RheeViewQ1 | 2016

For Rheem Water Heating Employees & Their Families

AND

M RE!

Eemax Joins Rheem FamilyPage 5

Andrew Bates, Rheem Co-op Student from Auburn University,

Receives Frank Vandergrift AwardPage 5

CHANGEI had originally planned on writing about 2016 goals and objectives, but instead I will just list them and talk about ‘change’.

Here are the high level goals and objectives I wrote about last quarter:

1. Touch the real customers! Contractors, influencers, specifiers, consumers, and commercial customers in a way that preferentially pulls the ‘right’ Rheem products through channels depending on application and overall benefit.

2. Strongly leverage our ‘external’ sales force of Agents and Manufacturing Reps to accomplish this in Wholesale channels.

3. Articulate Value, quantitatively and qualitatively, in everything we do for the customer.

4. Continue to manage and support our existing Distribution and Retail channel partners to enhance their ability to sell and service the ‘right’ Rheem branded products and services.

5. Have a full line of Tankless, Commercial, and Residential tanks, enabled by Econet related controls. Innovate and differentiate within these products!

6. Manufacture and supply these cost-effectively produced products, to deliver world class levels of in-use quality and warranty. Our Warranty costs are very high and must come down dramatically. Warranty is also a direct reflection of a customer experience that is good or bad.

7. Innovate in everything we do – how we sell, service, market, develop product, and manufacture. Innovation is the life blood of an organization over a long period of time.

8. Attract the best people to Rheem, and then continue to invest and support them to achieve success both individually and as a team.

As I observe our organization, our customers, and our culture, it is apparent to me that we are learning to accept – even embrace – change. This topic is perhaps familiar to you, as we frequently read or talk about it with our team mates. To me, change is about having a clear vision and roadmap to the future; being open minded about how we reach difficult goals; strongly embracing our history and strengths, while maintaining out positive and supportive Rheem culture.

My observation is that when we see changes happening to other groups, we typically say ‘good idea, maybe not perfect, but I hope they are successful’. However, when changes are occurring to oneself or group, there is a lot more on the line. Understanding how that impacts ‘me or my job’ can impact how quickly new direction is supported (or not). My experience suggests that change is most successful when:

• Top-down changes are developed with bottom-up input and consultation

• Bottom-up changes are met with acceptance, and assumptions that everyone is trying to do the right thing for the company and our work teams.

• Questions and challenges are not avoided, but embraced – it suggests interest and understanding in how to get from ‘today’ to ‘tomorrow’. Listening is a critical skill!

• The speed and pace of change is appropriate. Change which is too slow or too fast will fail.

• We are comfortable that a certain level of unresolved questions is acceptable. There will never be 100% consensus among most teams. .

• Dynamic, positive, tension exists, since all positions and input should be considered and ultimately, the best ideas – the most creative ideas – will prevail.

• Our goals and objectives are very challenging, since change is inevitable. However, the destination is a beautiful one that will enhance the customer, the Rheem team, and the company in the long run.

• We take some risk….

So as we continue on our journey and look at 2016 goals and objectives, embrace some of these concepts and take into account the processes which promote change as part of our roadmap to long term success. I am confident that you will enjoy the journey as much as the destination!

I am very pleased with our direction and our momentum. We are winning!

Rich Bendure

From the Desk of Rich Bendure, V.P. – General Manager, WHD

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I would like to wish you a belated Happy New Year, and welcome to an exciting 2016!

Joining the Rheem team on Dec. 7 is the outstanding Eemax organization, led by Kevin Ruppelt. Under Kevin’s leadership over the past several years, Eemax has grown dramatically to become North America’s largest tankless electric OEM in both the Residential and Commercial space. We go to market under the ‘Ecosmart’ brand in Residential and the ‘Eemax’ brand in Commercial. This expands Rheem’s offering to have one of the most complete tank and tankless product lines across all fuel types in the industry. In the last 3 months of getting to know the Eemax team better, I am very confident that our team has been strengthened, and I’m very excited about our future in this category. There will be more communication in the near future of new product launches and initiatives, but most importantly I wanted to extend a warm welcome to them, and would encourage you to do the same!

FINANCIAL REVIEW

The fiscal year of 2016 is off to a strong start. Our commercial and tankless product lines are far exceeding our expectations and prior year actuals. While residential shipments and revenue are below prior year and budget, this comes as no surprise considering the extraordinary volumes in the first quarter of 2015 due to pre NAECA III purchases. From an Earnings Before Interest and Taxes (EBIT) perspective we are also very happy with our performance both significantly exceeding Prior Year and Budget.

