A water heater system includes a tank for storing water; a flue assembly positioned within the tank, the flue assembly adapted to transfer heat from flue gases within the flue assembly to water in the tank; a burner in fluid communication with an inlet end of the flue assembly and operable in at least a high input mode and a low input mode to deliver the flue gases to the flue assembly, the exhaust assembly having a threshold temperature above which the exhaust assembly is not suitable; and an exhaust assembly including a fan, wherein at least in the low input mode, the flue gases condense in the flue assembly, and wherein operation of the fan reduces a temperature of the flue gases in the exhaust assembly to below the threshold temperature at least in the high input mode.