Bridges Transitions Inc.
TSX : BIT

Bridges Transitions Inc.

May 13, 2005 09:00 ET

Bridges Announces Financial Results for Third Interim Period of Fiscal 2005

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - May 13, 2005) - Bridges Transitions Inc. (TSX:BIT) today releases its financial results for the nine months ending March 31, 2005. The following comments are excerpts from the Company's Interim Report mailed to shareholders and available online at http://www.bridges.com on May 13, 2005.

Bridges overall plan embodies three strategies. They are:

1. To "retain" market share by ensuring that Bridges' products continue to meet the needs of its more than 14,000 subscribing sites;

2. To "deepen" Bridges' relationships with its customers by offering additional high quality products or services and by doing so, become a more important vendor; and

3. To "extend" Bridges' markets by utilizing its unique market position and product assets to help new customer categories to meet their business objectives.

During the past quarter, Bridges continued to build on its "Retain, Deepen and Extend" strategies. The highlights of the Company's efforts in this regard are as follows:

Research and Development

The very best way for Bridges to "retain" its customer base is to ensure that its products and services are cutting-edge. Bridges' commitment in this regard is evidenced by the Company's continued development of new features for its new flagship Choices Planner product which was launched earlier this year. To date in Fiscal 2005, the Company has invested more than $700,000 in the continued development of this product and expects its spending in this area to grow through the balance of Fiscal 2005 and into Fiscal 2006. The Company's products are technically and functionally superior to those of its competitors and the Company intends to widen this gap even further.

Product Pricing

The education market continues to be under funded and many Bridges' customers face significant budget challenges. Given the funding environment and in order to "retain" its customers, it is necessary for Bridges to recognize these budget challenges and respond accordingly. In the past quarter, the Company continued the practice initiated in the previous quarter of reducing and reforming its pricing system. Simply stated, Bridges' new prices make its products easier to afford while the new pricing system is easier to understand and fair and equitable for all of Bridges' customers.

Professional Services Division

This year, as part of the Company's "deepen" strategy, Bridges has invested in the creation of training and professional development products as well as a program of consultative services. The focus of this division is to equip Bridges' customers with stronger methodology in an effort to help them to achieve their objectives more efficiently. This "outcome" based approach signals a shift away from the basic provision of products which the Company believes will become more prevalent in all areas of education.

testGEAR™ Test Preparation Products

Bridges remains committed to generating sales growth from the testGEAR™ test preparation products as a principal action in its plan to "deepen" relationships with customers. testGEAR is a highly effective product that the Company believes meets and exceeds the efficacy of products costing much more. The Company is starting to achieve traction in the market for testGEAR™ and Bridges is convinced that test preparation represents significant revenue growth potential.

Regional Manager Staff Additions

In order to both "retain" customers and "deepen" these relationships it will require a commitment to staff with the very best front-line candidates - people who can help their customers to achieve their objectives and outcomes in the most efficient manner. At the end of this past quarter, the Company hired two additional front-line Regional Managers. Bridges is committed to staff excellence and the Company will continue to upgrade its skills in order to provide exemplary service to its customers.

While the Company is adhering to plan, it is doing so aware of other issues and effects on its business. The most significant of these issues are:

Foreign Exchange

Over the course of this year, there has been a continued weakening of the US dollar. Given that Bridges' US revenues are more than 90% of overall revenues, this continued decline significantly impacts reported revenues and given that the majority of the Company's costs are in Canadian dollars, profitability.

To limit the near term exposure to foreign exchange, the Company has adopted an aggressive currency hedging plan -- giving a high degree of certainty on exchange rates over the near term. This is helpful in the short term, but if continued declines in the US dollar occur, these would have a pronounced impact on the speed with which Bridges is pursuing research and development.

Financial Resources and Expense Management

Bridges continues to be vigilant with respect to the overall expense load. While the Company is investing in the future, operating expenses are being closely monitored. Over the past few years, through restructuring and the adoption of technical efficiencies, the Company has developed a highly efficient cost structure. During a period of intense investment, it is doubly important that Bridges maintains focus on costs and the Company intends to do so.

The Company's balance sheet is strong. Bridges' debt position is small and declining and the Company has sufficient cash reserves. Through careful expense management the Company will maintain balance sheet health while continuing to meet investment plans.