As you can see from the below Thermometer chart showing year to date March, 2016 financial results, we are sitting at 97% of our budgeted revenue goals and significantly favorable to the EBIT target (Earnings before Interest and Tax) at 121% of the goal. As you can imagine, our favorable EBIT numbers are significantly impacted by our strategy to move towards a more profitable product mix, maintain pricing discipline and drive toward continuous process improvements. We are confident that as the year progresses we will see the revenue numbers improve as our strategic efforts kick-in which will help to close the 3% gap to the target we are currently seeing. So thank you to all for your efforts, as the below indicates, we have the opportunity to make a significant impact.

Water Heating Division Financial Perspective – First Quarter Updateby Tim Hazelrig, VP Finance

As we look towards the remainder of 2016, the budget calls for continued aggressive growth in the Commercial and Tankless product lines. In addition to this, we have fairly high expectations for the residential product lines.

As mentioned in the previous newsletter, Rich and I are working together to drive a focus on Business Optimization and the 4P’s (Performance, Portfolio, Processes and of course People). We wanted to highlight an example of where we are focusing our efforts.

On April 11th, we kicked-off a new project focusing on process improvements in the areas of Procurement and Materials. The project is being led by James Courtney from our Product Management group as a part of a stretch assignment for employee development (which another area of Business Optimization and the 4P’s which will be talked about next quarter). We are very excited to have James as a part of this exciting team of cross functional players who will strive to create even more value and process improvements. Some of the focus areas for this project are:

PURCHASE ORDERS – Process with respect to how Rheem enters into commitments and is exposed to liabilities

VENDOR PROGRAMS – Minimizing risk and establishing controls associated with every vendor held inventory

INTERNAL CONTROLS – Processes & Controls based on pro-defined parameters and expectations

NEW PRODUCT LAUNCHES – Incorporate inventory considerations into new product and end of life decision making processes

INDIRECT PURCHASE – Leveraging the purchasing power of Rheem and Oracle functionality for gain increase oversight

While these programs may seem basic in nature, it might surprise you the level of opportunity they present.

We believe that with an effective balance of the “4-P’s” we can continue to grow in terms of volume, profit and market share. Each and every one of you plays a part in making sure we are successful in the quest to become better and better at what we do every single day. As we move forward, we will continue to share with you more specifics on current projects which fall into these categories.

Improve our Business Processes to Drive Competitiveness and Remove Barriers

PROCESS

140% –

120% –

100% –

80% –

60% –

40% –

20% –

0% –SALES EBIT

Target97%

121%

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SALES UPDATE

As the water heater business continues to evolve with the introduction of new and exciting new products from Tankless Water Heaters, to electric hybrid models, to condensing and high-efficiency gas, and on to wifi enabled products featuring EcoNet, we are witnessing a significant change in how homeowners view their water heater needs as well as how they make their buying decisions. When looking at the homeowner customer journey, it is interesting to see that over 80% of all water heater decisions are made without price being the driver. Instead, homeowners are looking to their local plumbing contractor to help them make the best buying decision they can for their family needs.

When looking at this changing landscape, there is a huge opportunity for us to take the lead in educating and training our Rheem plumbers on how to not only install and service these new, more complex products; but, more importantly, teach them on how to sell the value and benefit of these products. It is a big task and an exciting one that will position our Company as the true leader in bringing value to our customers by helping them make more money while driving more demand for our products. As such, we are introducing a brand new team of Contractor Outreach Managers to our sales organization with the mission of teaching and educating the professional plumber on how they can take advantage of a value and upsell approach.

