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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, DC20549

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FORM10-Q

(Mark One)

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|   | **QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

**For the quarterly period ended September 30, 2004**

**or**

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|   | **TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934** |

**For the transition period from                     to                    .**

Commission File No.001-32342

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NALCOHOLDING COMPANY

(Exact name ofregistrant as specified in itscharter)

|                                                               |  |                                        |  |  |  |  |
|---------------------------------------------------------------|--|----------------------------------------|--|--|--|--|
| Delaware                                                      |  | 16-1701300                             |
| (State or other jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentification Number) |
|                                                               |

1601 West DiehlRoad Naperville, IL 60563-1198 (630) 305-1000

(Address, Including Zip Code, andTelephone Number, Including Area Code, of Registrant's PrincipalExecutive Offices)

Indicate by check mark whetherthe registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes     No 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes    No 

As of November 16,2004, the number of shares of the registrant's common stock, parvalue $0.01 per share, outstanding was 141,663,369shares.

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QUARTERLY REPORT ON FORM10-Q NALCO HOLDING COMPANY Quarter Ended September 30,2004

TABLE OF CONTENTS

|                                                         |  |                                                                                                                                                          |  |        |    |        |  |  |  |  |
|---------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
| **PartI.    Financial Information** |  |
| Item1.                                                  |  | FinancialStatements (Unaudited)                                                                                                                          |  |
|                                                    |  | CondensedConsolidated Balance Sheets –     September 30, 2004 andDecember 31, 2003                                             |  |   | 2  |   |
|                                                    |  | CondensedConsolidated and Combined Statements of Operations –    Three months and nine months ended September 30, 2004 and2003 |  |   | 3  |   |
|                                                    |  | Condensed Consolidated andCombined Statements of Cash Flows –     Nine months endedSeptember 30, 2004 and 2003                 |  |   | 4  |   |
|                                                    |  | Notes to Condensed Consolidated and CombinedFinancial Statements –     September 30,2004                                       |  |   | 5  |   |
| Item2.                                                  |  | Management's Discussion and Analysis of FinancialCondition and     Results of Operations                                             |  |   | 20 |   |
| Item 3.                                                 |  | Quantitative and Qualitative DisclosuresAbout Market Risk                                                                                                |  |   | 32 |   |
| Item4.                                                  |  | Controls and Procedures                                                                                                                                  |  |   | 32 |   |
| **Part II.    OtherInformation**    |  |
| Item1.                                                  |  | Legal Proceedings                                                                                                                                        |  |   | 33 |   |
| Item6.                                                  |  | Exhibits                                                                                                                                                 |  |   | 34 |   |
|                                                         |

1

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PARTI.    FINANCIAL INFORMATION

Item 1.    FinancialStatements (Unaudited)

Nalco Holding Company andSubsidiaries

Condensed Consolidated Balance Sheets(Dollars inMillions)

