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DATE

Wednesday, Sept. 30, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Matthew Neisius
• Chief Executive Officer - John Brase
• Chief Financial Officer - Dave Marberger

TAKEAWAYS

• Organic Net Sales -- decreased 1.1% in the first quarter, driven by a 2.1% volume decline that was partially offset by a 1.0% positive impact from price/mix.
• Adjusted Diluted EPS -- rose 5.1% to $0.41, reflecting lower adjusted selling, general, and administrative expenses and higher equity method investment earnings.
• Adjusted Operating Margin -- reached 11.5% in the first quarter, representing a 33 basis point decrease from the prior year period due to increased brand investment.
• Grocery & Snacks Segment Organic Net Sales -- declined 2.0%, as a 5.4% decrease in volume was partially offset by a 3.4% increase in price/mix.
• Refrigerated & Frozen Segment Organic Net Sales -- decreased 1.6% in the first quarter, consisting of a 1.5% decrease in price/mix and a 0.1% decrease in volume.
• International Segment Organic Net Sales -- grew 0.9%, supported by a 1.6% price/mix increase despite a 0.7% volume contraction.
• Foodservice Segment Organic Net Sales -- increased 3.3% in the first quarter, reflecting a 2.5% volume increase and a 0.8% price/mix gain.
• Equity Method Investment Earnings -- rose 71.8% to $50 million, primarily due to favorable market conditions and effective management of wheat volatility at the Ardent Mills joint venture.
• Advertising and Promotional (A&P) Expense -- increased 15.1% to $61 million in the quarter, representing 2.3% of net sales compared to 2.0% in the prior year.
• Net Leverage Ratio -- ended the first quarter at 3.99x, supported by a $193 million reduction in net debt versus the prior year period.
• Free Cash Flow -- resulted in a use of $128 million in the quarter, compared to a use of $26 million in the prior year period, driven by lower operating profit and higher litigation payments.
• Capital Expenditures -- totaled $124 million in the first quarter, with management maintaining a full-year target of approximately $550 million.
• Fiscal 2027 Organic Net Sales Guidance -- reaffirmed at a range of (3)% to (1)% compared to fiscal 2026.
• Fiscal 2027 Adjusted EPS Guidance -- reaffirmed at a range of $1.40 to $1.50 for the full year.
• Fiscal 2027 Adjusted Operating Margin Guidance -- reaffirmed at a range of 10.0% to 10.5%.
• Second Quarter Organic Net Sales Outlook -- projected to decline 2%, which incorporates the timing of Thanksgiving shipments and seasonal inventory building.
• A&P Guidance -- expected to increase to 3% of net sales in the second quarter as the company intensifies brand-building efforts for meat snacks and popcorn.
• Inflation Outlook -- anticipated to be at the higher end of the 5% to 6% range for the fiscal year, with transportation costs doubling versus original planning.
• Debt Repayment Target -- management expects to pay down approximately $250 million of debt during the fiscal year.
• Interest Expense Guidance -- reaffirmed at approximately $360 million for fiscal 2027.
• SKU Optimization Impact -- management noted that exiting the Celeste Pizza business resulted in a 15 basis point impact on first quarter net sales while being profit accretive.

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RISKS

• Marberger warned that inflation in transportation costs has reached "basically the doubling of inflation in transportation versus where we planned it for the year," which is offsetting favorability in other material costs.
• Brase characterized the macro environment as dynamic and described the consumer as "muted" and "bifurcated by income," noting particular pressure in the convenience store channel due to higher gas prices.

SUMMARY

Conagra Brands, Inc. (CAG -3.09%) reported first quarter results that aligned with its internal top-line expectations and performed ahead of its profit targets despite a volatile logistics environment. Management reaffirmed its full-year guidance for fiscal 2027, focusing on strategic objectives such as margin restoration and reducing organizational complexity through SKU optimization. The company reported a 1.1% decline in organic net sales as a reduction in volume outweighed pricing increases, particularly within the Grocery & Snacks and Refrigerated & Frozen segments. Financial priorities for the year include reducing net leverage toward a long-term target of 3.0x while increasing advertising and promotional investment to drive brand relevance across its core categories.