The Company's strategic plan is sound and it is executing on plan. That said, the Company's shareholders need to understand that change in education market spending is slow to occur and requires lead time and budget cycles for that change to be realized. The Company will require shareholders' patient support in the short term as Bridges moves to realize this plan for long term growth and profitability.



BRIDGES TRANSITIONS INC.
Consolidated Interim Financial Statements - Nine Months Ended
March 31, 2005
Balance Sheets (unaudited)
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March 31 June 30
2005 2004
-----------------------------
ASSETS
Current
Cash and cash equivalents $ 3,548,087 $ 4,250,069
Accounts receivable 734,693 3,549,827
Prepaid expenses and other 853,365 501,146
Deferred costs 309,050 647,083
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5,445,195 8,948,125
Restricted cash - 200,000
Property and equipment 2,144,862 2,663,385
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$ 7,590,057 $ 11,811,510
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LIABILITIES
Current
Accounts payable and accrued
liabilities $ 1,300,367 $ 2,613,384
Accrued restructuring charge 195,740 511,012
Current portion of long-term debt 332,822 340,800
Deferred revenue 5,739,966 7,540,847
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7,568,895 11,006,043
Long-term debt 160,820 662,200
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7,729,715 11,668,243
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(DEFICIENCY IN ASSETS) SHAREHOLDERS'
EQUITY
Common stock 43,773 17,690,721
Contributed surplus 53,831 85,584
Deficit (237,262) (17,633,038)
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(139,658) 143,267
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$ 7,590,057 $ 11,811,510
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BRIDGES TRANSITIONS INC.
Consolidated Interim Statements of Operations and Deficit
(Unaudited)
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Three Three Nine Nine
months months months months
Ending ending ending ending
March 31 March 31 March 31 March 31
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REVENUE $ 3,291,331 $ 3,743,051 $ 9,952,620 $ 10,276,509

COSTS OF REVENUE 1,095,025 1,161,980 3,505,251 3,621,935
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GROSS MARGIN 2,196,306 2,581,071 6,447,369 6,654,574
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EXPENSES
Sales and
marketing 974,258 1,163,875 3,241,012 3,534,861
Research and
development 508,320 7,943 1,119,028 146,382
General and
administrative 457,080 387,516 1,425,625 1,271,450
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1,939,658 1,559,334 5,785,665 4,952,693
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EARNINGS BEFORE
RECOVERY OF
RESTRUCTURING
CHARGES,
AMORTIZATION,
FOREIGN
CURRENCY
EXCHANGE AND
OTHER INCOME
(LOSS) AND
INCOME TAXES 256,648 1,021,737 661,704 1,701,881

