Bridges Transitions Inc.
TSX : BIT

Bridges Transitions Inc.

September 13, 2005 17:42 ET

Bridges Announces Financial Results for the Year Ending June 30, 2005

KELOWNA, BRITISH COLUMBIA--(CCNMatthews - Sept. 13, 2005) - Bridges Transitions Inc. (TSX:BIT) today releases its financial results for the year ending June 30, 2005.

Fiscal 2005 was a rebuilding year for Bridges, following two years of restructuring. During the restructuring, most of the Company's efforts were focused on internal issues relating to expense and capital expenditure reduction and creating a simpler and more streamlined business. With this work largely complete, Bridges turned its attention in Fiscal 2005 to addressing market needs. The goal -- to restore Bridges to long-term growth and profitability.

The strategy for growth is quite simple. Bridges has a large and loyal base of education customers that the Company has been serving for more than two decades. The strategy is to keep and grow these relationships and by doing so become a more important vendor to each of the Company's customers. Specific plans have been delineated around three separate but related initiatives. These 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 meet their business objectives.

During the 2005 year, the Company took tangible steps and made significant investments to establish and build upon its "Retain, Deepen and Extend" initiatives. The highlights of these efforts are as follows:

Retaining Market Share

The very best way for Bridges to "retain" its customer base is to ensure that its products and services are cutting-edge. To this end, the Company invested $1.8 million in Fiscal 2005 in the redevelopment of its flagship Choices™ CD-ROM product into the online Choices Planner™ product. The first version of Choices Planner was deployed at the beginning of Fiscal 2005 and, in spite of some early technical challenges, it received wide customer acclaim. Through the 2005 year, the Company has continued to invest in the development of new and advanced features for Choices Planner. It is anticipated that there will be a large feature release of Choices Planner in Q2 of Fiscal 2006.

During the 2005 year, it became obvious that Bridges planning products' pricing was out of step with the market. The education market continues to be under funded and many of Bridges customers face significant budget challenges. Given the funding environment and the availability of lower priced competitive products, Bridges made the decision to radically alter its pricing system and pricing levels. 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 its customers. The decision to reform and lower pricing reduced revenue in Fiscal 2005 but is expected to allow Bridges to hold its market share while pursuing other growth initiatives and tactics.

Deepening Customer Relationships

Fiscal 2005 provided optimism that Bridges "deepen" strategy was on the right track. During Fiscal year 2004, the Company introduced a third party line of test preparation products. Initial marketing and sales plans were launched, and sales during Fiscal year 2004 were modest. During Fiscal year 2005 the products were re-branded under testGEAR™. In addition, the Company launched its Professional Services Division, providing training and professional development services to its education customers. Market traction for the new products is a positive sign. It confirms that Bridges is moving in the right direction even though the business has yet to achieve revenue growth on a per site basis. Management is convinced that this strategy is sound and intends to continue to follow this course.

Extending Reach

Bridges recognizes that its customer relationships and content have the potential to help other organizations to further their business goals. In these respects, the Company sees great possibilities in the areas of college admission services and workforce development where it believes Bridges can create a significant impact in helping these organizations to identify and attract applicants earlier and in a very cost effective manner. The potential of these opportunities are expected to be fully explored in Fiscal 2006.

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 www.bridges.com. The Company is listed on the Toronto Stock Exchange under the symbol: BIT.



