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(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (312) 630-1900

The number of shares outstanding of each of the issuer's classes of common stock, as of June 30, 2023, is 105,275,400 Common Shares, $.01 par value, and 7,482,300 Series A Common Shares, $.01 par value.

The following discussion and analysis compares Telephone and Data Systems, Inc.’s (TDS) financial results for the three and six months ended June 30, 2023, to the three and six months ended June 30, 2022. It should be read in conjunction with TDS’ interim consolidated financial statements and notes included herein, and with the description of TDS’ business, its audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) included in TDS’ Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 2022. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers. 

This report contains statements that are not based on historical facts, which may be identified by words such as “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects,” “will” and similar expressions. These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements. See the disclosure under the heading Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement elsewhere in this report for additional information.

The accounting policies of TDS conform to accounting principles generally accepted in the United States of America (GAAP). However, TDS uses certain “non-GAAP financial measures” in the MD&A. A discussion of the reasons TDS determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with GAAP are included in the disclosure under the heading Supplemental Information Relating to Non-GAAP Financial Measures within the MD&A of this report.

TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities. In pursuing this mission, TDS seeks to grow its businesses, create opportunities for its associates, support the communities it serves, and build value over the long term for its shareholders. Across all of its businesses, TDS is focused on providing exceptional customer experiences through best-in-class services and products and superior customer service. Since its founding, TDS has been committed to bringing high-quality communications services to rural and underserved communities. TDS continues to make progress on developing and enhancing its Environmental, Social and Governance (ESG) program, including the publication of the most recent TDS ESG Report in July 2023, which is available on the TDS website.

TDS’ long-term strategy calls for the majority of its operating capital to be reinvested in its businesses to strengthen their competitive positions and financial performance, while also returning value to TDS shareholders primarily through the payment of a regular quarterly cash dividend.

TDS plans to build shareholder value by continuing to execute on its strategies to build strong, competitive businesses providing high-quality, data-focused services and products. Strategic efforts include:

▪UScellular offers economical and competitively priced service plans and devices to its customers and is focused on increasing revenues from sales of related products such as device protection plans and from new services such as fixed wireless home internet. In addition, UScellular is focused on increasing revenues from prepaid plans, tower rent revenues and expanding its solutions available to business and government customers. 

▪UScellular continues to enhance its network capabilities, including by deploying 5G technology. 5G technology helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency. Through the end of 2022, UScellular's 5G deployment has predominantly used low-band spectrum, and as of December 31, 2022, UScellular has launched 5G services in portions of substantially all of its markets. During 2023, UScellular is continuing to invest in 5G with a focus on deployment of mid-band spectrum, which will largely overlap portions of areas already covered with low-band 5G service. 5G service deployed over mid-band spectrum will further enhance speed and capacity for UScellular's mobility and fixed wireless services. In addition, a portion of UScellular's mid-band spectrum is not expected to be available for use until late 2023.

▪UScellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, UScellular may seek attractive opportunities to acquire wireless spectrum, including pursuant to Federal Communications Commission (FCC) auctions.

▪TDS Telecom strives to be the preferred broadband provider in its markets with the ability to provide value-added bundling with video and voice service options. TDS Telecom focuses on driving growth by investing in fiber deployment primarily in its expansion markets and also in its incumbent markets that have historically utilized copper and coaxial cable technologies.

▪TDS Telecom seeks to grow its operations by creating clusters of markets in attractive, growing locations and may seek to acquire and/or divest of assets to support its strategy.

On August 4, 2023, TDS and UScellular announced that the Boards of Directors of both companies have decided to initiate a process to explore a range of strategic alternatives for UScellular.

The following is a list of definitions of certain industry terms that are used throughout this document:

▪5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.

▪Account – represents an individual or business financially responsible for one or multiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.

▪Alternative Connect America Cost Model (A-CAM) – a USF support mechanism for certain carriers, which provides revenue support through 2028. This support comes with an obligation to build defined broadband speeds to a certain number of locations.