Recovery of
restructuring
charges - - 74,796 -
Amortization of
property and
equipment (183,051) (401,928) (546,911) (1,220,563)
Foreign
currency
exchange and
other income
(loss) 110,529 58,424 (167,570) (56,300)
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INCOME BEFORE
INCOME TAXES 184,126 678,233 22,019 425,018
Income tax
recovery (32,265) - (28,389) -
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NET EARNINGS
FOR THE PERIOD 216,391 678,233 50,408 425,018
DEFICIT,
BEGINNING OF
PERIOD (358,521) (14,406,143) (17,633,038) (14,171,932)
Capital
reduction - - 17,633,038 -
Interest on
shareholder
loans (4,638) 9,348 14,264 28,352
Excess of
purchase cost
over carrying
value of common
shares
cancelled (90,494) - (301,934) -
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DEFICIT, END OF
PERIOD $ (237,262)$(13,718,562)$ (237,262)$(13,718,562)
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Basic earnings
per share $ 0.02 $ 0.06 $ 0.00 $ 0.03
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Diluted
earnings per
share $ 0.02 $ 0.06 $ 0.00 $ 0.03
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Weighted
average number
of shares used
to calculate
basic earnings
per share 11,808,583 12,141,183 11,896,521 12,152,657
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Weighted
average number
of shares used
to calculate
diluted
earnings per
share 11,995,723 12,144,262 12,083,661 12,155,736
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BRIDGES TRANSITIONS INC.
Consolidated Interim Statements of Cash Flows
(unaudited)
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Three Three Nine Nine
months months months months
Ending ending ending ending
March 31 March 31 March 31 March 31
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2005 2004 2005 2004
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CASH FLOWS FROM
OPERATING
ACTIVITIES
Earnings for
the period $ 216,391 $ 678,233 $ 50,408 $ 425,018
Items not
affecting cash
Amortization of
property and
equipment 183,051 401,928 546,911 1,220,563
Non-cash
portion of
restructuring
(recovery)
charge - - (74,796) 31,908
Stock-based
compensation 16,708 4,533 37,450 4,533
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416,150 1,084,694 559,973 1,682,022
Changes in
operating
assets and
liabilities:
Accounts
receivable 603,251 752,036 2,815,133 2,700,144
Prepaid
expenses and
other 5,268 (52,057) (352,218) (107,845)
Deferred costs 72,578 - 338,033 -
Accounts
payable and
accrued
liabilities (211,594) 61,884 (1,315,459) (474,580)
Deferred
revenue (1,951,493) (2,026,544) (1,800,882) 65,601
Accrued
restructuring
charge (68,233) (25,985) (240,476) (651,597)
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(1,134,073) (205,972) 4,104 3,213,745
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CASH FLOW FROM
INVESTING
ACTIVITIES
Purchase of
property and
equipment, net
of related
accounts
payable 620 (35,481) (95,061) (73,409)
Proceeds on
sale of
property and
equipment - - - 10,755
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620 (35,481) (95,061) (62,654)
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CASH FLOWS FROM
FINANCING
ACTIVITIES
Issuance of
common shares
on exercise of
stock
options 4,936 - 6,573 65
Shares
purchased for
cancellation (11,335) (16,215) (11,335) (16,215)
Shares
purchased and
cancelled (75,860) - (380,285) (32,423)
Interest on
shareholder
loans (4,638) 9,348 14,264 28,352
Restricted Cash 200,000 - 200,000 -
Repayment of
obligations
under long-term
debt (280,217) (72,000) (440,242) (144,000)
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(167,114) (78,867) (611,025) (164,221)
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NET CASH
(OUTFLOW)
INFLOW DURING
THE PERIOD (1,300,567) (320,320) (701,982) 2,986,870
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 4,848,654 5,723,417 4,250,069 2,416,227
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 3,548,087 $ 5,403,097 $ 3,548,087 $ 5,403,097
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Supplemental
Cash Flow
Disclosure:
Interest earned $ 21,825 $ 38,898 $ 65,568 $ 103,970
Interest paid $ 9,430 $ 17,095 $ 38,378 $ 56,645
Income taxes
paid $ 1,482 $ - $ 56,542 $ -
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About Bridges

Bridges is the leading provider of software-based and online education planning, career exploration, and high school/college test prep resources designed to help students achieve education and career success. Over 14,000 schools and other agencies across the U.S. and Canada use Bridges' products and services. Bridges serves the needs of more than one million annually graduating high school students seeking educational or career planning assistance.

For more information, visit http://www.bridges.com. The Company is listed on the Toronto Stock Exchange under the symbol: BIT.

Forward-Looking Statements

The foregoing includes forward-looking statements which are based on management's beliefs as well as on a number of assumptions concerning future events made by and information currently available to management.

These forward-looking statements relate to, among other things, plans and timing for the introduction or enhancement to the Company's services and products; customer demand for its products and services; expectations concerning future revenue and earnings; control of costs and expenses; loss of key employees; stock market volatility; changes in laws and regulations; Bridges' ability to compete successfully and adapt to technological advances and changing industry standards; currency exchange rate fluctuations; economic, political, and other risks associated with international sales and operations; U.S. government regulation; price and product competition; the ability to implement in a timely manner the Company's restructuring plans; the ability to form and implement alliances, and other factors and risks.

All forward-looking statements in this news release are based on management's reasonable beliefs, intentions, and expectations with respect to future events and are subject to certain risks, uncertainties, and assumptions as of the date of this release. In light of the many risks and uncertainties, readers are cautioned not to put undue reliance on such forward-looking statements which are not a guarantee of performance and are subject to a number of uncertainties and other factors -- many of which are outside of Bridges' control -- that could cause actual results, performances or achievements of Bridges to differ materially from any future results, performances or achievements expressed or implied by such forward-looking statements. The Company cannot give assurance that the forward-looking statements contained in this news release will be realized. Bridges assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

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