[my idea of before the transition: Episode resumes: Squidward:"Oh no what's gonna happen to me?[starts transforming] No...!!!!![What the...? I'm a snail?!? I guess I could live like this but how? [bubble transition to SB and Gary on fence] Squidward: May I join you 2? Both: OK.[episode ends like it does].
I distinctly remember the scene's existence. Not this one but THE one. Here's what I think may have happened.: I guess my memory was off: but i DO recall a similar scene cut if not that one: I think squidward goes into his house and as told is a snail. or:not a full transformation of Squidward but his eye turning into a snail eye and him saying "Meow".