|                                                                       |  |                  |         |                 |  |        |         |        |  |  |
|-----------------------------------------------------------------------|--|------------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                                                  |  | September30,2004 |         | December31,2003 |
|                                                                  |  | (Unaudited)      |         |            |
| **Assets**                                                            |  |             |    |            |  |   |    |   |
| Currentassets:                                                        |  |             |    |            |  |   |    |   |
| Cash and cashequivalents                                              |  | $                | 63.1    |            |  | $      | 100.0   |   |
| Accountsreceivable, less allowances of $23.9 in 2004 and $21.0 in2003 |  |             | 523.2   |            |  |   | 482.9   |   |
| Inventories:                                                          |  |             |    |            |  |   |    |   |
| Finishedproducts                                                      |  |             | 226.0   |            |  |   | 233.6   |   |
| Materialsand work inprocess                                           |  |             | 59.9    |            |  |   | 61.5    |   |
|                                                                  |  |             | 285.9   |            |  |   | 295.1   |   |
| Prepaidexpenses, taxes and other currentassets                        |  |             | 60.6    |            |  |   | 97.6    |   |
| Totalcurrentassets                                                    |  |             | 932.8   |            |  |   | 975.6   |   |
| Property,plant, and equipment,net                                     |  |             | 815.8   |            |  |   | 865.6   |   |
| Intangibleassets:                                                     |  |             |    |            |  |   |    |   |
| Goodwill                                                              |  |             | 2,359.1 |            |  |   | 2,500.1 |   |
| Otherintangibles,net                                                  |  |             | 1,333.9 |            |  |   | 1,408.9 |   |
| Otherassets                                                           |  |             | 386.5   |            |  |   | 413.6   |   |
| Totalassets                                                           |  | $                | 5,828.1 |            |  | $      | 6,163.8 |   |
| **Liabilitiesand shareholders'equity**                                |  |             |    |            |  |   |    |   |
| Currentliabilities:                                                   |  |             |    |            |  |   |    |   |
| Accountspayable                                                       |  | $                | 223.3   |            |  | $      | 155.9   |   |
| Short-termdebt                                                        |  |             | 13.7    |            |  |   | 51.9    |   |
| Other currentliabilities                                              |  |             | 321.7   |            |  |   | 321.0   |   |
| Totalcurrentliabilities                                               |  |             | 558.7   |            |  |   | 528.8   |   |
| Otherliabilities:                                                     |  |             |    |            |  |   |    |   |
| Long-termdebt                                                         |  |             | 3,503.5 |            |  |   | 3,262.8 |   |
| Deferredincometaxes                                                   |  |             | 560.8   |            |  |   | 624.0   |   |
| Accruedpensionbenefits                                                |  |             | 395.6   |            |  |   | 374.1   |   |
| Otherliabilities                                                      |  |             | 305.8   |            |  |   | 293.5   |   |
| Minorityinterest                                                      |  |             | 12.9    |            |  |   | 11.6    |   |
| Shareholders'equity                                                   |  |             | 490.8   |            |  |   | 1,069.0 |   |
| Totalliabilities and shareholders'equity                              |  | $                | 5,828.1 |            |  | $      | 6,163.8 |   |
|                                                                       |

Seeaccompanying notes to condensed consolidated and combined financialstatements.

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Nalco Holding Company andSubsidiaries

Condensed Consolidated and Combined Statements ofOperations (Unaudited)(Dollars inMillions)

|                                              |  |                                      |         |                                      |  |                                     |         |                                     |  |        |          |         |  |        |          |         |  |  |
|----------------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|----------|---------|--|--------|----------|---------|--|--|
|                                         |  | Successor                            |         | Predecessor                          |  | Successor                           |         | Predecessor                         |
|                                         |  | ThreeMonths ended September 30, 2004 |         | ThreeMonths ended September 30, 2003 |  | Nine Monthsended September 30, 2004 |         | Nine Months endedSeptember 30, 2003 |
| Netsales                                     |  | $                                    | 774.2   |                                 |  | $                                   | 711.4   |                                |  | $      | 2,227.9  |    |  | $      | 2,064.1  |    |
| Operatingcosts andexpenses:                  |  |                                 |    |                                 |  |                                |    |                                |  |   |     |    |  |   |     |    |
| Costof productsold                           |  |                                 | (394.7  | )                               |  |                                | (337.9  | )                              |  |   | (1,128.4 | )  |  |   | (992.8   | )  |
| Selling,administrative, and researchexpenses |  |                                 | (261.8  | )                               |  |                                | (261.5  | )                              |  |   | (789.6   | )  |  |   | (792.6   | )  |
| Impairmentofgoodwill                         |  |                                 | — |                                 |  |                                | — |                                |  |   | —  |    |  |   | (244.4   | )  |
| Amortizationof intangibleassets              |  |                                 | (23.9   | )                               |  |                                | (20.5   | )                              |  |   | (73.0    | )  |  |   | (61.8    | )  |
| In-processresearch anddevelopment            |  |                                 | — |                                 |  |                                | — |                                |  |   | (122.3   | )  |  |   | —  |    |
| Businessoptimizationexpenses                 |  |                                 | — |                                 |  |                                | (5.5    | )                              |  |   | —  |    |  |   | (15.2    | )  |
|                                         |  |                                 | (680.4  | )                               |  |                                | (625.4  | )                              |  |   | (2,113.3 | )  |  |   | (2,106.8 | )  |
| Operatingearnings(loss)                      |  |                                 | 93.8    |                                 |  |                                | 86.0    |                                |  |   | 114.6    |    |  |   | (42.7    | )  |
| Otherincome (expense),net                    |  |                                 | (1.2    | )                               |  |                                | (12.8   | )                              |  |   | (6.5     | )  |  |   | (13.0    | )  |
| Interestincome                               |  |                                 | 2.3     |                                 |  |                                | 1.1     |                                |  |   | 7.7      |    |  |   | 5.4      |    |
| Interestexpense                              |  |                                 | (64.0   | )                               |  |                                | (9.7    | )                              |  |   | (187.7   | )  |  |   | (29.2    | )  |
| Earnings(loss) before incometaxes            |  |                                 | 30.9    |                                 |  |                                | 64.6    |                                |  |   | (71.9    | )  |  |   | (79.5    | )  |
| Incometaxprovision                           |  |                                 | (27.2   | )                               |  |                                | (29.5   | )                              |  |   | (46.8    | )  |  |   | (70.1    | )  |
| Minorityinterests                            |  |                                 | (1.7    | )                               |  |                                | (1.4    | )                              |  |   | (3.6     | )  |  |   | (4.4     | )  |
| Netincome(loss)                              |  | $                                    | 2.0     |                                 |  | $                                   | 33.7    |                                |  | $      | (122.3   | )  |  | $      | (154.0   | )  |
|                                              |