Our Contractor Outreach team, will be made up of former plumbers….experienced professionals who carried the tools, know how to sell value, and have not only the ability; but, also the credibility to be able to speak from one-plumber-to-another. Recently, we hired a leader to manage and build this exciting organization. Rob Wagner worked as a plumber for over 30-years and served as both an owner of his own business and a leader of a large plumbing and heating company in Philadelphia, PA. Rob is a passionate supporter of the trade and a proud member of the Rheem team. He also knows how to sell value and did so with Rheem Water Heaters at an attachment rate of just under 50% in one tough market. He is currently building his team of other like-minded plumbers. It is truly exciting to see how many in the trade are embracing our message and appreciate what we are doing. Others have already taken Rob’s message to heart by moving their business approach to a value-selling one that promotes higher-end, more efficient, and winning water heater solutions for the homeowner.

taking advantage of a value and upsell approach

Contractor Outreach Team Initiativeby Tom Wujcik, VP Sales

SAFETY FIRST – Powerlift® Technique for Safer Lifting, Dr. Michael Schaefer

Dr. Michael Schaefer is a chiropractic orthopedist that has worked with industry in developing effective ergonomic and material handling techniques for workers across America and Europe. The economic machine of our bodies is our backs an Dr. Schaefer has developed five lifting techniques to help protect us against back injury. Some of the world’s largest corporations like 3M, The United States Postal Service, Northwest Airlines and National Car Rental use this technique. This is a departure from the squat-lift technique that has been commonly taught.

Some of the industries for which the customized Powerlift® Training has been developed include the following:

Manufacturing, General Industry, Healthcare, Moving and Storage, Warehouse and Distribution, Airline, Trucking

Here are just a few highlights of the Powerlift® Technique: Maintaining a strong, neutral spine position is the key to Dr.

Schaefer's Power Lifting techniques

Use a stance wider than your shoulders, lift with your legs as an elevator and not by using your spine like a crane

The wide stance allows you to get closer to the load since your knees are no longer in the way, so it’s much easier on hurt and arthritic knees than a squat lift

A wrestler’s stance is wide and the knees are not over-bent, keep their backs in neutral with hips rotated forward. This creates a strong, flexible stance

This method explains five lifting techniques that protect against back injury: • Wide-stance lift • Tilt load • Tripod • Golfer's bend • Lean-bar lift

We will be learning more about the Dr. Schaefer Powerlift® Technique in the future.

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PRODUCT MANAGEMENT

At the end of 2015, Eemax became a part of the Rheem family and immediately enhanced our product portfolio. Eemax, the industry leader in the electric tankless water heater market, marketing under the Eemax and EcoSmart brands, has certainly made a name for itself in water heating. With a focus specifically on electric tankless applications, they

have incredible breadth, with products spanning the residential, light commercial, industrial/heavy commercial, and safety segments. The addition of their winning

product line will significantly enhance Rheem’s total offering and strengthen our tankless product line, one of our top initiatives for 2016.

Eemax is known as an innovator, and we are excited about what that means for Rheem’s product roadmap. Their most recent innovative launch is happening right now, the new AutoBooster™, which can increase hot water delivery from a standard electric tank by up to 45%! Many homeowners’ water heater options have been impacted by the new NAECA III regulations, due to increased dimensions and large capacity efficiency standards. These

customers will find great value in the AutoBooster™, which can help them get more out of a smaller footprint product. Another great innovation from the

Eemax team is their commercial Phd (Parabolic Heat Design) water heater. It quickly, precisely heats the temperature of water for industrial and commercial

applications, while ensuring minimized energy usage. Its reliability also makes it great for safety applications in industrial settings.

It’s obvious that the addition of these innovations and the core Eemax line to the Rheem family will allow us to be much more competitive in the electric tankless market than we ever have been before. It will also help expand our solutions into segments we haven’t been traditionally strong in. We look forward to strategically integrating these products into the Rheem brand portfolio, and to being able to offer our customers an even more complete, winning product line in 2016.

Adding our New Tankless Electric Family of Products to the Rheem Brand Portfolioby Stacey Gearhart, Director, Product & Channel Marketing

New Electric

Tankless Line Strengthens

Rheem Portfolio

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Andrew Bates, Auburn engineering co-op student in Manufacturing Engineering, was selected to receive the Frank Vandergrift Award for the Most Outstanding Engineering Co-Op Student for 2016. This award recognizes a student’s most meaningful co-op experience with a leading organization. Bates was one of the many who had the highest GPA of all engineering co-op students graduating this year. He had to submit an essay about his experience as a co-op student and the leadership skills he developed during his time at Rheem.

Congratulations Andrew!

Andrew Bates receiving the Frank Vandegrift Award from the Dean of Engineering, Christopher Roberts

Rheem Co-op Student from Auburn University Wins Prestigious Award

SUPPLY CHAIN

This is a question the Demand Planning group has been working on the last six months to answer. As the Sales & Operations Planning (S&OP) Manager, having a successful demand planning function is

critical to getting many diverse groups and stakeholders aligned

to overall business goals.