▪Auction 107 – Auction 107 was an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and concluded in February 2021.

▪Broadband Connections – refers to the individual customers provided internet access through various transmission technologies, including fiber, coaxial and copper.

▪Broadband Penetration – metric which is calculated by dividing total broadband connections by total service addresses.

▪Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions.

▪Churn Rate – represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

▪Connected Devices – non-handset devices that connect directly to the UScellular network. Connected devices include products such as tablets, wearables, modems, and hotspots.

▪EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.

▪Enhanced Alternative Connect America Cost Model (EA-CAM) – a USF support mechanism for certain carriers, which provides revenue support through 2038. This support comes with an obligation to provide 100/20 Mbps service to a certain number of locations.

▪Expansion Markets – markets utilizing fiber networks in areas where TDS does not serve as the incumbent service provider.

▪Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment and less Cash paid for software license agreements. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.

▪Gross Additions – represents the total number of new connections added during the period, without regard to connections that were terminated during that period.

▪Incumbent Markets – markets where TDS is positioned as the traditional local telephone or cable company.

▪IPTV – internet protocol television.

▪Net Additions (Losses) – represents the total number of new connections added during the period, net of connections that were terminated during that period.

▪OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.

▪Postpaid Average Revenue per Account (Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

▪Postpaid Average Revenue per User (Postpaid ARPU) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid connections and by the number of months in the period.

▪Residential Revenue per Connection – metric which is calculated by dividing total residential revenue by the average number of residential connections and by the number of months in the period.

▪Retail Connections – individual lines of service associated with each device activated by a postpaid or prepaid customer. Connections are associated with all types of devices that connect directly to the UScellular network.

▪Service Addresses – number of single residence homes, multi-dwelling units, and business locations that are capable of being connected to the TDS network, based on best available information.

▪Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.

▪Video Connections – represents the individual customers provided video services.

▪Voice Connections – refers to the individual circuits connecting a customer to TDS' central office facilities that provide voice services or the billable number of lines into a building for voice services.

1Consists of corporate and other operations and intercompany eliminations.

2Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

3Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.

Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level.

Equity in earnings of unconsolidated entities represents TDS’ share of net income from entities in which it has a noncontrolling interest and that are accounted for using the equity method or the net asset value practical expedient. TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $18 million and $16 million for the three months ended June 30, 2023 and 2022, respectively and $38 million and $34 million for the six months ended June 30, 2023 and 2022, respectively. See Note 8 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Interest expense increased for the three and six months ended June 30, 2023 due primarily to interest rate increases on variable rate debt. See Market Risk for additional information regarding maturities of long-term debt and weighted average interest rates.

Income tax expense decreased for the three and six months ended June 30, 2023 due primarily to the decrease in Income before income taxes, partially offset by increases to state valuation allowances that reduce the net value of deferred tax assets.

In April 2023, TDS received a federal income tax refund of $57 million related to the 2020 net operating loss carryback enabled by the CARES Act.

Net income attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income, the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income and other TDS noncontrolling interests.

*Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

UScellular owns, operates, and invests in wireless markets throughout the United States. UScellular is an 83%-owned subsidiary of TDS. UScellular’s strategy is to attract and retain customers by providing a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a community focus. 

▪Serves customers with 4.7 million retail connections including 4.2 million postpaid and 0.5 million prepaid connections

▪Operates in 21 states

▪Employs approximately 4,600 associates

▪4,341 owned towers

▪6,952 cell sites in service

UScellular had net handset losses during the three and six months ended June 30, 2023, due to aggressive industry-wide competition.

Total postpaid handset net losses decreased for the three and six months ended June 30, 2023, when compared to the same period last year due primarily to lower defections as a result of improvements in voluntary churn.

Total postpaid connected device net additions increased for the three and six months ended June 30, 2023, when compared to the same period last year due primarily to higher demand for fixed wireless home internet as well as a decrease in tablet churn.