Seeaccompanying notes to condensed consolidated and combined financialstatements.

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Nalco Holding Company andSubsidiaries

Condensed Consolidated and Combined Statements ofCash Flows (Unaudited)(Dollars in Millions)

|                                                                               |  |                                   |         |                                  |  |        |         |         |  |  |
|-------------------------------------------------------------------------------|--|-----------------------------------|---------|----------------------------------|--|--------|---------|---------|--|--|
|                                                                          |  | Successor                         |         | Predecessor                      |
|                                                                          |  | NineMonthsendedSeptember 30, 2004 |         | NineMonthsendedSeptember 30,2003 |
| **Operatingactivities**                                                       |  |                              |    |                             |  |   |    |    |
| Netloss                                                                       |  | $                                 | (122.3  | )                           |  | $      | (154.0  | )  |
| Adjustmentsto reconcile net loss to net cash provided by operatingactivities: |  |                              |    |                             |  |   |    |    |
| Depreciation                                                                  |  |                              | 80.7    |                             |  |   | 91.6    |    |
| Amortization                                                                  |  |                              | 73.0    |                             |  |   | 61.8    |    |
| Impairmentofgoodwill                                                          |  |                              | — |                             |  |   | 244.4   |    |
| In-processresearch anddevelopment                                             |  |                              | 122.3   |                             |  |   | — |    |
| Amortizationof deferred financing costs and accretion of senior discountnotes |  |                              | 36.4    |                             |  |   | — |    |
| Other,net                                                                     |  |                              | 21.1    |                             |  |   | 49.7    |    |
| Changes inoperating assets andliabilities                                     |  |                              | 44.9    |                             |  |   | (30.8   | )  |
| Netcash provided by operatingactivities                                       |  |                              | 256.1   |                             |  |   | 262.7   |    |
| **Investingactivities**                                                       |  |                              |    |                             |  |   |    |    |
| Purchase priceadjustment on acquisition of Ondeo NalcoGroup                   |  |                              | 25.3    |                             |  |   | — |    |
| Additions toproperty, plant, and equipment,net                                |  |                              | (57.7   | )                           |  |   | (66.9   | )  |
| Businesspurchases/sales,net                                                   |  |                              | — |                             |  |   | (25.6   | )  |
| Other investingactivities                                                     |  |                              | (5.1    | )                           |  |   | (35.4   | )  |
| Netcash used for investingactivities                                          |  |                              | (37.5   | )                           |  |   | (127.9  | )  |
| **Financingactivities**                                                       |  |                              |    |                             |  |   |    |    |
| Cashdividends                                                                 |  |                              | — |                             |  |   | (29.0   | )  |
| Changes inshort-term debt,net                                                 |  |                              | (38.1   | )                           |  |   | (100.6  | )  |
| Proceeds fromlong-term debt                                                   |  |                              | 542.9   |                             |  |   | 0.6     |    |
| Repaymentsof long-termdebt                                                    |  |                              | (318.6  | )                           |  |   | (6.8    | )  |
| Deferredfinancingcosts                                                        |  |                              | (1.2    | )                           |  |   | — |    |
| Capitalcontributions (distributions),net                                      |  |                              | (437.6  | )                           |  |   | 31.6    |    |
| Other                                                                         |  |                              | (0.7    | )                           |  |   | (2.6    | )  |
| Netcash used for financingactivities                                          |  |                              | (253.3  | )                           |  |   | (106.8  | )  |
| Effect ofexchange rate changes on cash and cashequivalents                    |  |                              | (2.2    | )                           |  |   | 10.7    |    |
| Increase(decrease) in cash and cashequivalents                                |  |                              | (36.9   | )                           |  |   | 38.7    |    |
| Cash andcash equivalents at beginning ofperiod                                |  |                              | 100.0   |                             |  |   | 120.5   |    |
| Cashand cash equivalents at end ofperiod                                      |  | $                                 | 63.1    |                             |  | $      | 159.2   |    |
|                                                                               |