• CEO Brase announced an internal work stream to reduce complexity, stating, "We made the decision, as you saw with Celeste Pizza... but it was actually profit accretive to the enterprise."
• Management reported that a large portion of its SKU reduction effort will focus on single-serve meals, where the company currently maintains more than 400 distinct items.
• CFO Marberger confirmed the company is insulated from recent interest rate volatility, stating, "We're pretty much 100% fixed right now. The only variable debt that we have is our commercial paper."
• The company issued a $500 million note in July 2026 at a 5.4% rate to refinance existing debt maturing in the second quarter of fiscal 2027.
• The Ardent Mills joint venture provided a significant $0.03 EPS benefit in the quarter, as Marberger explained that "with more volatility, Ardent Mills will benefit from that volatility with their commodity trading business."
• The company expects its inflation rate in the second and third quarters to be higher than in the first quarter before moderating in the fourth quarter.

INDUSTRY GLOSSARY

• A&P: Advertising and promotional expenses used to support brand awareness and consumer engagement.
• Ardent Mills: A joint venture between Conagra Brands, Cargill, and CHS that focuses on flour milling and specialty grain products.
• Net Leverage Ratio: A financial metric calculated as net debt divided by adjusted EBITDA, used to assess a company's ability to pay off its debt.
• Organic Net Sales: A non-GAAP financial measure that excludes the impacts of foreign exchange, acquisitions, and divestitures to provide a view of underlying business performance.
• Price/Mix: The combined impact on net sales from changes in product pricing and the relative proportion of products sold at different price points.
• SKU: Stock Keeping Unit, a unique identifier for each distinct product and service that can be purchased.

Full Conference Call Transcript

Operator: Good morning, and welcome to the Conagra Brands Q1 Fiscal Year '27 Earnings Q&A Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Matthew Neisius, Head of Investor Relations. Please go ahead.

Matthew Neisius: Good morning, everyone, and thank you for joining us. Once again, I'm joined this morning by John Brase, our CEO; and Dave Marberger, our CFO. We may be making some forward-looking statements and discussing non-GAAP financial measures during this Q&A session. Please see our earnings release, prepared remarks, presentation materials and filings with the SEC in the Investor Relations section of our website for descriptions of our risk factors, GAAP to non-GAAP reconciliations and information on our comparability items. I'll now ask the operator to introduce the first question.

Operator: [Operator Instructions] Our first question today comes from Andrew Lazar from Barclays.

Andrew Lazar: Maybe I want to start out, Conagra is pointing to organic sales in fiscal 2Q to decline 2%, a bit heavier than current consensus. It looks like quarter-to-date, maybe scanner looks to be running maybe closer to flattish. So, I guess, I'm just curious if anything has changed in your 2Q top line outlook and whether it's elasticity or something else that might cause a sequential deceleration or perhaps it's just more prudent planning?

John Brase: Andrew, let me start, and then I'll turn it over to Dave. But I think in general, the pricing we discussed in the Q4 earnings call is really just hitting the market kind of as we speak. And so I would say in terms of our pricing assumptions, at this point, results are in line with how we planned the year. And I like the word you used, Andrew. I think we've taken a very prudent approach to our elasticity assumptions, and these assumptions remain unchanged, which is really frozen at more of a 2:1 elasticity that we've modeled for the year and Grocery & Snacks at more of a 1:1 elasticity.

Now in terms of competitors and followership, I would say we have not assumed any followership in our pricing moves. Obviously, if that happened, there could be some upside to those elasticity assumptions, but we have not modeled that in.

David Marberger: And John, just one additional piece of color. So we guided to 2%, down 2% organic for Q2. This contemplates Thanksgiving timing because you have the second quarter this year versus third quarter. So we may ship a bit below consumption in the second quarter because of the seasonal items, may have some more consumption versus shipments. So -- but this -- the 2% is consistent, like John said, with our original planning posture.

Operator: Our next question comes from Peter Galbo from Bank of America.

