Volcano Corporation (Volcano) has signed a termination agreement with its Japan distributor, Goodman Co. Ltd. (Goodman), effective July 8, 2009. The termination agreement would enable Volcano to accelerate its transition to a direct sales force in the market to support its intravascular ultrasound (IVUS) and Functional Measurement or FM consoles and disposables, as well as products currently in development.
The key financial aspects of the agreement include:
Volcano Japan has agreed to pay Goodman JPY350 million, plus 5% Japanese consumption tax (a total of approximately $3.9 million), between July 15 and August 31, 2009. Volcano Japan plans to allocate this entire amount to the purchase of IVUS consoles, and depreciate it over the next ten quarters.
Volcano Japan has agreed to repurchase from Goodman any remaining IVUS and FM disposables on August 31, 2009. While Volcano does not expect such repurchases to be financially material, to the extent there is a buyback of disposables, it is expected to occur in the third quarter and be treated as contra revenue.
Volcano has also agreed to pay Goodman commissions based on net receipts of Volcano Japan from the sale of products to customers transferred from Goodman to Volcano from July 1, 2009 to December 31, 2009. Volcano guarantees a minimum total commission of JPY310 million (approximately $3.3 million). The commissions will be expensed as they occur.
We want to express our appreciation to Goodman for their support over the past several years and their cooperation during this process. They have been a good partner and helpful in communicating this change to customers and they will continue to assist us with this transition. Both parties believe that this is a fair agreement that facilitates a smooth transition and enables Volcano to continue delivering its leading-edge offerings to patients in Japan and the clinicians that treat them, Huennekens noted.
Volcano develops, manufactures and commercializes a broad suite of devices designed to facilitate endovascular procedures, enhance the diagnosis of vascular and structural heart disease and guide optimal therapies.