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Table of Contents
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
$2.1 billion, and working capital productivity improvements totaling $300 million.
Recent Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for a description of recent accounting pronouncements.
Segment Reviews
Segment sales include transfers to another business segment. Products are transferred between segments on a basis intended to reflect, as nearly as practicable,
the market value of the products. Segment pre-tax operating income (loss) (PTOI) is defined as operating income before income taxes, exchange gains
(losses), corporate expenses and interest. All references to selling prices are on a U.S. dollar (USD) basis, including the impact of currency. A reconciliation
of segment sales to consolidated net sales and segment PTOI to income before income taxes for 2011, 2010 and 2009 is included in Note 21 to the
Consolidated Financial Statements.
AGRICULTURE
(Dollars in millions) 2011 2010 2009
Segment sales $ 9,166 $ 7,845 $ 7,069
PTOI $ 1,527 $ 1,293 $ 1,160
PTOI margin 17% 16% 16%
2011 2010
Change in segment sales from prior period due to:
Selling price 6% 4 %
Volume 10% 8 %
Portfolio / Other 1% (1)%
Total change 17% 11 %
2011 versus 2010 Pioneer seed sales reflect growth primarily in corn and soybean seeds. Volume increases in all regions were underpinned by increased
acres and market position. Pricing gains in all regions reflect the introduction and penetration of new products including Optimum ® AcreMax® 1 into the
North America corn lineup. Crop Protection sales growth reflects both volume and price gains with increases in insect control, weed control and fungicides
product sales, particularly continued strong demand for Rynaxypyr ® insecticide and continued expansion of picoxystrobin fungicides. Sales grew in all
regions, particularly Latin America and Europe.
2011 PTOI and PTOI margin increased on continued new product penetration and leverage on volume growth, partially offset by a $175 million charge
related to Imprelis® claims. Additionally, aligned with the segment's long-term plan, research and development expense increased 15 percent to support
continued growth in breeding, biotechnology and crop chemistry. 2011 and 2010 PTOI each included a licensing agreement charge of $50 million.
2010 versus 2009 Higher sales volume was primarily due to higher Pioneer seed sales in North America with market share gains for corn and soybeans.
Higher global sales of Crop Protection products were led by broad-based recovery across most regions and strong demand for Rynaxypyr® in Asia Pacific and
Latin America. The higher selling prices reflect higher value product mix and pricing actions to offset the increase in raw material costs, along with a
favorable currency impact.
2010 PTOI increased primarily due to the higher sales volume, partially offset by higher spending for growth investments and a $50 million charge for an
upfront payment associated with a Pioneer licensing agreement. PTOI margin was flat compared to 2009.
Outlook Pioneer anticipates continued global growth in corn and soybean markets, as well as pricing gains reflecting innovative technology and the
business' differentiated route to market. Specific innovations include continued penetration of the Optimum® AcreMaxTM 1 products in corn coupled with new
corn hybrids, many of which include AquaMax® technology and new soybean varieties with leading disease packages developed for local needs. Pioneer
anticipates earnings growth in 2012 reflecting strong sales performance, partially offset by higher input costs resulting from commodity price increases and
the weather related impact
21