BRIDGES TRANSITIONS INC.
Consolidated Balance Sheets

ASSETS June 30, 2005 June 30,2004
-------------------------------
Current
Cash and cash equivalents $ 2,291,780 $ 4,250,069
Accounts receivable 3,231,267 3,549,827
Prepaid expenses and other 775,929 501,146
Deferred costs 450,204 647,083
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6,749,180 8,948,125
Restricted cash - 200,000
Property and equipment 1,980,436 2,663,385
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$ 8,729,616 $ 11,811,510
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LIABILITIES
Current
Accounts payable and accrued
liabilities $ 1,790,894 $ 2,613,384
Accrued restructuring charge - 511,012
Current portion of long-term debt 285,883 340,800
Deferred revenue 7,102,073 7,540,847
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9,178,850 11,006,043
Long-term debt 127,402 662,200
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9,306,252 11,668,243
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(DEFICIENCY IN ASSETS) SHAREHOLDERS
EQUITY
Common stock 54,076 17,690,721
Contributed surplus 72,650 85,584
Deficit (703,362) (17,633,038)
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(576,636) 143,267
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$ 8,729,616 $ 11,811,510
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The Company ended the year with cash and cash equivalents of $2.3 million, down $2.0 million from the June 30, 2004 balance of $4.3 million. The major component of this reduction included an overall increase of $1.5 million in net working capital other that cash. Other items impacting cash and cash equivalents included $0.4 million to repurchase Company shares under rules for Normal Course Issuer bids, $0.5 million for repayment of long term debt, and $0.25 million for payment of restructuring obligations.



BRIDGES TRANSITIONS INC.
Consolidated Statements of Operations and Deficit

Three months Three months
Year ended Year ended ended ended
-----------------------------------------------------
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
-----------------------------------------------------
REVENUE $ 13,146,610 $ 13,898,955 $ 3,193,990 $ 3,622,446

COSTS OF
REVENUE 4,426,098 4,712,689 920,847 1,090,754
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GROSS MARGIN 8,720,512 9,186,266 2,273,143 2,531,692
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EXPENSES
Sales and
marketing 4,260,651 4,973,078 1,019,639 1,438,217
Product
development 2,138,317 212,466 1,019,289 66,084
General and
administrative 1,857,059 1,771,528 431,434 500,078
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8,256,027 6,957,072 2,470,362 2,004,379
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EARNINGS
(LOSS) BEFORE
RESTRUCTURING
(RECOVERY) CHARGE,
AMORTIZATION,
FOREIGN CURRENCY
EXCHANGE AND
OTHER(LOSS)
INCOME, AND
INCOME TAXES 464,485 2,229,194 (197,219) 527,313

Restructuring
recovery (charge)
and related
impairment of
property and
equipment 74,796 (4,034,246) - (4,034,246)
Amortization
of property
and equipment (734,036) (1,628,457) (187,125) (407,894)
Loss on sale
of property
and equipment - (37,945) - (37,945)
Foreign
currency
exchange and
other (loss)
income (239,125) 22,913 (71,555) 79,213
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LOSS BEFORE
INCOME TAXES (433,880) (3,448,541) (455,899) (3,873,559)
Income tax
(recovery)
expense (28,326) 50,265 63 50,265
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NET LOSS FOR
THE PERIOD (405,554) (3,498,806) (455,962) (3,923,824)
DEFICIT,
BEGINNING OF
PERIOD (17,633,038) (14,171,932) (237,262) (13,718,562)
Capital
reduction 17,633,038 - - -
Interest on
shareholder
loans 18,748 37,700 4,484 9,348
Excess of
purchase cost
over carrying
value of
common shares
cancelled (316,556) - (14,622) -
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DEFICIT, END
OF PERIOD $ (703,362) $(17,633,038) (703,362) (17,633,038)
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Basic and
diluted loss
per share $ (0.03) $ (0.29) $ (0.04) $ (0.32)
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Weighted
average number
of shares used
to calculate
basic and
diluted loss
per share 11,863,980 12,137,423 11,766,001 12,091,803
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Revenue earned in Fiscal 2005 was down by $0.75 million, a 5% drop compared to Fiscal 2004. The revenue declines were predominantly in the Company's Planning Products line. Management attributes the decline in revenue to product price decreases initiated during the year to meet market conditions, disfavourable U.S. currency exchange rates and some sales losses due to customer funding issues.

