##### Table of Contents





UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549
      FORM 10-Q
  (Mark One)x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File
    No. 001-32342
      NALCO HOLDING COMPANY
 (Exact name of registrant as
    specified in its charter)
   Delaware(State or other jurisdiction
    of
    Incorporation or Organization)

16-1701300(I.R.S. Employer
    Identification Number)    1601 West Diehl Road
 Naperville, IL
    60563-1198
 (630) 305-1000
 (Address, Including Zip Code, and
    Telephone Number, Including Area Code, of Registrants
    Principal Executive Offices)
   Not applicable
 (Former name, former address and
    former fiscal year, if changed since last report)
   x o
   12b-2
   Large
    accelerated
    filer x
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o    Rule 12-b-2 o x




---



##### 





QUARTERLY
    REPORT ON
    FORM 10-Q
    NALCO HOLDING COMPANY
    Quarter Ended June 30, 2008
    TABLE OF CONTENTS
   
 Part I. Financial InformationItem 1.

Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  June
    30, 2008 and
    December 31, 2007


2Condensed Consolidated Statements of Operations
     Three months and six months ended June 30, 2008 and
    2007


3Condensed Consolidated Statements of Cash Flows
     Six months ended
    June 30, 2008 and 2007


4Notes to Condensed Consolidated Financial
    Statements  June 30, 2008


5Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of
    Operations


15Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


28Item 4.

Controls and Procedures


28Part II. Other InformationItem 1.

Legal Proceedings


29Item 2.

Unregistered Sales of Equity Securities and Use
    of Proceeds


29Item 4.

Submission of Matters to a Vote of Security
    Holders


29Item 6.

Exhibits


30Signature




31EX-10.1: ASSET PURCHASE AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION   1




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##### Table of Contents



PART I.  FINANCIAL
    INFORMATION   Item 1.
    Financial
    Statements  Nalco
    Holding Company and Subsidiaries
 Condensed Consolidated Balance Sheets
 (dollars in millions)
  (Unaudited)June 30,


December 31,2008


2007AssetsCurrent assets:Cash and cash equivalents

$
86.2


$
119.9Accounts receivable, less allowances of $23.8 in 2008 and $19.5
    in 2007


811.9



805.6Inventories:Finished products


328.8



268.9Materials and work in process


107.4



81.5436.2



350.4Prepaid expenses, taxes and other current assets


100.9



112.6Total current assets


1,435.2



1,388.5Property, plant, and equipment, net


771.9



762.3Intangible assets:Goodwill


2,488.2



2,459.8Other intangibles, net


1,122.2



1,121.4Other assets


215.8



246.6Total assets

$
6,033.3


$
5,978.6Liabilities and shareholders equityCurrent liabilities:Accounts payable

$
357.9


$
316.4Short-term debt


90.8



130.4Other current liabilities


300.5



322.5Total current liabilities


749.2



769.3Other liabilities:Long-term debt


3,241.9



3,193.7Deferred income taxes


268.3



327.5Accrued pension benefits


322.6



314.4Other liabilities


220.2



234.7Minority interest


19.0



21.2Shareholders equity


1,212.1



1,117.8Total liabilities and shareholders equity

$
6,033.3


$
5,978.6   See accompanying notes to condensed consolidated financial
    statements.
 2




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##### Table of Contents



Nalco
    Holding Company and Subsidiaries
 Condensed Consolidated Statements of
    Operations
 (Unaudited)
 (dollars in millions, except per share amounts)
  Three Months


Three Months


Six Months


Six Monthsended


ended


ended


endedJune 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Net sales

$
1,066.3


$
970.9


$
2,066.0


$
1,880.2Operating costs and expenses:Cost of product sold


594.9



537.5



1,159.3



1,041.9Selling, administrative, and research expenses


332.2



292.2



641.0



579.7Amortization of intangible assets


15.9



15.4



29.5



30.6Business optimization expenses


1.4



2.3



2.4



2.3Total operating costs and expenses


944.4



847.4



1,832.2



1,654.5Operating earnings


121.9



123.5



233.8



225.7Other income (expense), net


(4.3
)






(7.3
)


(0.3
)Interest income


2.0



1.9



4.5



4.5Interest expense


(64.7
)


(68.2
)


(132.0
)