Postpaid ARPU and Postpaid ARPA increased for the three and six months ended June 30, 2023, when compared to the same period last year, due to favorable plan and product offering mix and an increase in device protection plan revenues. These increases were partially offset by an increase in promotional discounts.

1Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

2Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.

▪Retail Service - Postpaid and prepaid charges for voice, data and value-added services and cost recovery surcharges

▪Inbound Roaming - Consideration from other wireless carriers whose customers use UScellular’s wireless systems when roaming

▪Other Service - Amounts received from the Federal USF, tower rental revenues, miscellaneous other service revenues and Internet of Things (IoT)

Equipment revenues consist of:

▪Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors

Retail service revenues decreased for the three and six months ended June 30, 2023, as a result of a decrease in average postpaid and prepaid connections, partially offset by an increase in Postpaid ARPU as previously discussed in the Operational Overview section.

Inbound roaming revenues decreased for the three and six months ended June 30, 2023, primarily driven by lower data revenues resulting from lower rates. UScellular expects inbound roaming revenues to continue to decline for the remainder of 2023 relative to prior year levels, due primarily to continued reductions in roaming rates.

Equipment sales revenues decreased for the three and six months ended June 30, 2023, due primarily to a decline in smartphone upgrades and gross additions.

Wireless service providers have been aggressive promotionally and on price in order to attract and retain customers. This includes both traditional carriers and cable companies operating through mobile virtual network operators (MVNOs). UScellular expects promotional aggressiveness by traditional carriers and pricing pressures from cable companies to continue during 2023. Operating revenues and Operating income have been negatively impacted in current and prior periods, and may be negatively impacted in future periods, by competitive promotional offers to new and existing customers.

Total operating expenses for the six months ended June 30, 2023 include $9 million of severance and related expenses associated with a reduction in workforce that was recorded in the first quarter of 2023. These severance expenses are included in System operations expenses and Selling, general and administrative expenses.

System operations expenses decreased for the three and six months ended June 30, 2023, due primarily to decreases in roaming and customer usage expenses, partially offset by an increase in maintenance, utility, and cell site expenses.

Cost of equipment sold decreased for the three and six months ended June 30, 2023, due primarily to a decline in smartphone upgrades and gross additions.

Selling, general and administrative expenses were essentially flat for the three months ended June 30, 2023, due primarily to increases in advertising expenses offset by decreases in agent expenses.

Selling, general and administrative expenses increased for the six months ended June 30, 2023 due primarily to an increase in advertising expenses and costs related to the reduction in workforce.

Depreciation, amortization and accretion expenses decreased for the three and six months ended June 30, 2023 due primarily to enhancements that extended the useful life of a software platform.

TDS Telecom owns, operates and invests in high-quality networks, services and products in a mix of rural and suburban communities throughout the United States. TDS Telecom is a wholly-owned subsidiary of TDS and provides a wide range of broadband, video and voice communications services to residential, commercial and wholesale customers, with the constant focus on delivering superior customer service.

▪Serves 1.2 million connections in 32 states TDS Telecom increased its service addresses 9% from a year ago to 1.6 million as of June 30, 2023 through network expansion.

▪Employs approximately 3,500 associates

Total connections decreased due to legacy voice, video, and competitive local exchange carrier (CLEC) connections declines, partially offset by broadband connection growth.

A majority of TDS Telecom's residential customers take advantage of bundling options as 59% of customers subscribe to more than one service.

1Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

2Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.

•Broadband services

•Video services, including IPTV, traditional cable programming and satellite offerings

•Voice services

•High-speed and dedicated business internet services

•Video services

•Voice services

•Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom's networks

•Federal and state regulatory support, including A-CAM

Residential revenues increased for the three and six months ended June 30, 2023, due primarily to price increases and growth in broadband connections, partially offset by promotional activity and a decline in video and voice connections.