Seeaccompanying notes to condensed consolidated and combined financialstatements

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NalcoHolding Company and Subsidiaries

Notes to CondensedConsolidated and Combined Financial Statements(Unaudited)(Dollars in Millions)

September 30, 2004

1.    Description ofBusiness and Change in Ownership

Description of Business

Nalco Holding Company and subsidiaries (the Company or Successor) isengaged in the worldwide manufacture and sale of highly specializedservice chemical programs. This includes production and service relatedto the sale and application of chemicals and technology used in watertreatment, pollution control, energy conservation, oil production andrefining, steelmaking, papermaking, mining, and other industrialprocesses.

Change in Ownership

On November 4, 2003, ourindirect subsidiary, Nalco Holdings LLC (the Buyer), a newly formedentity controlled by affiliates of The Blackstone Group, L.P., ApolloManagement, L.P., and The Goldman Sachs Group, Inc. (collectively, theSponsors), pursuant to a Stock Purchase Agreement, (as amended, theStock Purchase Agreement) with Suez S.A. (Suez or Seller) and certainof its affiliates, acquired the net assets of Ondeo Nalco Group (asdefined in Note 2 below) for $4,127.1 million including direct costs ofthe acquisition of $125.6 million, excluding assumed debt of $30.2million, and subject to certain closing and post-closing adjustments(the Acquisition).

The Buyer was capitalized by equityinvestments totaling $991.9 million from the Sponsors and $10.0 millionfrom Dr. William H. Joyce, the Chairman and Chief Executive Officer ofthe Buyer. The equity investments were made to Nalco InvestmentHoldings LLC, the direct parent company of the Buyer which, in turn,contributed $1,001.9 million to the Buyer and was its parent company asof December 31, 2003. Funding for the Acquisition included the equityinvestments and the issuance of senior notes and senior subordinatednotes (the Notes) in a private offering, and new revolving credit andterm loan facilities by the Buyer, through its 100% ownedsubsidiary, Nalco Company.

The Stock Purchase Agreement providedfor certain adjustments of the purchase price, including adjustmentsbased on the closing working capital and indebtedness (as both aredefined in the Stock Purchase Agreement) of the Ondeo Nalco Group atthe date of the Acquisition. On March 25, 2004, the Buyer and Suezagreed to a $25.6 million working capital adjustment payable to theBuyer plus interest. This adjustment was not reflected in theconsolidated financial statements as of December 31, 2003. The Buyerrecorded the purchase price adjustment in 2004 by decreasinggoodwill.

On January 14, 2004, Nalco Investment Holdings LLCcontributed its 100% interest in the Buyer to a newly formedentity, Nalco Finance Holdings LLC, in exchange for a 99%interest in Nalco Finance Holdings LLC. The remaining 1%interest in Nalco Finance Holdings LLC is held indirectly by NalcoInvestment Holdings LLC through its wholly owned subsidiary, NalcoFinance Holdings II Inc. As of January 14, 2004, Nalco Finance HoldingsLLC became the direct parent company of the Buyer. Subsequent to thatdate, the Sponsors and Dr. Joyce engaged in a series of transactionsthat ultimately resulted in a newly formed entity, Nalco LLC, becomingthe indirect and ultimate parent company of Nalco Investment HoldingsLLC, Nalco Finance Holdings LLC, and the Buyer. Nalco LLC'sinterests in Nalco Investment Holdings LLC were held through itsholdings of 100% of the interests of each of BCP Nalco I LLC,BCP Nalco II LLC, APV Nalco LLC, GS Nalco LLC and JAG Nalco LLC(collectively, the Sponsor entities), which collectively held100% of the interests of Nalco Investment Holdings LLC.