Positive revenue gains were achieved resulting from the sale of the Company's testGEAR test preparation products as well as services provided by the Company's Professional Services Division. These two sources accounted for approximately 10% of sales invoices issued by the Company in Fiscal 2005.

Costs of revenue decreased by $0.29 million compared to Fiscal 2004. As a percentage of revenue, costs of revenue remained the same at 34% during Fiscal year 2005 compared to Fiscal year 2004.

Operating expenses in Fiscal 2005 were generally lower in all categories than in Fiscal 2004 with the exception of research and development expenditures. In Fiscal 2005, the Company incurred nearly $1.9 million in research and development expenditures, the majority of which were attributed to the development of Choices Planner, the Company's new online planning product.



BRIDGES TRANSITIONS INC.
Consolidated Statements of Cash Flows

Three months Three months
Year ended Year ended ended ended
-----------------------------------------------------
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
-----------------------------------------------------
CASH FLOWS
FROM OPERATING
ACTIVITIES
Loss for the
period $ (405,554) $ (3,498,806) $ (455,962) $ (3,923,824)
Items not
affecting cash
Amortization
of property
and equipment 734,036 1,628,457 187,125 407,894
Impairment of
property and
equipment - 3,289,758 - 3,289,758
Loss on sale
of property
and equipment - 37,945 - 37,945
Non-cash
portion of
restructuring
(recovery)
charge (74,796) 31,908 - -
Stock-based
compensation 56,269 16,381 18,819 11,848
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309,955 1,505,643 (250,018) (176,379)
Changes in
operating
assets and
liabilities:
Accounts
receivable 318,560 91,227 (2,496,573) (2,608,917)
Prepaid
expenses and
other (274,783) (154,612) 77,435 (46,767)
Deferred
costs 196,879 (647,083) (141,154) (647,083)
Accounts
payable and
accrued
liabilities (864,403) 631,904 451,056 1,106,484
Deferred
revenue (438,774) 1,571,951 1,362,108 1,506,350
Accrued
restructuring
charge (436,216) (313,670) (195,740) 337,927
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(1,188,782) 2,685,360 (1,192,886) (528,385)
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CASH FLOW FROM
INVESTING
ACTIVITIES
Purchase of
property and
equipment, net
of related
accounts
payable (78,287) (850,214) 16,774 (776,805)
Proceeds on
sale of
property and
equipment - 135,336 - 124,581
Restricted
cash released 200,000 - - -
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121,713 (714,878) 16,774 (652,224)
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CASH FLOWS
FROM FINANCING
ACTIVITIES
Issuance of
common shares 6,576 65 3 -
Shares
purchased for
cancellation - (8,988) 11,335 7,227
Shares
purchased and
cancelled (395,942) (88,417) (15,657) (55,994)
Interest on
shareholder
loans 18,748 37,700 4,483 9,348
Proceeds from
long-term debt - 264,000 - 264,000
Repayment of
obligations
under
long-term debt (520,602) (341,000) (80,359) (197,000)
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(891,220) (136,640) (80,195) 27,581
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NET CASH
INFLOW
(OUTFLOW)
DURING THE
PERIOD (1,958,289) 1,833,842 (1,256,307) (1,153,028)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 4,250,069 2,416,227 3,548,087 5,403,097
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 2,291,780 $ 4,250,069 2,291,780 4,250,069
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CASH AND CASH
EQUIVALENTS
ARE COMPOSED
OF:
Cash in bank $ 957,270 $ 1,447,320 957,270 1,447,320
Short-term
deposits 1,334,510 2,802,749 1,334,510 2,802,749
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$ 2,291,780 $ 4,250,069 2,291,780 4,250,069
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Supplemental
Cash Flow
Disclosure:

Interest
earned $ 80,650 $ 100,434 15,082 (3,536)
Interest paid $ 44,422 $ 71,391 6,044 14,746
Income taxes
paid $ 56,605 $ 6,490 63 6,490
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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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