credit.

Capital expenditures for the remainder of 2004 approximate $2.5 million
and include $1.9 million for the purchase of wetland mitigation credits
and $500,000 for the completion of the first phase of the Gateway
Commerce Center. The Company declared on October 27, 2004 a $.07 per
share quarterly dividend payable on December 1, 2004. Cash and
investment securities on hand, as they mature, along with operating
activities and existing financing sources will be used to fund these
capital requirements. 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.

17

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 66, or the Company retains some form of continuing
involvement with the property. No income was deferred for the first nine
months of 2004 or 2003, 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 September 30, 2004, a liability of $939,647 had been
established on the Company's balance sheet and included in accrued
liabilities. Other comprehensive loss of $577,196 ($939,647 net of
income taxes of $362,451) has also been recorded to date.

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 investment
securities 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 its $8,000,000 ($7,569,364
at September 30, 2004) 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 rate swap agreement during
the second quarter of 2002, which effectively fixed the interest rate
paid by the Company.

18

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 third 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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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.

Item 2 through 5.

Not Applicable

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

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.

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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: November 9, 2004 By:/s/ William H. McMunn
----------------------------
William H. McMunn, President
and Chief Executive Officer

Date: November 9, 2004 By:/s/ Bruce W. Teeters
----------------------------
Bruce W. Teeters, Senior
Vice President - Finance
and Treasurer

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