On June 1, 2004, Nalco Investment Holdings II LLC was formed as adirect subsidiary of Nalco LLC. On June 7, 2004, Nalco InvestmentHoldings II LLC merged with each of the Sponsor entities 

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1.    Description ofBusiness and Change in Ownership  (continued)

and was the surviving entity of such merger.As a result of the merger, Nalco Investment Holdings II LLC owned100% of the equity interests of Nalco Investment Holdings LLC.On June 17, 2004, Nalco Investment Holdings II LLC was converted into acorporation named Nalco Investment Holdings II Corp. and has since beenrenamed Nalco Holding Company. Because the ultimate ownership of theentities in the Successor company financial statements did not change,such financial statements have been presented as if Nalco HoldingCompany was the parent company since the date of the Acquisition.

2.    Basis ofPresentation

These consolidated and combined financialstatements should be read in conjunction with the consolidatedfinancial statements of the Successor as of December 31, 2003 and forthe period from November 4, 2003 to December 31, 2003, the combinedfinancial statements of the Predecessor as of December 31, 2002 and2001 and for each of the two years in the period ended December 31,2002 and the combined financial statements of the Predecessor for theperiod from January 1, 2003 to November 3, 2003.

Predecessor — The accompanying combined financialstatements of the Predecessor prior to the Acquisition include theconsolidated financial statements of Ondeo Nalco Company andsubsidiaries (ONC) and the combined financial statements of certainsubsidiaries of Nalco International SAS (NIS) plus Calgon EuropeLimited (UK), owned by Degremont (a former related party). The combinedfinancial statements of NIS subsidiaries are a combination of theconsolidated financial statements of Ondeo Nalco France, theconsolidated financial statements of Aquazur Ltd., and the consolidatedfinancial statements of Nalco Dutch Holdings B.V., Ondeo Nalco BelgiumNV/SA, Wyss Wassertechnik AG, Ondeo Nalco (Shanghai) Trading Co., Ltd.,and Nalco Portuguesa (Quimica Industrial) Ltd. Ondeo IndustrialSolutions North America, a subsidiary of ONC, has been excluded fromthe Predecessor, as it was not acquired by the Company.

Successor — The accompanying consolidated financialstatements include the accounts of Nalco Holding Company andsubsidiaries (collectively, the Company) subsequent to theAcquisition.

The accompanying unaudited consolidated financialstatements of the Successor and unaudited combined financial statementsof the Predecessor have been prepared in accordance with generallyaccepted accounting principles for interim financial information.Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the UnitedStates for complete financial statements. Management believes thesefinancial statements include all normal recurring adjustmentsconsidered necessary for a fair presentation of the financial positionand results of operations of the Company. Operating results for thethree months and nine months ended September 30, 2004 are notnecessarily indicative of results that may be expected for the yearended December 31, 2004.

Certain reclassifications have beenmade to the prior year data to conform to the current year presentationwhich had no effect on net income reported for any period.

Theconsolidated financial statements of the Successor as of and for thethree months and nine months ended September 30, 2004 reflect theAcquisition under the purchase method of accounting, in accordance withthe Financial Accounting Standards Board("FASB") Statement of Financial AccountingStandards ("SFAS") No.  141,Business Combinations.

The following unaudited pro formafinancial data summarizes the results of operations for the threemonths and nine months ended September 30, 2003 as if the Acquisitionhad occurred as of the beginning of that period.