Peter Galbo: Dave, just wanted to touch on the updated inflation guidance for the year, having moved kind of at the higher end of the 5% to 6%. I know you had kind of Q1 inflation in the 5-ish percent range, more towards the low end. But just kind of how you see it pacing over the balance of the year? And maybe just help us think about exit rate. Are we above that 5% to 6% as we get to Q4 and kind of how we might think about it again from a phasing perspective?

David Marberger: Yes, Peter, thanks for the question. Let me try to give you a little bit of color here. So as we talked about for Q1, we did have some favorability in proteins relative to our planning. So we're a bit favorable, which drove some of the favorability we saw in Q1. But as we went through Q1, obviously, we've seen an acceleration in inflation around logistics, or transportation costs, really driven by the driver shortage and oil prices as well. So as we forecasted inflation, we're still in that 5% to 6% range for the year. We said towards the higher end of the range.

And really, what's happening is the favorability that we've seen in proteins, which we would continue to see is a little bit more than offset by the -- basically the doubling of inflation in transportation versus where we planned it for the year. So it's kind of a trade-off there. In terms of the flow of the year, we would expect -- and we usually don't give this much detail, but I think it's important because I think there's some confusion on this inflation. We would expect our inflation rate in Q2 and Q3 to be higher than Q1 and then to be about the same. And then we expect our Q4 inflation rate to actually be lower than Q3.

So that's kind of the flow. And as we sit here today, we have no reason to believe that we wouldn't be wrapping on not just the transportation costs that we're seeing this year, but things like edible oils and kind of our corrugated aluminum. We have a lot of areas where we're still seeing high inflation, which we will have all during fiscal '27. I don't see a reason why we couldn't expect that we would wrap on that. So obviously, we'll have to get closer for that.

But I feel like Q4 will be lower than Q3, and we should be wrapping on a lot of these higher inflation categories in our materials when we get into fiscal '28.

Operator: Our next question comes from David Palmer from Evercore.

David Palmer: I wanted to ask you about the pricing, the acceptance at retail, how much is that a factor into what you're thinking there? Or is your price elasticity modeling just basically a price impact to the consumer in a vacuum of competitors not also pricing? And I have a quick follow-up.

John Brase: Yes. Thanks for the question. I think in terms of pricing, I kind of go back to my opening comments. I'd really say really in line with our expectations. And so we're really past kind of the customer acceptance of that now. Pricing is effective in market. And I would tell you that customer acceptance, there was no surprises versus our planning posture. And so that's how I think about pricing as we move forward.

David Palmer: And then I noticed you had some comments about not repeating a promotion from last year on the Sandwich Bros. brand. Is that the kind of thing that you will be -- we will be seeing throughout the year that there'll be promotions that you see -- that you already see that were not effective from a profitability standpoint? And is that baked into your guidance? And I'll pass it on.

John Brase: Yes, great question. And again, I think we continue to look at our promotional dollars through a real ROI mindset. And I think we've been really prudent of saying, "Hey, we're not going to repeat promos that have been dilutive to the company." And I think that's what you're seeing in some of this simplification, really focusing on those high-leverage elements that can bring value to not only the consumer, but also to the shareholders. And so we're going to continue to make that a part of how we operate. But I would tell you, again, everything -- all those assumptions have been embedded into the fiscal year forecast.

Operator: Our next question comes from Tom Palmer from JPMorgan.

Thomas Palmer: I wanted to maybe just clarify on your second quarter expectations. You've got this high single-digit operating margin outlook. Incremental pricing is flowing through. There was the SG&A call out. I just want to make sure I kind of have my arms around the gross margin cadence here. Like, is there a step down expected in gross margin as we move into 2Q? Or is this really about the timing of SG&A that swings the margin lower?

David Marberger: Yes, Tom, let me take that. There's really 3 drivers. If you would look at where we landed Q1 operating margin, let me just kind of go there at 11.5% for Q1, we said higher single digits for Q2. There's really 3 drivers. One, as I just mentioned, we expect higher inflation in Q2 versus Q1. The second piece is the SG&A favorability that we had in Q1. It was roughly $0.03 of our EPS beat. Half of that was a onetime benefit and half of it was timing where it didn't hit in Q1. It's going to hit in Q2. And then the third piece is accelerating our investment in A&P.