(136.5
)Earnings before income taxes and minority interests


54.9



57.2



99.0



93.4Income tax provision


9.0



13.7



22.5



28.4Minority interests


(1.7
)


(1.7
)


(3.1
)


(3.6
)Net earnings

$
44.2


$
41.8


$
73.4


$
61.4Net earnings per share:Basic

$
0.32


$
0.29


$
0.52


$
0.43Diluted

$
0.31


$
0.28


$
0.51


$
0.41Weighted-average shares outstanding (millions):Basic


141.4



144.4



141.7



144.0Diluted


142.2



148.0



142.5



148.0Cash dividends declared per share

$
0.035


$
0.035


$
0.07


$
0.07   See accompanying notes to condensed consolidated financial
    statements.
 3




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##### Table of Contents



Nalco
    Holding Company and Subsidiaries
 Condensed Consolidated Statements of Cash
    Flows
 (Unaudited)
 (dollars in millions)
  Six Months


Six Monthsended


endedJune 30, 2008


June 30, 2007Operating activitiesNet earnings

$
73.4


$
61.4Adjustments to reconcile net earnings to net cash provided by
    operating activities:Depreciation


69.9



64.0Amortization


29.5



30.6Amortization of deferred financing costs and accretion of senior
    discount notes


23.8



22.3Other, net


1.7



(10.4
)Changes in operating assets and liabilities


(64.6
)


(97.2
)Net cash provided by operating activities


133.7



70.7Investing activitiesAdditions to property, plant, and equipment, net


(61.9
)


(47.6
)Other, net


(14.0
)


(1.0
)Net cash used for investing activities


(75.9
)


(48.6
)Financing activitiesCash dividends


(9.9
)


(5.0
)Changes in short-term debt, net


(61.2
)


(8.3
)Proceeds from long-term debt


3.1



48.8Repayments of long-term debt


(0.7
)


(24.0
)Purchases of treasury stock


(21.7
)


Other, net


(3.9
)


(4.1
)Net cash provided by (used for) financing activities


(94.3
)


7.4Effect of exchange rate changes on cash and cash equivalents


2.8



1.8Increase (decrease) in cash and cash equivalents


(33.7
)


31.3Cash and cash equivalents at beginning of period


119.9



37.3Cash and cash equivalents at end of period

$
86.2


$
68.6   See accompanying notes to condensed consolidated financial
    statements.
 4




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##### Table of Contents



Nalco Holding Company and SubsidiariesNotes to Condensed Consolidated Financial
    Statements(Unaudited)
  June 30, 2008
  1.
    Description
    of Business    2.
    Basis of
    Presentation        3.
    Recent
    Accounting Pronouncements  Fair Value Measurements 157-2,
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans  an amendment of FASB
    Statements No. 87, 88, 106 and 132(R)
 5




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##### Table of Contents



3.
    Recent
    Accounting Pronouncements (continued)    The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115.
  Business Combinations Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement
    No. 133 Accounting
    for Derivative Instruments and Hedging Activities
 6




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##### Table of Contents



3.
    Recent
    Accounting Pronouncements (continued)    4.
    Debt    June 30,


December 31,(dollars in millions)

2008


2007Short-termChecks outstanding and bank overdrafts

$
31.3


$
14.1Notes payable to banks


27.3



6.1Current maturities of long-term debt


22.2



32.4Unsecured notes, due May 2008






27.8Revolving credit facility


10.0



50.0$
90.8


$
130.4Long-termSecuritized trade accounts receivable facility

$
137.0


$
134.0Term loan A, due November 2009


39.5



64.8Term loan B, due November 2010


887.0



887.0Senior notes, due November 2011


980.2



959.6Senior subordinated notes, due November 2013


780.2



759.6Senior discount notes, due February 2014


439.3



420.6Other


0.9



0.53,264.1



3,226.1Less: Current portion


22.2



32.4$
3,241.9


$
3,193.7   5.
    Shareholders
    Equity    June 30,


December 31,(dollars in millions, except per share amounts)

2008


2007Preferred stock, par value $0.01 per share; authorized
    100,000,000 shares; none issued

$



$
Common stock, par value $0.0l per share; authorized
    500,000,000 shares; 146,764,030 and 144,377,068 shares
    issued at June 30, 2008 and December 31, 2007,
    respectively


1.4



1.4Additional paid-in capital


761.2



749.7Treasury stock, at cost; 5,977,500 shares and
    4,588,500 shares at June 30, 2008 and
    December 31, 2007, respectively


(138.4
)


(108.0
)Retained earnings


163.1



100.7Accumulated other comprehensive income


424.8



374.0Total shareholders equity

$
1,212.1


$
1,117.8    7




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##### Table of Contents



5.
    Shareholders
    Equity (continued)      6.
    Pension
    and Other Postretirement Benefit Plans    Pension BenefitsThree Months


Three Months


Six Months


Six Monthsended


ended


ended


endedJune 30,


June 30,


June 30,


June 30,(dollars in millions)

2008


2007


2008


2007Service cost

$
6.4


$
7.1


$
13.1


$
14.2Interest cost


12.2



11.4



24.4



22.5Expected return on plan assets


(9.7
)


(8.6
)


(18.9
)


(16.8
)Prior service (credit) cost


(0.5
)


0.1



(1.1
)


0.1Net actuarial loss


0.1



0.2



0.2



0.3Net periodic cost

$
8.5


$
10.2


$
17.7


$
20.3   Other Postretirement BenefitsThree Months


Three Months


Six Months


Six Monthsended


ended


ended


endedJune 30,


June 30,


June 30,


June 30,(dollars in millions)

2008


2007


2008


2007Service cost

$
0.9


$
1.1


$
2.2


$
2.7Interest cost


2.0



1.9



4.4



4.1Prior service credit


(1.2
)


(1.3
)


(2.4
)


(2.4
)Net actuarial gain


(1.0
)


(0.1
)


(1.3
)


(0.1
)Net periodic cost

$
0.7


$
1.6


$
2.9


$
4.3   7.
    Business
    Optimization Expenses   8




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##### Table of Contents



8.
    Summary
    of Other Income (Expense)    Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Franchise taxes

$
(0.7
)

$
(0.8
)

$
(1.3
)

$
(1.6
)Equity in earnings of unconsolidated subsidiaries


0.5



0.5



0.9



0.9Foreign currency exchange adjustments


(2.4
)


0.7



(5.4
)


0.5Other


(1.7
)


(0.4
)


(1.5
)


(0.1
)$
(4.3
)

$



$
(7.3
)

$
(0.3
)   9.
    Income
    Taxes  non-U.S. subsidiaries,
       9




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##### Table of Contents



9.
    Income
    Taxes (continued)    Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007U.S. statutory tax rate

$
19.2


$
20.0


$
34.6


$
32.7Foreign tax credits


(40.1
)






(40.1
)


U.K. valuation allowances


20.4







20.4



U.S. audit


2.2







2.5



Other


7.3



(6.3
)


5.1



(4.3
)Income tax provision

$
9.0


$
13.7


$
22.5


$
28.4   10.
    Comprehensive
    Income    Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Net earnings

$
44.2


$
41.8


$
73.4


$
61.4Other comprehensive income, net of income taxes:Derivatives


0.6



(0.2
)


1.3



0.9Net prior service credit


(1.2
)


(0.8
)


(2.3
)


(1.5
)Net actuarial (gain) loss


(0.9
)






(1.1
)


0.1Foreign currency translation adjustments


14.9



48.8



52.9



64.5Comprehensive income

$
57.6


$
89.6


$
124.2


$
125.4   11.
    Segment
    Information    Industrial and Institutional Services
  Energy Services
  Paper Services
  Other
   10




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##### Table of Contents



11.
    Segment
    Information (continued)        Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Industrial and Institutional Services

$
474.8


$
432.5


$
902.9


$
836.9Energy Services


363.0



316.9



709.7



611.3Paper Services


203.0



194.8



404.0



381.5Other


25.5



26.7



49.4



50.5Net sales

$
1,066.3


$
970.9


$
2,066.0


$
1,880.2     Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Segment direct contribution:Industrial and Institutional Services

$
96.1


$
93.6


$
177.1


$
178.7Energy Services


72.4



74.5



147.8



136.5Paper Services


24.3



31.9



52.6



58.2Other


(24.6
)


(27.2
)


(53.8
)


(49.7
)Capital charge elimination


24.6



20.9



48.1



41.0Total segment direct contribution


192.8



193.7



371.8



364.7Expenses not allocated to segments:Administrative expenses


53.6



52.5



106.1



106.1Amortization of intangible assets


15.9



15.4



29.5



30.6Business optimization expenses


1.4



2.3



2.4



2.3Operating earnings


121.9



123.5



233.8



225.7Other income (expense), net


(4.3
)






(7.3
)


(0.3
)Interest income


2.0



1.9



4.5



4.5Interest expense


(64.7
)


(68.2
)


(132.0
)


(136.5
)Earnings before income taxes and minority interests

$
54.9


$
57.2


$
99.0


$
93.4    11




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##### Table of Contents



12.
    Earnings
    Per Share      Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Numerator for basic and diluted earnings per share:Net earnings

$
44.2


$
41.8


$
73.4


$
61.4Denominator for basic earnings per share  weighted
    average common shares outstanding


141.4



144.4



141.7



144.0Effect of dilutive securities:Stock purchase warrant


0.6



3.5



0.6



3.9Share-based compensation plans


0.2



0.1



0.2



0.1Denominator for diluted earnings per share


142.2



148.0



142.5



148.0   13.
    Contingencies
    and Litigation      clean-up clean-up
   12




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##### Table of Contents



13.
    Contingencies
    and Litigation (continued)  de
    minimis
      14.
    Fair
    Value Measurements  Fair
    Value Measurements
  Level 1 
    Quoted prices in active markets that are accessible at the
    measurement date for identical assets and liabilities. The fair
    value hierarchy gives the highest priority to Level 1
    inputs.  Level 2 
    Observable inputs other than quoted prices in active markets.Level 3 
    Unobservable inputs for which there is little or no market data
    available. The fair value hierarchy gives the lowest priority to
    Level 3 inputs. 13




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##### Table of Contents



14.
    Fair
    Value Measurements (continued)     BalanceJune 30,(dollars in millions)

2008


Level 1


Level 2


Level 3Assets:Foreign exchange forward contracts

$
0.1


$



$
0.1


$
Natural gas forward contracts


1.3







1.3



$
1.4


$



$
1.4


$
Liabilities:Foreign exchange forward contracts

$
4.0


$



$
4.0


$
     15.
    Guarantees      16.
    Subsequent
    Event   14




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
     
    Second quarter 2008 revenues of $1,066.3 million increased
    9.8% over second quarter 2007 revenues of $970.9 million.
    This increase consisted of organic growth of 5.7%, a currency
    benefit of 5.4%, less an acquisition/divestiture impact of 1.3%.
    We define organic growth as nominal, or actual, sales growth
    less the impacts of changes in foreign currency translation
    rates and acquisitions and divestitures.  
    We experienced increases in product and freight costs
    approximating $36 million in the second quarter of 2008
    over the prior-year period, but these were largely offset with
    price increases of about $29 million.
    The effective tax rate dropped to 16.4% for the second quarter
    of 2008 from 24.0% for the year-ago quarter, as a result of
    recognizing federal tax benefits for the expected utilization of
    foreign tax credit carryforwards generated in previous years.
    This resulted from continued improvements in profitability in
    the U.S. and the rationalization of our legal entity
    structure to make it more tax efficient.
    Second quarter 2008 net earnings of $44.2 million were
    up 5.7% over year-ago net earnings of $41.8 million.
    Diluted earnings per share (EPS) of 31 cents rose 10.7% over the
    28 cents reported in the second quarter of 2007.
    Adjusted EBITDA, a measure used to determine compliance with our
    debt covenants, was $175.7 million for the second quarter
    of 2008, a 1.5% increase over year-ago Adjusted EBITDA of
    $173.1 million that excludes the waste coal agglomeration
    (synfuel) business that ended with a December 31, 2007 tax
    code expiration. With that synfuel business included, Adjusted
    EBITDA was $179.9 million in the second quarter of 2007.
    Free Cash Flow, defined as cash from operating activities less
    capital expenditures and minority interest charges, was
    $25.9 million in the second quarter of 2008, an improvement
    of $41.3 million from the negative Free Cash Flow of
    $15.4 million in the year-ago period. The increase
    primarily resulted from lower net working capital requirements,
    most notably for receivables; however, cash required for
    inventories was up over the year-ago period primarily because of
    higher raw material costs and additions to support business
    growth in emerging geographies. Lower pension funding
    requirements also contributed to the improvement. Net cash
    provided by operating activities is reconciled to Free Cash Flow
    as follows:  Three Months


Three Monthsended


ended(dollars in millions)

June 30, 2008


June 30, 2007Net cash provided by operating activities

$
63.1


$
12.8Minority interests


(1.7
)


(1.7
)Additions to property, plant, and equipment, net


(35.5
)


(26.5
)Free cash flow

$
25.9


$
(15.4
)
   
    We repurchased an additional 639,000 shares at a cost of
    $14.2 million during the second quarter of 2008. For the
    first six months of 2008, we have repurchased
    1,389,000 shares at a cost of $30.4 million, of which
    $21.7 million was expended in cash and $8.7 million
    was reported as a payable at June 30, 2008, for share
    repurchases executed in June 2008 and settling in July 2008. 15




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)   Outlook
    Results
    of Operations  Consolidated
  Quarter
    Ended June 30, 2008 Compared to the Quarter Ended
    June 30, 2007
  Net sales
  Gross profit,
  Selling, administrative, and research expenses
  Amortization of intangible assets
  Business optimization expenses,
  Other income (expense), net
  Net interest expense,
 16




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)  The income tax provision non-U.S. subsidiaries,
  non-U.S. subsidiaries,
  Minority interest expense
  Six
    Months Ended June 30, 2008 Compared to the Six Months Ended
    June 30, 2007
  Net sales
  Gross profit,
  Selling, administrative, and research expenses
  Amortization of intangible assets
  Business optimization expenses,
 17




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)  Other income (expense), net
  Net interest expense,
  The income tax provision non-U.S. subsidiaries,
  non-U.S. subsidiaries,
  Minority interest expense
  Results
    of Operations  Segment Reporting
  Quarter
    Ended June 30, 2008 Compared to the Quarter Ended
    June 30, 2007
  Net sales
  Attributable to ChangesThree Months Ended



in the Following FactorsJune 30,

June 30,



Currency

Acquisitions/(dollars in millions)

2008

2007

% Change

Translation

Divestitures

OrganicIndustrial & Institutional Services

$
474.8


$
432.5



9.8
%


6.6
%


(3.0
)%


6.2
%Energy Services


363.0



316.9



14.5
%


3.6
%






10.9
%Paper Services


203.0



194.8



4.2
%


5.9
%






(1.7
)%Other


25.5



26.7



(4.3
)%


5.9
%






(10.2
)%Net sales

$
1,066.3


$
970.9



9.8
%


5.4
%


(1.3
)%


5.7
%    18




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)          Direct contribution
  Attributable to ChangesThree Months Ended



in the Following FactorsJune 30,

June 30,



Currency

Acquisitions/(dollars in millions)

2008

2007

% Change

Translation

Divestitures

OrganicIndustrial & Institutional Services

$
96.1


$
93.6



2.8
%


7.0
%


(7.4
)%


3.2
%Energy Services


72.4



74.5



(2.8
)%


3.5
%


0.1
%


(6.4
)%Paper Services


24.3



31.9



(24.0
)%


4.4
%






(28.4
)%Other


(24.6
)


(27.2
)


9.8
%


(3.5
)%






13.3
%          19




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)  Six
    Months Ended June 30, 2008 Compared to the Six Months Ended
    June 30, 2007
  Net sales
  Attributable to ChangesSix Months Ended



in the Following FactorsJune 30,

June 30,



Currency

Acquisitions/(dollars in millions)

2008

2007

% Change

Translation

Divestitures

OrganicIndustrial & Institutional Services

$
902.9


$
836.9



7.9
%


6.6
%


(3.0
)%


4.3
%Energy Services


709.7



611.3



16.1
%


3.9
%






12.2
%Paper Services


404.0



381.5



5.9
%


6.1
%






(0.2
)%Other


49.4



50.5



(2.2
)%


6.8
%






(9.0
)%Net sales

$
2,066.0


$
1,880.2



9.9
%


5.6
%


(1.3
)%


5.6
%           Direct contribution
  Attributable to ChangesSix Months Ended



in the Following FactorsJune 30,

June 30,



Currency

Acquisitions/(dollars in millions)

2008

2007

% Change

Translation

Divestitures

OrganicIndustrial & Institutional Services

$
177.1


$
178.7



(0.9
)%


6.9
%


(7.1
)%


(0.7
)%Energy Services


147.8



136.5



8.3
%


4.1
%






4.2
%Paper Services


52.6



58.2



(9.7
)%


5.9
%






(15.6
)%Other


(53.8
)


(49.7
)


(8.2
)%


(3.7
)%






(4.5
)%    20




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)        Liquidity
    and Capital Resources
  Operating activities.
  Investing activities.
    Financing activities.
      Senior credit facilities.
 21




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)                Senior discount notes, senior notes and senior subordinated
    notes. 3 4 U.S. dollar-denominated 3 4 7 8
   22




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)        
    incur additional indebtedness;
    pay dividends on or make other distributions or repurchase
    certain capital stock;
    make certain investments;
    enter into certain types of transactions with affiliates;
    limit dividends or other payments by our restricted subsidiaries;
    use assets as security in other transactions; and
    sell certain assets or merge with or into other companies.    Covenant compliance.
     23




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)    Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Net earnings

$
44.2


$
41.8


$
73.4


$
61.4Interest, net


62.7



66.3



127.5



132.0Income tax provision


9.0



13.7



22.5



28.4Depreciation


35.4



32.2



69.9



64.0Amortization


15.9



15.4



29.5



30.6EBITDA

$
167.2


$
169.4


$
322.8


$
316.4Non-cash charges (1)


5.7



4.0



14.9



13.5Business optimization expenses (2)


1.4



2.3



2.4



2.3Unusual items (3)


3.3



5.7



5.6



9.3Other adjustments (4)


(1.9
)


(1.5
)


(4.4
)


(3.6
)Adjusted EBITDA

$
175.7


$
179.9


$
341.3


$
337.9     (1)
    
    Non-cash charges are further detailed on the following table:  Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Profit sharing and 401(k) expense funded by Suez

$
6.7


$
6.5


$
14.9


$
13.2Other


(1.0
)


(2.5
)






0.3Non-cash charges

$
5.7


$
4.0


$
14.9


$
13.5
   Profit Sharing and 401(k) Expense Funded by SuezIn conjunction with the Acquisition, defined as the
    November 2003 acquisition of Ondeo Nalco Group, comprised of
    Nalco Company and Nalco International SAS Subsidiaries, by our
    subsidiary, Nalco Holdings LLC, from Suez S.A.
    (Suez), we entered into an agreement with Suez
    whereby Suez will reimburse us for certain profit-sharing and
    401(k) matching contributions made by us to the Profit-Sharing
    Trust.OtherOther non-cash charges include the non-cash impact on earnings
    of our equity investments and minority interests. Non-cash
    charges also includes the non-cash portion of rent expense under
    the sublease that we entered into with Suez in conjunction with
    the Acquisition.(2)
    
    Business optimization expenses include costs associated with the
    redesign and optimization of work processes. See Note 7 to
    Item 1 for more information. 24




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)   (3)
    
    Unusual items are further detailed on the following table:  Three Months


Three Months


Six Months


Six Monthsended


ended


ended


ended(dollars in millions)

June 30, 2008


June 30, 2007


June 30, 2008


June 30, 2007Loss (gain) on sales, net of expenses

$
0.1


$
1.1


$
0.9


$
1.3Other unusual items


3.2



4.6



4.7



8.0Unusual items

$
3.3


$
5.7


$
5.6


$
9.3
   (4)
    
    We are required to make adjustments to EBITDA for franchise
    taxes and 401(k) matching contributions.    June 30, 2008Required


ActualSenior credit facility(1)Minimum Adjusted EBITDA to cash interest ratio


1.85x



3.45xMaximum net debt to Adjusted EBITDA ratio


5.25x



3.83xIndentures(2)Minimum Adjusted EBITDA to fixed charge ratio required to incur
    additional debt pursuant to ratio provisions


2.00x



2.95x     (1)
    
    During 2008, our senior credit facility requires us to maintain
    an Adjusted EBITDA to cash interest ratio at a minimum of 1.85x
    and a net debt to Adjusted EBITDA ratio at a maximum of 5.25x,
    in each case for the most recent four quarter period. Failure to
    satisfy these ratio requirements would constitute a default
    under the senior credit agreement. If our lenders failed to
    waive any such default, our repayment obligations under the
    senior credit agreement could be accelerated, which would also
    constitute a default under our indentures.(2)
    
    Our ability to incur additional debt and make certain restricted
    payments under our indentures, subject to specified exceptions,
    is tied to an Adjusted EBITDA to fixed charge ratio of at least
    2.0 to 1, except that we may incur certain debt and make certain
    restricted payments and certain permitted investments without
    regard to the ratio, such as up to an aggregate principal amount
    of $1,950 million (including $926.5 million that was
    outstanding under our term loan facilities as of June 30,
    2008) and investments in similar business and other
    investments equal to 6% of Nalco Holding Company consolidated
    assets.  Local lines of credit. non-U.S. subsidiaries
  Receivables facility.
   25




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)      Recent
    Accounting Pronouncements
    Safe Harbor Statement Under Private Securities
    Litigation Reform Act of 1995
      
    our substantial leverage;
    limitations on flexibility in operating our business contained
    in our debt agreements;
    increases in interest rates as a result of our variable rate
    indebtedness;
    pricing pressure from our customers;
    our ability to respond to the changing needs of a particular
    industry and develop new offerings;
    technological change and innovation;
    risks associated with our
    non-U.S. operations;
    fluctuations in currency exchange rates;
    high competition in the markets in which we operate;
    adverse changes to environmental, health and safety regulations;
    operating hazards in our production facilities;
    inability to achieve expected cost savings;
    difficulties in securing the raw materials we use; 26




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (continued)   
    significant increases in the costs of raw materials we use and
    our ability to pass any future raw material price increases
    through to our customers;
    our significant pension benefit obligations and the current
    underfunding of our pension plans;
    our ability to realize the full value of our intangible assets;
    our ability to attract and retain skilled employees,
    particularly research scientists, technical sales professionals
    and engineers; and
    our ability to protect our intellectual property rights.  Form 10-K
    Use of
    Non-GAAP Financial Measures
         27




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##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk    Item 4.
    Controls
    and Procedures    Rules 13a-15(e) 15d-15(e))
     28




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##### Table of Contents



PART II.  OTHER
    INFORMATION  Item 1.
    Legal
    Proceedings    Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    (d)(c)


ApproximateTotal Number of


Dollar Value of(a)





Shares Purchased


Shares that MayTotal Number


(b)


as Part of Publicly


Yet Be Purchasedof Shares


Average Price


Announced Plans


Under the PlansPurchased


Paid per Share


or Programs (1)


or Programs (1)(2)April 1, 2008  April 30, 2008





$







$
175,770,562May 1, 2008  May 31, 2008





$







$
175,770,562June 1, 2008  June 30, 2008


639,000


$
22.20



639,000


$
161,585,078Total


639,000


$
22.20



639,000


$
161,585,078     (1)
    
    On July 31, 2007, our Board of Directors authorized a
    $300 million share repurchase program, and gave our
    management discretion in determining the conditions under which
    shares may be purchased from time to time. We intend to
    repurchase all shares under this authorization in open market
    transactions. There is no set timetable for share repurchases,
    and the program has no stated expiration date.(2)
    
    For the quarter ended June 30, 2008, we expended
    $14.1 million in cash for the repurchase of shares. An
    additional $8.7 million was reported as a payable on the
    balance sheet at June 30, 2008 for share repurchases
    executed in June 2008 and settling in July 2008.  Item 4.
    Submission
    of Matters to a Vote of Security Holders    Nominee

For

WithheldDouglas A. Pertz


103,531,314



14,301,733Daniel S. Sanders


103,627,760



14,205,287    29




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##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders (continued)    For

Against

Abstain117,712,250



117,329



3,468
   Item 6.
    Exhibits    Exhibit 10
.1

Asset Purchase Agreement by and between Chemetall Corp. and
    Nalco Company, dated as of July 24, 2008Exhibit 31
.1

Certification of Chief Executive Officer, Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31
.2

Certification of Chief Financial Officer, Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32
.1

Certifications Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002  30




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##### Table of Contents



SIGNATURE    NALCO HOLDING COMPANY
     Title:
    Executive Vice President and 
    Chief Financial Officer   31