Effective January 1, 2018, the Subsystems business unit was transferred from Others to Analog, MEMS and Sensors Group (AMS). Prior periods have been restated accordingly.
| Net Revenues By Product Group
(in US$ millions) | Q4 2018 | Q3 2018 | Q4 2017 | Q/Q | Y/Y |
| Automotive and Discrete Group (ADG) | $967 | $901 | $821 | 7.3% | 17.8% |
| Analog, MEMS and Sensors Group (AMS) | 988 | 899 | 902 | 9.9 | 9.5 |
| Microcontrollers and Digital ICs Group (MDG) | 689 | 719 | 740 | (4.1) | (6.9) |
| Others | 4 | 3 | 3 | (2.9) | 3.0 |
| Total Net Revenues | $2,648 | $2,522 | $2,466 | 5.0% | 7.4% |
Net revenues increased 5.0% sequentially, 70 basis points lower than the mid-point of the Company's guidance. The revenue growth in Imaging, Automotive and Power Discrete was partially offset by Microcontrollers. On a year-over-year basis, fourth quarter net revenues increased 7.4% on double-digits growth across ADG, in Imaging and in Digital. Year-over-year sales to OEMs and Distribution were up 8.9% and 4.1%, respectively.
Gross profit totaled $1.06 billion, representing a year-over-year increase of 5.6%. Gross margin was 40.0%, 20 basis points higher than the mid-point of the Company's guidance. Gross margin decreased 70 basis points year-over-year, mainly due to negative currency effects, net of hedging, with normal price pressure largely offset by improved product mix and manufacturing efficiency.
Operating income increased 7.9% to $443 million, compared to $411 million in the year-ago quarter, led by ADG's improved profitability. The Company's operating margin increased 10 basis points on a year-over-year basis to 16.8% of net revenues, compared to 16.7% in the 2017 fourth quarter.
By product group, compared with the year-ago quarter:
Automotive and Discrete Group (ADG):
- Revenue grew double-digits, in both Automotive and Power Discrete.
- Operating profit increased by 39.0% to $141 million. Operating margin expanded 220 basis points to 14.6% from 12.4%.
Analog, MEMS and Sensors Group (AMS):
- Revenue grew double-digits in Imaging, while Analog and MEMS grew single-digits.
- Operating profit increased by 7.7% to $202 million. Operating margin was 20.5% compared to 20.8%.
Microcontrollers and Digital ICs Group (MDG):
- Revenue grew double-digits in Digital ICs, while Microcontrollers / Memories decreased.
- Operating profit decreased by 16.1% to $122 million. Operating margin decreased to 17.7% from 19.7%.
Net income and diluted earnings per share increased to $418 million and $0.46, respectively, compared to $308 million and $0.34, respectively, in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
| Trailing 12 Months(1) | ||||||
| US$ in millions | Q4 2018 | Q3 2018 | Q4 2017 | Q4 2018 | Q4 2017 | TTM Change |
| Net cash from operating activities | $656 | $373 | $587 | $1,845 | $1,677 | 10.0% |
| Free cash flow (non-U.S. GAAP) | $363 | $114 | $145 | $533 | $308 | 73.1% |
(1) FY 2017 amounts have been adjusted in Q318 to reflect the impact of new 2018 accounting guidance, which requires, on comparative periods, the reclassification as operating cash flows of the implied interest paid in the settlement of our convertible bonds.
Capital expenditure payments, net of proceeds from sales, were $279 million in the fourth quarter and $1.26 billion for 2018. In the year-ago quarter, capital expenditures, net, were $407 million and $1.3 billion for 2017.
Inventory at the end of the quarter was $1.56 billion, down from $1.59 billion in the prior quarter. Day sales of inventory at quarter-end was 88 days, down from 95 days in the prior quarter.
Free cash flow (non-U.S. GAAP) was $363 million in the fourth quarter, up 150.3% from the year-ago quarter and $533 million for 2018, up 73.1% from 2017.