So we expect to increase A&P as a percentage of net sales to 3% versus 2.3% as it was in Q1. So they're really the 3 drivers. So you will see a little bit of impact on gross margin from the higher inflation versus Q1.

Operator: Our next question comes from Alexia Howard from Bernstein.

Alexia Howard: Great. Could I ask about leverage? So you've talked about the 3x being the long-term target, and I think it increased a little bit this quarter to close to 4x. I think you're saying that you'll still probably be at 4x by the end of the year or you said through fiscal '27, it will remain at this 4x. So how quickly do you expect to start on that deleveraging trajectory? And how quickly do you expect to achieve that goal?

David Marberger: Alexia, if you start with this year, yes, we said -- we guided to expecting to finish the year at approximately 4x on our leverage. We finished Q1 at 3.99x. That's actually favorable to where we thought. Usually, what will happen in Q1 and Q2 is our leverage will click up because we're very seasonal with our inventory, right, with our seasonal businesses and things like our tomato operations, we build all the inventory in Q1 and Q2. So obviously, we use cash in the first half and then we have cash inflow in the second half. So that's very normal. So we're still on track with the approximately 4x.

That -- we don't get specific with this, but it's implied. We do expect to pay down debt in the year for the full year, approximately $250 million of debt paydown is what we would expect for this year. Our target is 3x. We are maniacally focused on getting there as soon as possible. As we get into fiscal '28, John talked about it, we're focused on improving margins and profitability of this business. So with improved profitability and the dividend adjustment that we made, we feel like we're going to be able to make great progress in fiscal '28 on getting that leverage down.

We're not going to give you that number today, but we want to get to 3x as soon as possible.

Operator: Our next question comes from Wells Fargo Securities.

Christopher Carey: Chris Carey. I wanted to ask about the Snacks portfolio. Can you just give us a sense of maybe where you are on some of the interventions to improve performance? You talked about, I think, popcorn, Slim Jim, what are the expectations more from a volume standpoint as you look forward and perhaps lap some of the elasticities over the medium term? And then just -- maybe it's not a good clarification, but just curious whether you're seeing or you thought you saw any benefit in your frozen business from Cyclospora-related demand and if that's a factor in how you're viewing the next few quarters in frozen?

John Brase: Great. I'll take both of those. As you think about Snacking, let's start with the positives. Really, our Sweet Treats portfolio continues to perform really, really well and had a very strong quarter Q1, and that's really behind both Snack Pack and Swiss Miss continue to really be performing very well in the market. I think permissible snacking, as you said, is really where -- we're not where we want to be there. And I think a couple of points of drivers there. The first is, obviously, we're very overdeveloped in our meat snacks and our seeds business in the convenience channel, which has been really challenged lately with the higher gas prices.

But I think aside that, there's work to do from my standpoint in terms of from an execution and a channel lens, we need to do a better job of participating where the growth is really coming from, specifically in the meat snacks category. As you take a step back and you think about meat snacks and popcorn and seeds, these are fantastic categories, and we are the market leader. And so, it's our responsibility to, kind of, drive these categories forward. And so I think what you're going to see, and you're already seeing as we go into Q2, a significant step-up in our brand building and marketing, specifically pinpointed at meat snacks and popcorn specifically there.

But then also innovation, a major step-up in innovation. We think those are the 2 critical levers to, kind of, get us back to a growth trajectory in those important businesses. On Cyclospora, just a quick one there. We did see some benefit, but I would tell you, nothing material as we think about Q1. And we also actually saw some offsets from Cyclospora as you think about like our Wish-Bone salad dressing as an example. So again, nothing material there.

But I think more than the onetime benefit, I think what's really important is this is a reflection of consumers coming to a brand they know and trust with Birds Eye, and we did a great job of delivering for them. And so, I think, as you think about that brand, we've got such an opportunity to drive better -- more trial and more engagement with consumers. We deliver great taste, great convenience and honestly, reliability that they're looking for in their vegetables. So we think a great opportunity to continue to drive Birds Eye.

Operator: Our next question comes from Max Gumport from BNP.

Max Andrew Gumport: Just coming back to the 1Q beat and your reaffirmed outlook for the year. Obviously, it was a sizable EPS beat versus consensus, I think versus your expectations, too. You did get some help from inflation. There was some SG&A timing benefit as well and your inflation outlook for the remainder of the year has ticked up. So I'm curious to what degree the reaffirmed outlook maybe has embedded additional conservatism in it, especially with regard to Ardent Mills as well, given the wheat price volatility.

David Marberger: Yes, Max, let me take that. Starting with Q1, you, kind of, hit it. We had a beat to our expectations really driven by, I think, 4 things: our SG&A, which was the timing and then the onetime. We had the Ardent Mills benefit. We had the inflation lower than our internal forecast. And then we did get a bit of benefit on the tariff refunds that we got in the quarter, which was close to $0.01. When you look for the full year, SG&A, we talked about it, the onetime to onetime and then you have the timing, but that's pretty much on track. The big impact is the acceleration of transportation inflation.

It's double the rate that we -- and we had assumed inflation for transportation, and it's double the rate. The good news is that we have some other areas in materials where we're favorable to that. So there's a lot of puts and takes there. The other dynamic is we're just starting with our frozen pricing. And so we really need to see how this plays out. We've been very clear on how we've modeled elasticities. There could be a scenario where maybe that winds up being conservative, maybe not. So we just need to see how that plays out. And then Ardent Mills, we were favorable about $0.03 in the quarter to our expectations for Ardent Mills.

Wheat prices have been extremely volatile, right? If you just, kind of, look from May to now, they're up significantly, but they've been up and down. And so that creates trading opportunities for the commodity side of the Ardent business. And so the thing with that is that it's a little bit more difficult to forecast that with precision for the full year. So we thought it was prudent to hold the year. It's one quarter, and then we'll update at the half. And if things continue as they do in Q1, then maybe we have some upside there, but we want to wait a little longer to see.

Operator: Our next question comes from Robert Moskow from TD Cowen.

Robert Moskow: I don't know if I saw, kind of, a firm guide on gross margin for the year. 3 months ago, I think the guide was, kind of, flattish, but now you have the higher cost. And the other element that I wanted to ask about, Dave, is in the Frozen & Refrigerated division, the volumes are going to be down like 10%. And at the same time, you were also increasing capacity, particularly in frozen chicken. So I'm just wondering if there's -- how are you managing through the leverage consequences of that? Is that a drag? Have you already put into your numbers a drag from that dynamic?

David Marberger: Yes, Rob, good questions. On the first one, we've held our guidance for operating margin for the year. So obviously, gross margin is a big part of that. We've had puts and takes in the cost. And so we're still where we were before, which is relatively flat to the prior year in terms of gross margin. To your second question, yes, obviously, we have modeled the pricing and the elasticity impacts, and there's volume impacts where we have decreases in volume in our frozen business. We've modeled that. We've taken into account the absorption impact. So all of that is included in the guidance that we provided, and we'll just see how that plays out.

Operator: Our next question comes from Rob Dickerson from U.S. Bancorp.

Robert Dickerson: John, I just want to ask you about the simplification process, kind of, how you're thinking about SKU rationalization and then maybe even brand rationalization, right? I realize you said last quarter, prepared remarks this quarter, again, kind of looking at everything. But there was -- it was noted in those prepared remarks that I guess you exited Celeste Pizza. And I'm just curious, I mean, clearly, when you exit that, that rationalized the SKUs. So like are there parts of the portfolio such that you could simplify by just kind of stepping away from certain brands that are on lines that you have?

And then, I guess, secondly, just kind of broadly, like how are you thinking at this point about the manufacturing footprint?

John Brase: Rob, thanks for the question. And if you guys will indulge me, I'm going to go a bit long on this one because I think it really is important for you to kind of understand how we're thinking about this. I am incredibly excited about the opportunity we have to really reduce complexity across the enterprise. And I will tell you, SKU optimization is definitely one of those areas. As we've discussed before, we have an extremely long tail of SKUs that we are getting after. Right now, we did -- we stood up an internal work stream that's really looking to significantly reduce SKU count. And I'd put this work into 2 buckets.

The smaller bucket, which you just alluded to is there are certain brands and categories where we simply just don't see a future. And it just makes sense to exit those small and really unprofitable brands or low-profit brands as soon as possible. And so we made the decision, as you saw with Celeste Pizza, which had a minor impact on net sales for Q1, about a 15 bps impact, but it was actually profit accretive to the enterprise. And I think we'll continue to look for more of those small opportunities that we do see in front of us. I think the larger opportunity, though, is what I'm really calling the simplification of our core platforms.

And I want to use an example here that I think will bring this to life, single-serve meals. We've got over 400 single-serve meal SKUs. And I believe there's a future where we can have a much simpler, more productive assortment. That doesn't mean for a second that we don't believe in the category, that we have any plans to cede distribution or that we're going to stop innovating. I would say just the opposite. We want to double down in this business, and we think an optimized assortment can help drive velocity on our most impactful SKUs. And so that -- in terms of SKU complexity, that's one component.

But I would also tell you, we're looking to optimize our formats and formulations. We just have to do a better job of eliminating non-value-added complexity that the consumer, quite frankly, isn't willing to pay for. So as we're looking at this, we're not just looking at SKUs, we're looking at formats and formulation as well. And I think as you fast forward, this is going to do several things for us. It's going to drive stronger operational efficiency. It's going to drive procurement savings as we're procuring fewer items, but with greater scale. It's going to help us drive improved focus, which I think is so important. When we get focused on something, we execute with excellence.

We need to focus our organization a bit more, and this will do that. And then finally, improved velocity on shelf, which is good for us, good for our customers. And so the last thing I'd say here is, we're going to take a real measured approach in how we roll out the SKU simplification. We really need to coordinate this with our customer reset timing and look at inventory impacts. So I would see the majority of this benefit from this work to happen more in fiscal '28, but the decisions are happening right now.

Operator: Our next question comes from Scott Marks from Jefferies.

Scott Marks: I wanted to just ask a little bit about the consumer. You made some comments in the prepared remarks talking about the consumer just being thoughtful about where they're spending their dollars, obviously, managing through a volatile environment. Any updates you can share with us in terms of what you're seeing? Have things improved, gotten worse? Just any changes that you've seen recently?

John Brase: Yes. Thanks for the question. And I think I would describe the macro environment as dynamic. That's probably an understatement. But in terms of the consumer, I would tend to say the word that I would use is muted and it continues to be kind of bifurcated by income, no doubt about it. But having said that, we really haven't seen any material step change in consumer behavior. There's pockets, C-store as an example, that's been a bit more pressured in recent months because of the gas prices. But overall, I would say the consumer has been relatively stable and resilient. And our job is to continue to stay incredibly close to the consumer.

And we've got to evolve alongside how they're evolving and delivering the food they want, where they want it, but also importantly, at the right value. And this is what I love about our portfolio. We've got brands that compete all across the value spectrum, value brands like Banquet all the way up to more premium offerings like Healthy Choice. And so we've got a portfolio that can meet this dynamic consumer wherever they are.

Operator: Our next question comes from Leah Jordan from Goldman Sachs.

Leah Jordan: Just see if you could provide more detail on the changes in your approach for the step-up in the A&P spend. It sounds like you've had some early traction. Just curious what's been working? How are you measuring that return? And where are you allocating the step-up in spend you're planning to do in 2Q?

John Brase: Yes. As you think about A&P, this is a big one for me. We have so many great brands. But if I'm being truthful, we haven't consistently invested behind them at the levels that are required to drive that brand affinity and awareness. And so we have a tremendous opportunity to communicate more with consumers to ensure they understand we've got great value propositions out there, and our job is to make sure they fully understand it. And so as you think about the investments, I'm really pleased in 2 fronts. One, we're investing more; and two, we're getting that money to work a lot harder for us.