With a successful demand planning function in mind, we began efforts in 2015 to restructure the Demand Planning group to match the functionality and business planning needs of each segment of the Water Heater Division; Residential, Commercial, Tankless Gas, Intercompany, and Marathon.

The first milestone was to get a Demand Planning Lead dedicated to demand planning and analysis for Commercial business. In late Q3 2015, Akin Akinsolu accepted the challenge of getting the weekly, monthly, & quarterly demand planning activities aligned. Prior to working with Demand Planning, Akin had experience with R&D advanced research and early flammable vapor ignition resistance (FVIR) design testing. He also brings in product knowledge and an interest in Product Management. During the 2015 NAECA 3 transition, Akin was key to loading the initial demand plans for our transition products. Starting in January 2016, a schedule of monthly and bi-weekly meetings now takes place to gain alignment across stakeholders. There is a monthly demand planning meeting taking place where the short- and long-term forecasts are aligned with Sales to gain a consensus demand plan. This is critical as it provides input to Production,

Material, and Inventory planning groups to drive capacity and inventory. Along with this monthly demand meeting, there are bi-weekly meetings that take place where Demand Planning works with Operations; inventory and capacity; to synchronize and gain consensus alignment.

The second milestone was to get a Demand Planning Lead in place to manage the demand planning and data analytics for Residential, Tankless Gas, Intercompany, and Marathon business segments. In December 2015, Carlos Garcia accepted the challenge and has since relocated to the WHD Headquarters in Montgomery where he leads the demand and supply planning meetings on a monthly basis. Carlos, in his previous roles, has spent time in Production Planning and has a thorough understanding of the current process. This puts him in a unique position to support the Operations groups. Throughout the month he is involved in working directly with Sales to insure forecasts are loaded into Oracle to drive visibility of demand throughout the organization. He supports Operations (Materials Planning, Production Planning, Shipping, and Distribution) by providing key demand inputs that they consume on a weekly basis to insure we are able to fulfill the demand needs of our customers.

Each Demand Planning Lead brings their own unique skillsets and many years of Rheem experience to the role along with a strong desire to be part of a team that contributes to the success of Rheem. As their contributions and success feeds up into the S&OP function, Water Heater Division becomes more agile and responsive to the needs of our customers and our markets. We are able to avoid being put in reactionary positions through better planning and are able to take quicker advantage of our competitive strengths.

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by James Lee, S&OP Manager

What is Success

in Demand Planning?

Figure 3, CoilDesigner™ Tool

ADVANCED TECHNOLOGY ANALYSIS

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What’s Happening in ATAby Troy Trant, Manager, Advanced Technology Analysis

Within Research and Development (R&D) there are some strange things going on! This is true when you see an ultra-low NOx furnace in a water heater laboratory and eventually condensing boilers too. Such activity is ongoing as we leverage the wide range of skills and talents across the organization. That brings me to our introduction. Working across the Rheem Enterprise is nothing new and in fact it is encouraged, especially within the Advanced Technology Analysis (ATA) team of R&D. Built from a similar vision that led to our Advanced Technology Integration (ATI) Controls Group, the ATA team places its focus on areas very much important to all of Rheem product lines that includes heat transfer, fluid flow, combustion and materials.

Today, the ATA team, led by Troy Trant, comprises Hafez Fard – Staff Engineer, Heat Transfer and Thermal Management; Reza Khatami – Staff Engineer, Combustion Technologies; Divakar Mantha – Staff Engineer, Materials Specialist; Qian Zhang – Research Engineer, along with Jordan Randolph and John Stauter – both Engineering Co-op students. The ATA team is part of a Shared Services Group with efforts supporting the major divisions of Rheem (Water Heating, A/C, Raypak, and HTPG). We provide essentially 2 roles within Rheem, namely, investigating new technologies to help bring forward “Gate 0” proposals, and with assisting major project needs that may come up.

For 2016, we have some exciting and challenging efforts on the horizon. As just a sampling, modelling and analyses have been an area of focus as preparations are being made to field test, this year, new-to-market ultra-low NOx furnaces. Figure 1 shows a model built to better understand metal temperatures inside the furnace design. Recently, we also started a joint project with Raypak to develop a new generation condensing boiler. Figure 2 depicts a sample of specially shaped tubes, made with stainless steel, needed for high performance and competitively sized space heating boilers that will include firing rates up to 5MMBtu/hr. This project will also leverage synergies with the Water Heater Division. Finally, in Figure 3, a new design tool called CoilDesigner™ was recently brought into the organization to both update and to bring under a common platform a tool for modelling air-to-refrigerant (and other) heat exchangers. Here, we are supporting calibrating the tool outputs ahead of more wide spread application. Looking ahead, this new tool will play a role as new refrigerant regulations come into place.

