SHENANDOAH TELECOMMUNICATIONS COMPANY ■  28 Note 7. Significant Contractual Relationship 2003 2002 2001 Deferred tax assets: (in thousands) Allowance for doubtful accounts $ 192 $ 370 $ 247 Accrued compensation costs - 181 149 State net operating loss carryforwards, net of federal tax 1,569 1,425 - Recognized investment losses including impairments - 593 - Deferred revenues 304 338 179 AMT credits - 285 - Accrued pension costs 476 395 397 Other, net 81 23 - Total gross deferred tax assets $ 2,622 $ 3,610 $ 972 Less valuation allowance (864) (704) - Net deferred tax assets $ 1,758 $ 2,906 $ 972 Deferred tax liabilities: Plant-in-service $ 20,058 $ 17,568 $ 11,313 Escrowed gain on sale of discontinued operations 1,859 - - Unrealized gain on investments 15 - 26 Gain on investments, net 123 - 4,035 Total gross deferred tax liabilities $ 22,055 $ 17,568 $ 15,374 Net deferred tax liabilities $ 20,297  $ 14,662 $ 14,402 In 1999, the Company executed a Management Agreement (the Agreement) with Sprint whereby the Company committed to construct and operate a PCS network using CDMA air interface technology, replacing an earlier PCS network based on GSM technology. Under the Agreement, the Company is the exclusive PCS Affiliate of Sprint providing wireless mobility communications network products and services in its territory which extends from Altoona, York and Harrisburg, Pennsylvania, and south along the Interstate 81 corridor through Western Maryland, the panhandle of West Virginia, to Harrisonburg, Virginia. The Company is authorized to use the Sprint brand name in its territory, and operate its network under the Sprint radio spectrum license. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generating future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it more likely than not that the Company will realize the benefits of the deductible differences that are not reserved by the valuation allowance, which increased by $160 thousand, to $864 thousand in 2003, from $704 thousand in 2002. The Company has generated net operating loss (NOL) carry forwards of approximately $25.9 million from its PCS operations in several states. The carry forwards expire at varying dates beginning in 2005. Net deferred tax assets and liabilities consist of the following at December 31: Years Ended December 31, 2003 2002 2001 (in thousands) Computed “expected” tax expense $ 5,122  $ (1,701)  $ 5,271 State income taxes, net of federal tax effect 298 (460) 575 Other, net (116) 52 (35) Income tax provision (benefit) $ 5,304 $ (2,109) $ 5,811 Note 6. Income Taxes (C ontinued) SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS