CASE STUDY: SENECA FOODS CORPORATION

Client Profile:
Seneca Foods Corporation: "Always In Season"

Seneca Foods is the world’s leading producer and distributor of canned vegetables, with products sold under the Libby’s, Aunt Nellie’s Farm Kitchen, Stokely’s, READ, and Seneca labels as well as through the private label and industrial markets. Seneca also produces canned and frozen vegetables under the Green Giant label. The company also supplies frozen vegetable products to the food service industry, and fruit and snack chip products to retail markets and other food processors.

With $864 million in sales in 2005, the publicly traded company is working aggressively to position itself as the low-cost, high-quality producer of canned vegetables through the elimination of costs from the supply chain and investment in state-of-the-art production and logistical technology. Seneca Foods is headquartered in Marion, New York.

Download a PDF version of this case study to read at your convenience

Seneca Foods’ challenge: grow lean, grow smart
The vast array of food products that Seneca Foods processes and packages in a can, box or snack package is a far cry from the singular Concord grape juice product they pressed and sold in their founding year, 1949. The complexity of their tax requirements has also grown. The company now files annual consolidated income tax returns with the federal government and 20 states, in addition to handling state and local sales tax remittances, tax provision reporting, and other issues.

In late 2001, it became clear to Jeff Van Riper, Seneca’s Controller and Secretary, that the firm’s in-house tax department was no longer sufficient to meet the company’s needs. “For a company of our size, it’s cost-prohibitive to find a tax manager with all of the varying expertise we require,” says Van Riper.

“Depending on how you look at us, we are a big small company or a small big company,” he says. “To grow in the food processing industry, we have to be lean and mean and as cost-efficient as possible. We were also looking for someone to be proactive on our behalf on the tax planning side.”

A constellation of requirements: all in one firm?
“We talked to some of the Big Four accounting firms and a handful of regional firms,” Van Riper says about their search for an accounting firm to take over the responsibilities of Seneca’s tax department. “With the Sarbanes-Oxley requirements, it’s no longer feasible to have the same CPA firm auditing your results and preparing your tax returns. In fact, your auditing firm is prohibited from doing your tax provisions,” he adds, referring to the reporting of tax expenses to the financial statements.

“We thought there was some synergy to having a one-stop tax shop. Preparing the provisions uncovers information that can be useful to the tax return. So we wanted a firm that could handle both.”

Why choose EFP Group? “I’d say it was the combination of the expertise we perceived and cost, as well as an emphasis on service,” Van Riper says. “I contacted three references, I believe, and talked to them about their experiences with Kevin Hill and EFP Group, and the response I got was very positive. And we felt, from a service perspective, that it was better to be a big fish in a smaller pond.”

Kevin Hill, EFP Group partner and Director of Large Corporate Tax Services, has been Seneca Foods’ engagement partner since the beginning. “We have a large tax group here, compared to our regional competitors,” says Hill. “And we are cost-competitive with the big national accounting firms. It was clear that our ability to provide proactive tax planning was a requirement for Seneca Foods—and Sarbanes-Oxley prohibits companies from obtaining certain consultation services from their auditing firm.”

Many hands on deck: just-in-time delivery of talent
“With EFP Group, we get the best of both worlds,” says Van Riper. “We use ‘fractions’ of EFP people on both the management and clerical side as we need them. EFP now does our federal and state income tax returns, franchise tax returns and tax provision work. We’ve gotten them involved in payroll taxes, unemployment taxes and property taxes at different times. They’ve been very proactive in bringing us savings opportunities. Their tracker system notifies us when estimated tax payments are due.

“EFP also handles our taxes for the Seneca Foods Foundation, a not-for-profit entity,” explains Van Riper. “That’s a whole different branch of tax, involving a 990-PF and so forth. They have people with that expertise.”

Cost segregation has been a large focus for EFP Group and Seneca Foods. The process involves “segregating” the costs involved in construction or renovation of large properties to achieve more favorable depreciation rates for some of the components, or costs, involved. Done correctly, cost segregation can return significant tax savings to a property owner. In Seneca’s case, cost segregation has saved the company millions of dollars.

“We put that work out to bid,” says Van Riper. EFP Group brought in its affiliate, Ernst & Morris, an engineering-based firm which specializes in cost segregation work. “Their joint proposal was a good bid, and they came through with good documentation and savings in excess of what they had predicted.” Seneca Foods has since had EFP Group and Ernst & Morris handle “many” cost segregations, including one large engagement that involved multiple plants. “They picked up benefits that had been missed,” says Van Riper.

Result: savings in cost, time, trouble
“There is no question that EFP Group has saved us in taxes,” says Van Riper. “They’re proactive on this. For instance, they’ve found us rebates on certain utility taxes from the state. And we’re just beginning to jointly look at credits for research and development. Cost segregation has also meant a big savings to us.”

EFP’s replacement of Seneca’s tax department has also proved to be a time-saver. “Certainly there is work we have to do to provide them with the information we need,” says Van Riper. “But all in all, EFP Group provides time efficiencies—and more critically, the right mix of expertise.”

EFP Group regularly provides clients with “audit room” services—allowing state or federal auditors to come to their offices to review client financial records. EFP’s paperless approach to accounting—involving mobile scanners, laptops, and state-of-the-art document management— makes it easy to move that function away from the client site. “We have a state audit coming up,” says Van Riper, “and it’s good to know that those auditors will be in EFP’s offices, not mine.”

Van Riper also appreciates EFP’s memberships in CPAmerica and Horwath International, key industry groups that provide shared expertise. “It’s another way that they provide the depth and advantages of a larger firm,” he says, “without the bureaucracy.”

What counts: just what you need, just when you need it
The switch from in-house tax services to a relationship with EFP Group has allowed Seneca Foods to purchase only the expertise they need, just when they need it, and still reap the benefits of strategic tax planning. Asked to rate his satisfaction, Van Riper replies: “I’d say it’s pretty high.”

“Our EFP Group team is hardworking. They are willing to go the extra mile to get the job done,” he says. “At year-end, especially, it can be difficult—our timetables can be very tight—and we ask them to spend a lot of time on our account. They are good to work with. They come through for us.”

For more information about the Outsourced Tax Services of EFP Group, contact:

Kevin Hill, Partner
EFP Group
585.427.8900