These are some interesting and exciting times for Rheem as we work on joint projects and share our collective knowledge in developing uniquely competitive products.

Figure 1, New ULN Furnace

Figure 2, Boiler HX Tube

EMPLOYEE SOFT SKILLS TRAINING

Over the next two years, Rheem Water Heating is offering soft skills training to employees through Alabama Industrial Development Training (AIDT). The four courses being offered is Workforce Behaviors, Critical Thinking, Workforce Challenges, and Interpersonal Communication. After April 13, approximately 598 employees will have completed “Workforce Behaviors” training. The course objective is to focus on team building components such as understanding various personality styles, the importance of a diverse workforce, workplace etiquette, and how to manage conflict. Each participant completes a personal style inventory that allows them to better understand their own personality and why and how they make the decisions they do.

Workforce Behaviors training has been well received by all employees. Class participation has been extremely high and rewarding.

William Brown from our Materials Control Department said “I really enjoyed the training and it helped me to realize that I need to keep an open mind. It helped me evaluate my actions and how it affects other employees. I now realize I need to

analyze any situation before reacting or saying anything. The training was beneficial and I appreciate the Company for offering the training.”

Tamera Coleman form Heater Line 2, said “It was valuable training and the content was relevant. We had a good class. Participation was high and the instructor kept us engaged and attentive.”

Jonathan McShan from Residential Boiler, stated “I was listening and observing during the class and the instructor was trying to help everyone interact and work together as a team. “The instructor took advantage of the time in class to explain to everyone how important teamwork was to the success of Rheem. It helped us all realize to keep an open mind and to understand that people have different perspectives and to respect those differences.”

Our next class, Critical Thinking, will be held later in the year. This course objective is to expose employees to concepts, benefits, and processes related to problem solving, critical thinking, following directions, and continuous improvement.

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William Brown

Tamera Coleman

Jonathan McShan

by Rodger Fisher, Plant Human Resources Manager

BOILER QUALITY IMPROVEMENT

Going into 2016, the Montgomery Plant is continuing our focus on Safety and Quality. The Boiler Team is committed to ensuring that the Rheem Brand continues to be known for quality in the market and to our customers. The cultural shift from “Pushing Product out the Door” to “Sending Quality Products out the Door” is taking hold to the teams.

I would like to highlight a significant improvement for our Commercial Boiler process. The tank leak rate has dropped from 25% to 7% in the last twelve months! This is a direct result of effective teamwork and collaboration along with goal alignment between operations and support groups.

Jesus Guarneros, Process Engineer, is continuing to lead the activities to improve fit up. Tina Burke, Weld Engineer, has partnered with the welders to optimize weld parameters along with providing Weld Certification Training. Darius Thomas, Process Engineer, is providing engineering solutions to mechanical constraints and has partnered with maintenance and tooling to implement these improvements. Larry Lewis, Production Supervisor, is leading the operations team through motivation, communicating quality expectations, and partnering with the support teams. The Commercial Boiler operations team that is directly building our product

has responded very well by embracing the quality cultural change which has shown through results.

Welding is a major core competency to making boilers. We recognize the value in investing in our welders through training and the results it will provide in exceeding our customer expectations. Through partnering with our Mexico Team, the Montgomery Plant launched the 6 Level Welder Certification Program in January. The results were very successful with the completion of 61 Welders, 9 Working Leaders, and 2 Supervisors passing Level 3 Certification. There was a high level of enthusiasm, engagement, participation, and teamwork amongst the welders and trainers. It was very impressive to see the welders working together to improve their weld knowledge and skills through the training. We are on target to complete Level 6 by the end of 4th Quarter.

Sending Quality

Products Out the Door

Commercial Boiler Team

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Jesus and Darius verifying fit-up improvement

Pressing forward deeper into 2016, our team is very excited to see more results of our continuous improvement activities focused on quality and meeting our customer’s expectations.

Welder Training

by Brian Hand, Superintendent Boiler

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Operational Excellenceby Jaime Loera, VP Mexico Operations

As we continue in our quest to Operational Excellence we will focus today on the Out Of Box Audits. This is an important part of our operation as the OBA Auditor is the last set of eyes that looks at our product at Rheem, the next set of eyes will be our customer. The emphasis is on cosmetic problems and components that are not put together as requested by our specifications. Those of you that have worked on the final assembly line know that there are many variables and components that

can cause our product not to work as intended. The difficulty of the process and attention to detail are critical to insure that we are producing a product that is worthy of the Rheem name.

If you are involved in this process any ideas that can help our product look and work better are welcome. We must reach our objective of Zero cosmetic issues at our customer’s homes.

Here are a few pictures that show a good looking water heater.

RHEEM MEXICO

Side of Top Pans: without any foam leaks, free of scratches, screws properly placed

Top Pans: free of scratches, foam, clean nipples Label: A straight label looks good. When the label is not straight, it is eye catching and gives a bad look to our product.

Valve: good looking, straight gas valve assembly

Complete Water Heater

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RHEEM MEXICO

2016 Contribution included donations of Furniture such as television, bedroom sets and dinner table for Casa de Misericordia Emergency shelter for victims of domestic violence in Laredo, TX on January 2016.

SHARE YOUR HAPPINESS WITH A PHOTO

Donation of 4 tablets and 1 mini split for Stereo 91, Local Radio Station, as prizes for a Children’s Photography Contest on April 2016.

Sponsorship of $800 to a Group of Students of Tec Milenio High school, to help them compete in the FIRST Robotics Competition in Mexico City, on March 2016.

Sponsorship of $1,400 for a “Global Race for Charity- 10K, 5K and Walk 4K” to U.S. Consulate. All funds will be given to Casa Hogar Elim orphanage in Nuevo Laredo, Tamaulipas, April 2016.

RHEEM CANADA

Canadian Update by Dave McPherson, General Manager

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The First Quarter of 2016 has begun with some exciting accomplishments that will set the stage for a successful year. From a Marketing perspective, I am proud to share

with you that Rheem Canada has been recognized with receiving the PPPC Image award for the “ProClub Program”. This award was presented to us from the Promotional Products Professionals of Canada in the B2B category. The PPPC seek to recognize the Best of the best. Included is a picture of the award which was presented in February at an Industry Event with recognition also going to the supporting marketing agency that assist with the program; SVS Marketing.

In addition to the award, Rheem Canada showcased the family of water and air products at the CMPX National Trade show in March. The CMPX show is Canada’s largest Mechanical Exposition. It was attended by thousands of contractors, architects, engineers, and Industry participants.

Rheem Canada ran a very creative and successful promotion campaign titled “PictureRheem and PictureRuud” that generated brand awareness along with attracting many visitors to the Rheem booth. We have attached a sample picture submission that was received as part of the CMPX contest.

This submission illustrates a Rheem contractor family (Zed family) succession from being a young Rheem supporter (Joey) in 1995 to eventually becoming a successful installing contractor with the family business and continuing to support Rheem some twenty-one (21) years later. Thanks to the Zed family for this sample picture submission and impressive, loyal support. Another worthy note with the Trade show related to Industry training where Rheem actively supported an Industry skills development contest over the three days with a combination of HVAC products and people.

This part of the event is geared to technical high school and college students that are at various levels as they enter the HVAC Industry. I want to extend a big thank you to all involved from the Sales, Marketing, Technical teams and with special support from the US Marketing team for making this a successful Rheem showcase event.

In the product leadership area, Rheem Canada is a leading participant in the Net Zero Energy project that is well supported by the Federal government

Rheem Trainer, Mark Parliament, presents an award at the Skills Competition “Photo courtesy of Mechanical Business Magazine”

through Natural Resources Canada (NR Can). This initiative was briefly covered in a 2015 RheeView article and worth of further coverage as project support is elevated. NR Can contributed almost $2 Million to a national demonstration project that supports building Net Zero Energy housing communities in many of the provinces. NR Can’s funding supported the technical design and engineering of these houses.

Rheem Canada was chosen as a technology partner to consult and provide Industry leading products that help build the Net Zero homes across Canada. Rheem’s feature product was the Prestige Hybrid Heat Pump. I encourage you to follow the link at https://vimeo.com/buildability/RheemNetZero to a short video explaining what the Net Zero Energy product means to the Rheem Canada family. This was created by the Sales team in conjunction with Technical Services support and very well prepared for further marketing activation in the product leadership strategic area.