Commercial revenues decreased for the three and six months ended June 30, 2023, due primarily to declining connections in CLEC markets.

Cost of services increased for the three and six months ended June 30, 2023, due primarily to higher employee-related expenses, plant and maintenance costs, and video programming costs.

Selling, general and administrative expenses increased for the three and six months ended June 30, 2023, due primarily to increases to support current and future growth, including employee-related expenses and advertising and marketing expenses.

Depreciation, amortization and accretion increased for the three and six months ended June 30, 2023, due primarily to increased capital expenditures on new fiber assets and customer-related equipment.

TDS and its subsidiaries operate capital-intensive businesses. TDS incurred negative free cash flow in the six months ended June 30, 2023, has incurred negative free cash flow in prior periods, and expects to continue to incur negative free cash flow in future periods. In the past, TDS’ existing cash and investment balances, funds available under its financing agreements, preferred share offerings, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets, pay dividends and to fund acquisitions. There is no assurance that this will be the case in the future.

TDS believes that existing cash and investment balances, funds available under its financing agreements, its ability to obtain future external financing, potential asset dispositions and expected cash flows from operating and investing activities will provide sufficient liquidity for TDS to meet its day-to-day operating needs and debt service requirements. TDS will continue to monitor the rapidly changing business and market conditions and is taking and intends to take appropriate actions, as necessary, to meet its liquidity needs, including reducing its planned capital expenditures. See Market Risk for additional information regarding maturities of long-term debt.

TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of telecommunications services, wireless spectrum license acquisitions, capital expenditures, agreements to purchase goods or services, leases, debt service requirements, repurchases of shares, payment of dividends, or making additional investments, including new technologies and fiber deployments. It may be necessary from time to time to increase the size of its existing credit facilities, to amend existing or put in place new credit agreements, to obtain other forms of financing, or to divest assets in order to fund potential expenditures. In addition, TDS has elected to slow the pace and reduce the size of its capital expenditures, and may continue to do so in the future, as a means to lower its funding needs.

Cash and cash equivalents include cash and money market investments. The primary objective of TDS’ Cash and cash equivalents investment activities is to preserve principal. TDS does not have direct access to UScellular cash.

In addition to Cash and cash equivalents, TDS and UScellular had available undrawn borrowing capacity (taking into account debt covenant restrictions related to compliance with the Consolidated Leverage Ratio) from the following debt facilities at June 30, 2023. See the Financing section below for further details.

			TDS						UScellular
(Dollars in millions)
Revolving Credit Agreement			$	274					$	300
Receivables Securitization Agreement			—						210
Repurchase Agreement			—						200
Total undrawn borrowing capacity			274						710
Debt covenant restrictions			—						85
Total available undrawn borrowing capacity			$	274					$	625

TDS has a revolving credit agreement with maximum borrowing capacity of $400 million. Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until maturity in July 2026. During the six months ended June 30, 2023, TDS borrowed $175 million and repaid $50 million under the agreement. As of June 30, 2023, TDS' outstanding borrowings under the agreement were $126 million, including letters of credit, and the unused borrowing capacity was $274 million.

TDS has a $150 million term loan credit facility with Export Development Canada to finance (or refinance) imported equipment, including equipment purchased prior to entering the term loan facility agreement. During the six months ended June 30, 2023, TDS borrowed $100 million under the agreement. As of June 30, 2023, the outstanding borrowings under the agreement were $150 million, which is the full amount available under the agreement with repayment due in December 2027.

UScellular, through its subsidiaries, has a receivables securitization agreement to permit securitized borrowings using its equipment installment plan receivables. Amounts under the agreement may be borrowed, repaid and reborrowed from time to time until March 2024. Unless the agreement is amended to extend the maturity date, repayments based on receivable collections commence in April 2024. The outstanding borrowings bear interest at a rate of the lender's cost of funds (which has historically tracked closely to Secured Overnight Financing Rate (SOFR)) plus 0.90%. During the six months ended June 30, 2023, UScellular borrowed $115 million and repaid $150 million under the agreement. As of June 30, 2023, the outstanding borrowings under the agreement were $240 million and the unused borrowing capacity was $210 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement. As of June 30, 2023, $38 million of the outstanding borrowings were classified as Current portion of long-term debt in the Consolidated Balance Sheet, based on an estimate of required repayments within the next twelve months if the agreement is not extended. However, UScellular intends to extend the maturity date of the facility, at which time this amount would be reclassified as Long-term debt, net in the Consolidated Balance Sheet.

UScellular, through a subsidiary (the repo subsidiary), has a repurchase agreement to borrow up to $200 million, subject to the availability of eligible equipment installment plan receivables and the agreement of the lender. In January 2023, UScellular amended the repurchase agreement to extend the expiration date to January 2024. The outstanding borrowings bear interest at a rate of the lender's cost of funds (which has historically tracked closely to SOFR) plus 1.35%. During the six months ended June 30, 2023, the repo subsidiary repaid $60 million under the agreement. As of June 30, 2023, there were no outstanding borrowings under the agreement and the unused borrowing capacity was $200 million.

The TDS and UScellular revolving credit agreements, term loan agreements, export credit financing agreements and the UScellular receivables securitization agreement require TDS or UScellular, as applicable, to comply with certain affirmative and negative covenants, which include certain financial covenants that may restrict the borrowing capacity available. In March 2023, the agreements were amended to require TDS and UScellular to maintain the Consolidated Leverage Ratio as of the end of any fiscal quarter at a level not to exceed the following: 4.25 to 1.00 from January 1, 2023 through March 31, 2024; 4.00 to 1.00 from April 1, 2024 through March 31, 2025; 3.75 to 1.00 from April 1, 2025 and thereafter. TDS and UScellular are also required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter. TDS and UScellular believe that they were in compliance as of June 30, 2023 with all such financial covenants.

TDS and UScellular have in place effective shelf registration statements on Form S-3 to issue senior or subordinated securities, preferred shares and depositary shares.

See Note 9 — Debt in the Notes to Consolidated Financial Statements for additional information related to the financing agreements.

In June 2023, Standard & Poor's revised the TDS issuer credit rating to a negative outlook. There was no change to the BB rating issued by Standard & Poor's in October 2022.

Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures; excludes wireless spectrum license additions), which include the effects of accruals and capitalized interest, for the six months ended June 30, 2023 and 2022, were as follows:

TDS intends to finance its capital expenditures for 2023 using primarily Cash flows from operating activities, existing cash balances and additional debt financing from its existing agreements and/or other forms of available financing.

TDS may be engaged in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, assets, wireless spectrum licenses (including pursuant to FCC auctions) and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.

TDS will require capital for future spending on existing contractual obligations, including long-term debt obligations; dividend obligations; lease commitments; commitments for device purchases, network facilities and transport services; agreements for software licensing; long-term marketing programs; commitments for wireless spectrum licenses acquired through FCC auctions; and other agreements to purchase goods or services. TDS has taken and expects to continue to take steps to reduce and defer capital expenditures to lower its funding needs. Refer to Liquidity and Capital Resources within this MD&A for additional information.

TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 10 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. TDS may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.

During the six months ended June 30, 2023, TDS repurchased 545,990 Common Shares for $6 million at an average cost per share of $10.09. As of June 30, 2023, the maximum dollar value of TDS Common Shares that may yet be repurchased under TDS’ program was $132 million. For additional information related to the current TDS repurchase authorization, see Unregistered Sales of Equity Securities and Use of Proceeds.

TDS operates a capital-intensive business. TDS makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade communications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-saving upgrades to TDS’ networks. Revenues from certain of these investments are long-term and in some cases are uncertain. To meet its cash-flow needs, TDS may need to delay or reduce certain investments, dividend payments or sell assets. Refer to Liquidity and Capital Resources within this MD&A for additional information. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, timing and other factors. The following discussion summarizes TDS' cash flow activities for the six months ended June 30, 2023 and 2022.

