Gross profit totaled $1.33 billion, a year-over-year increase of 38.7%. Gross margin of 41.6% increased 560 basis points year-over-year, mainly driven by improved product mix, manufacturing efficiencies, favorable pricing and lower unloading charges, partially offset by negative currency effects, net of hedging. Third quarter gross margin was 60 basis points above the mid-point of the Company’s guidance mainly due to product mix.

Operating income increased 84.0% to $605 million, compared to $329 million in the year-ago quarter. The Company’s operating margin increased 660 basis points on a year-over-year basis to 18.9% of net revenues, compared to 12.3% in the 2020 third quarter.

By product group, compared with the year-ago quarter:

Automotive and Discrete Group (ADG):

• Revenue increased in both Automotive and in Power Discrete.
• Operating profit increased by 120.6% to $108 million. Operating margin was 10.8% compared to 5.8%.

Analog, MEMS and Sensors Group (AMS):

• Revenue increased in Analog, MEMS and Imaging.
• Operating profit increased by 73.8% to $304 million. Operating margin was 24.0% compared to 17.5%.

Microcontrollers and Digital ICs Group (MDG):

• Revenue increased in Microcontrollers and decreased in RF Communications.
• Operating profit increased by 54.9% to $220 million. Operating margin was 23.9% compared to 17.4%.

Net income and diluted earnings per share increased to $474 million and $0.51, respectively, compared to $242 million and $0.26, respectively, in the year-ago quarter.

Cash Flow and Balance Sheet Highlights

Capital expenditure payments, net of proceeds from sales, were $437 million in the third quarter and $1.28 billion for the year-to-date period. In the year-ago quarter, capital expenditures, net, were $319 million.

Inventory at the end of the third quarter was $1.97 billion, compared to $1.93 billion in the year-ago quarter. Day sales of inventory at quarter-end was 96 days compared to 103 days in the year-ago quarter.