And this is kind of this new modern marketing machine that we're building internally that I think can become a real competitive advantage. And so as you think about where we're focusing these investments, it's really in 3 places: single-serve meals, meat snacks and popcorn. We're going to be very, very targeted in those important growth ambitions -- and your last point is a good one, too. We're already seeing some really positive results in terms of improved reach and engagement from some of the changes that we're doing. We've gotten a lot more targeted in who we're going after, how we're going after them, and our messaging is just sharper and more compelling.

And so I think this is a tremendous opportunity to use this increased focus on brand building to help kind of return us to growth and drive brand relevance.

Leah Jordan: That's very helpful. And then my follow-up was just on interest expense. I thought it was reiterated for the year. We've had to move higher in rates here recently. I think you're mostly fixed exposure, but I did think you had a little bit of floating. So just kind of catch up -- remind us where your exposure is there. And then I also thought you may have some refinancing needs in the relative near term. So just how are you thinking about that in this interest rate environment as well?

David Marberger: Leah, let me take that the first one. We're pretty much 100% fixed right now. The only variable debt that we have is our commercial paper. And so we use that as sort of our working capital needs. So we're very high percentage fixed, so we're really not exposed to the interest rate environment now. Yes, we do have 2 bonds coming due this month. We have a $500 million note and a $260 million note. We actually went into the market in July and financed ahead. And so we issued a $500 million note. The rate came in at 5.4%. The timing was actually pretty good there, given what rates have done since then.

So between the -- from the proceeds of that and just our normal kind of borrowing capacity, we're very comfortable refinancing these notes this month.

Operator: And our next question comes from Carla Casella from JPMorgan.

Carla Casella: Somewhat on that last question as well as Alexia's earlier question on leverage. Have you had conversations with the agencies? Because we've seen, in some cases, other peers that have cut their dividend and focused on deleveraging, but still gotten downgraded. Do you think they're kind of changing their view at all on your business?

David Marberger: Yes, Carla, we talk to the agencies all the time. And so they're very clear on our financial policy, our priority of using our discretionary cash flow to pay down our debt as quickly as possible. So we're always working and talking to the agencies. They obviously looked at our cut of the dividend as a positive in terms of our credit rating and our position. So they know where we're going. They know what our priorities are. So now it's a matter of just continuing to get that leverage down. We know the markers for levels where if you -- the leverage exceeds certain levels, you may be putting investment grade at risk. We're not near those levels.

And we're moving in the right direction, which is down with our leverage, and they know that. So that's our strategy. That's our focus, and they're very aligned with that.

Carla Casella: Okay. That's great. And then just one follow-up on Ardent Mills. How do we think about the volatility in wheat and how that flows through the numbers? I know it's a benefit for this quarter, but how should we think about that going forward?

David Marberger: Yes. So think of Ardent Mills as really 2 different businesses. They have a business where they mill flour and they sell flour at a margin, and they're selling flour to the Domino's Pizzas of the world and everything. So they're dealing with the same volume dynamics that the entire food industry is, but they do an amazing job of providing great customer service that's a competitive advantage for them. But that business is more stable and more flattish. If you look at the other part of their business, it's what we call commodity revenue, and that's the trading opportunities they create when you have volatility in the wheat markets. And so that's what we saw in Q1.

And the hard part there is when that comes, it's a little bit difficult to forecast with precision. But generally, with more volatility, Ardent Mills will benefit from that volatility with their commodity trading business. And so -- and the good news for us is, we're very aligned from a capital allocation perspective. So in terms of profit, we have a minimum of 80% cash flow conversion on that profit, and we're very aligned with Ardent and our partners on that philosophy.

Operator: And ladies and gentlemen, at this time, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Matthew Neisius for closing remarks.

Matthew Neisius: Thank you, Jamie, and thank you all for joining us today. Feel free to reach out to Investor Relations with any additional questions. Have a good day.

Operator: And with that, we'll conclude today's Q&A session and conference call. We do thank you for joining. You may now disconnect your lines.