TDS’ Cash, cash equivalents and restricted cash decreased $106 million. Net cash provided by operating activities was $514 million due to net income of $12 million adjusted for non-cash items of $483 million, distributions received from unconsolidated entities of $78 million, including $37 million in distributions from the LA Partnership, and changes in working capital items which decreased net cash by $59 million. The working capital changes were primarily driven by timing of vendor payments and payment of associate bonuses, partially offset by a federal income tax refund of $57 million received during the second quarter, reduced inventory purchases and timing of collection on receivables.

Cash flows used for investing activities were $629 million, due primarily to payments for property, plant and equipment of $629 million.

Cash flows provided by financing activities were $9 million, due primarily to $115 million borrowed under the UScellular receivables securitization agreement, $175 million borrowed under the TDS revolving credit agreement, and $100 million borrowed under the TDS export credit agreement. These were mostly offset by a $150 repayment on the UScellular receivables securitization agreement, a $60 million repayment on the UScellular EIP receivables repurchase agreement, a $50 million repayment on the TDS revolving credit agreement and the payment of dividends.

TDS’ Cash, cash equivalents and restricted cash increased $91 million. Net cash provided by operating activities was $734 million due to net income of $111 million adjusted for non-cash items of $517 million, distributions received from unconsolidated entities of $80 million, including $37 million in distributions from the LA Partnership, and changes in working capital items which increased net cash by $26 million. The working capital changes were primarily driven by a federal income tax refund of $125 million received during the first quarter of 2022, partially offset by timing of collection on receivables, increases in inventory and the payment of annual associate bonuses.

Cash flows used for investing activities were $1,122 million, which included payments for wireless spectrum licenses of $564 million and payments for property, plant and equipment of $526 million. Cash payments for property, plant and equipment were lower than the total capital expenditures in the six months ended June 30, 2022 due primarily to future obligations of certain software license agreements that are recorded as current year capital expenditures but are paid over time.

Cash flows provided by financing activities were $479 million, due primarily to $550 million borrowed under the term loan facilities, $150 million borrowed under the UScellular export credit financing agreement, $75 million borrowed under the UScellular revolving credit agreement, and $60 million borrowed under the UScellular EIP receivables repurchase agreement. These were partially offset by $150 million of repayments on the UScellular receivables securitization agreement, a $75 million repayment on the UScellular revolving credit agreement, the payment of dividends and repurchase of TDS and UScellular Common Shares.

The following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes. Notable balance sheet changes during 2023 were as follows:

Inventory, net decreased $52 million due primarily to efforts to reduce inventory on hand which was elevated to support holiday promotions and ensure adequate device supply.

Income taxes receivable decreased $54 million due primarily to a federal income tax refund received in the second quarter of 2023 related to the 2020 net operating loss carryback enabled by the CARES Act.

Current portion of long-term debt increased $41 million due primarily to an estimate of required repayments due on the receivables securitization agreement if the agreement is not extended.

Accounts payable decreased $142 million due primarily to the timing of vendor invoice payments related to inventory.

Accrued compensation decreased $40 million due primarily to associate bonus payments in March 2023.

Other current liabilities decreased $88 million due primarily to repayments on the UScellular EIP receivables repurchase agreement.

TDS sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business. Specifically, TDS has referred to the following measures in this report:

▪EBITDA

▪Adjusted EBITDA

▪Adjusted OIBDA

▪Free cash flow

These measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules. Following are explanations of each of these measures.

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation below. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation below are non-recurring, infrequent or unusual; such items may occur in the future.

Adjusted EBITDA is a segment measure reported to the chief operating decision maker for purposes of assessing the segments' performance. See Note 12 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information.

Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to applicable GAAP income measures are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income and Operating income.