Other noteworthy progress relates to the customer side as Rheem was able to achieve some distribution improvements with the addition of a new HVAC partner along with the territory expansion of an existing partner for organic growth in 2016. Wolseley has partnered with the “Rheem” brand for the Quebec market, our third largest market in Canada. This new relationship looks promising to provide growth and depth in the Eastern sales region, with Wolseley going to market with Rheem as their Top Tier Brand. Further Distribution improvements in the Mid-West have Sinclair expanding their Rheem territory, taking over Saskatchewan and Manitoba. In Q1, Rheem also kicked off the launch of the new Service Experts

PPPC Image Award

Picture Rheem / Picture Ruud Contest

CMPX Show

RHEEM CANADA

Canadian Update Continued by Dave McPherson, General Manager

relationship and has seen some good growth in the early phase. As a footnote relative to Industry Consolidation, one of our key Energy channel partners (Enercare) has initiated the acquisition of Service Experts and the deal is expected to close in Q2. Costco Quebec was launched in Q1 with the support of Emco and this now completes the Costco Canada store launch. Another retail channel note relates to the Q1 sale of HVAC ductless products to The Home Depot. This product is imported from China for the sale to The Home Depot. We anticipate further growth in this product segment in Q2. With all of these new opportunities, 2016 looks to be a very promising year!

The Customer Support Team has been busy as well. Karen Anderson joined to manage the Team in late November, and started with a re-branding. The recent upgrade to our phone system software has seen our call abandon rate go from ~25% to well into single digits. The hard work from the CSR Team is to be commended for this great success! We have also implemented a Statistics Board, where the team anxiously awaits the updates to the performance metrics so they can celebrate the improvements they have made. The efforts to increase direct customer shipments from the factory have also seen success. At the end of Q1, Rheem Canada has accomplished a milestone, with over 45% of customers’ orders for residential water heaters being supplied directly from the factories in Nuevo Laredo, Mexicali and Montgomery to the Canadian Market bypassing the Brampton Distribution Centre. Factory direct shipment supports the operational excellence strategy. There will be continued attention to this area as focal point through the remainder of the year.

Another core theme for Rheem Canada is under the Heart of Comfort umbrella. In March, the Rheem team assembled a bowling team in support of Big Brothers & Big Sisters Canada. Rheem was a media sponsor for the event. The event was led by Linda Doyle and included some great volunteers as seen in the picture.

The Rheem Team was the “Heating & Cooling Super Heroes”. The Team raised $3,166 toward the Bowl for Kids’ Sake event. It is grounded in the purpose of having mentors help to empower

Rheem Team Heating & Cooling Super Heroes

children to see a positive future and believe it can be achieved. There were over 1600 children in the Hamilton/Burlington area that were mentored over the last year. The total event raised $14,000 towards this good cause.

As a final few notes, the Rheem Canada team are continued to be focusing on a project initiated in 2015 relating to supply chain optimization. There was good progress in this area from Q1 and this will extend through the balance of 2016. I am excited to see the progress and accomplishments of the team. These improvements will be instrumental in driving further growth and progress over the year. I want to extend a sincere thank you to the Rheem Canada team for their commitment and support in driving the business forward.

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EMPLOYEE FOCUS

New HiresJanuaryTakilla R. Boyd ...................................................... AssemblerJeffrey L. Brooks ......................................Air and Gas TesterCedric D. Chatman .........................Spray Machine OperatorDeontae Fleeting .................................................. AssemblerQuinton T. Gordon ................................................ AssemblerLaBan K. Holly ...................................................... AssemblerSteven J. James .....................................Press Cell OperatorAntoine Jones ...................................................... AssemblerAnthony D. Overton .............................................. AssemblerLarry Simpson ...................................................... AssemblerValerie D. Turner ................................................... AssemblerJakeisha Wyman .................................................. AssemblerRaymond W. Gill .......................................Electrical EngineerYwaunothy Burton ............................... Tech Support AnalystLaura Stammer ...........................Sr. Sales Manager, FinanceDavid Vega ........................................................ ATI EngineerBrandon Alsup ...................................................... Assembler

FebruaryEddie Batie ........................................................... AssemblerDeMonte Bell ........................................................ AssemblerMarcus Bellinger ................................................... AssemblerKenneth J. Bolling ................................................ AssemblerShane A. Brown ..................................... Machine Arc WelderCedric J. Davis ..................................................... AssemblerKennedy Dowdell ................................................. AssemblerMarion R. Finney .................................................. AssemblerJohnathon K. George ........................................... AssemblerRoderick K. Johnson ............................................ AssemblerCurtis A. Palmer ................................................... AssemblerPatrick Perry ......................................................... AssemblerKaelin Pettus ........................................................ AssemblerKelsey Smith ......................................................... AssemblerRyan M. Them ...................................................... AssemblerVictoria N. Turner .................................................. AssemblerTaquana R. Waters ............................................... AssemblerRebecca A. Gulley ...............................................AccountantKristine Noland ............................ Engineering Support SpecTanjir H. Ratul .........................................Sr. Design Engineer

MarchBrandon S. Durham ................................... Projection WelderDaniel Fleurimond ..........................Spray Machine OperatorDerek B. Hatcheck ......................Gen Maintenance Mech AJordan L. Lawrence .............................................. AssemblerWillie J. Smith ....................................................... AssemblerGloria J. Tarver ..................................................... AssemblerPamela G.Thaggard ............................................. AssemblerReginald L. Hall ....................................... Production AnalystMeghan Hammitt ............................ Sales Support SpecialistTito Peterson ...............................Customer Claims AnalystIIMatthew Storey ..................................................... Sales MgrKaladale Blackmon ........................................ Lab TechnicianRichard Cable ................................................ Lab TechnicianAbigail Passero .................................................Test Engineer

PromotionsJanuaryLuca Bologna .....Division Manufacturing Engineer (NL/Mex)William Bradford .................................Power Truck OperatorDavid Gibbons ........................................Sr. Design EngineerAndy Zortman .......................Product Manager- Commercial

FebruaryMatthew Lamasney ................... Sr. Specialist Ed. & Content

DevelopmentNeil Lynn ..........................................................Senior TrainerJeffrey Reimer ..............................Sr. Region Sales Manager

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Q1 RHEEMARKABLE HEROES

James Courtney – James lead the development of a very detailed and thorough analysis of the Tankless product category. This analysis was used to articulate our product needs Executive Leadership and formed the basis of our product strategy. James worked on this after hours and on weekends in order to meet deadlines. His efforts led to a very successful review with Paloma, and ultimately a trust in our understanding of our market.

Willie Johnson – Willie has been with Rheem for 34 years and has demonstrated his extreme dedication to meeting customer expectations. He brings positive value to Rheem by preventing orders from leaving the dock which don’t meet our shipping standards. During the N3 go live Willie stayed countless hours helping the heater lines get water heaters pulled to the trucks.

30 Years John RuckerAllan FulghumJohn Andrews

5 YearsJoel BouriaqueChristopher Puranen

5 Years Mark Muzyka

JAN2016

JAN2016

FEB2016

FEB2016

MAR2016

MAR2016

10 Years Douglas Schroeder

5 YearsAnthony Gallello

25 YearsPerry Warren

5 YearsArmand GauvinNatasha Fisekovic

SERVICE AWARDS

SERVICE AWARDS

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Earnest MartinYear Hired: 1983Retirement Date: Jan. 8, 2016Job Title: Punch Press OperatorDepartment: Heater PressYears of Service: 33

Madison BrownYear Hired: 1981Retirement Date: Feb. 26, 2016Job Title: ASME Hand Arc WelderDepartment: Commercial Tank FabricationYears of Service: 35

Jeanette PowellYear Hired: 1979Retirement Date: Mar. 25, 2016Job Title: Spot Welder Machine OperatorDepartment: Jacket PaintYears of Service: 37

Timothy RobinsonYear Hired: 1982Retirement Date: Jan. 31, 2016Job Title: Team Leader,

ProductionDepartment: Heater GeneralYears of Service: 34

Emily BishopYear Hired: 1994Retirement Date: Feb. 26, 2016Job Title: AssemblerDepartment: Heater GeneralYears of Service: 22

Butch AikensYear Hired: 2005Retirement Date: Jan. 12, 2016Job Title: Sales ManagerDepartment: Tankless SalesYears of Service: 11

David Wright Year Hired: 1988Retirement Date: Mar. 31, 2016Job Title: AssemblerDepartment: Heater Line 4Years of Service: 28

RETIREMENTS