Pro formaadjustments include adjustments for (1) purchase accounting, including,(i) the elimination of inventory write-up recorded as a result of theAcquisition, (ii) adjustments to depreciation and amortization toreflect the fair value of property, plant and equipment and identified

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2.    Basis ofPresentation  (continued)

intangible assets (with finite lives), (iii)elimination of the pension and other postretirement benefitamortization of unrecognized actuarial losses, prior service costs andtransition obligations and assets losses, and (2) adjustments for itemsdirectly related to the transaction, including (i) rent expense that wewould have incurred had the sublease of our Naperville, Illinoisheadquarters and research facility been in place, (ii) elimination ofmanagement fees that Suez and its affiliates charged to the Company forgeneral corporate overhead and of charges to Suez and its affiliatesfor tax planning and compliance and treasury administration provided bythe Company in North America, (iii) adjustments to interest expense toreflect the Company's new capital structure, and (iv)corresponding adjustments to income tax expense.

These pro formaamounts are not necessarily indicative of the results that would havebeen attained if the Acquisition had occurred at the beginning of eachperiod presented or that may be attained in the future.

|                          |  |                                     |       |                                    |  |        |         |         |  |  |
|--------------------------|--|-------------------------------------|-------|------------------------------------|--|--------|---------|---------|--|--|
|                     |  | Predecessor(unaudited)              |
|                     |  | ThreeMonths endedSeptember 30, 2003 |       | Nine MonthsendedSeptember 30, 2003 |
| Net sales                |  | $                                   | 711.4 |                               |  | $      | 2,064.1 |    |
| Operating earnings(loss) |  |                                | 85.4  |                               |  |   | (46.1   | )  |
| Net income(loss)         |  | $                                   | (1.1  | )                             |  | $      | (257.8  | )  |
|                          |

TheCompany has not finalized the allocation of the purchase price as ofSeptember 30, 2004. The Company has preliminarily allocated thepurchase price on the basis of its current estimate of the fair valueof the underlying assets acquired and liabilities assumed asfollows:

|                                                  |  |                     |         |        |  |  |
|--------------------------------------------------|--|---------------------|---------|--------|--|--|
|                                             |  | AsofNovember 4,2003 |
| Currentassets:                                   |  |                |    |   |
| Cash and cash equivalents                        |  | $                   | 24.3    |   |
| Trade accounts receivable                        |  |                | 477.5   |   |
| Inventories                                      |  |                | 316.5   |   |
| Other current assets                             |  |                | 103.6   |   |
| Goodwill                                         |  |                | 2,288.6 |   |
| Intangible assets                                |  |                | 1,410.0 |   |
| Purchased in-process research anddevelopment     |  |                | 122.3   |   |
| Other noncurrent assets                          |  |                | 366.3   |   |
| Property, plant and equipment                    |  |                | 831.4   |   |
| Totalassets acquired                             |  |                | 5,940.5 |   |
| Currentliabilities:                              |  |                |    |   |
| Accounts payable                                 |  |                | 138.7   |   |
| Accrued expenses                                 |  |                | 266.2   |   |
| Other current liabilities                        |  |                | 74.3    |   |
| Long-term debt                                   |  |                | 30.2    |   |
| Deferred income taxes                            |  |                | 645.2   |   |
| Accrued pension and otherpostretirement benefits |  |                | 539.9   |   |
| Othernoncurrent liabilities                      |  |                | 144.2   |   |
| Total liabilitiesassumed                         |  |                | 1,838.7 |   |
| Net assetsacquired                               |  | $                   | 4,101.8 |   |
|                                                  |

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2.    Basis ofPresentation  (continued)

Cash and cash equivalents, trade accountsreceivable, other current assets, accounts payable, accrued expensesand other current liabilities were stated at historical carryingvalues, given the short-term nature of these assets and liabilities.Inventory and long-term debt outstanding as of the effective date ofthe Acquisition have been recorded based on management'sjudgments and estimates. The Company's projected pension andother postretirement benefit obligations and assets have been reflectedin the allocation of purchase price at the projected benefit obligationless plan assets at fair market value, based on management'scomputations which included valuations performed by independentactuaries engaged by the Company. Deferred income taxes have beenprovided in the consolidated balance sheet based on the Company'spreliminary estimates of the tax versus book basis of the assetsacquired and liabilities assumed, as adjusted to estimated fair values.Valuation allowances were established for deferred tax assets relatedto all of the net operating loss carryforwards for which utilization isuncertain.

The Company engaged independent appraisers to assistin determining the fair values of property, plant and equipment andintangible assets acquired, including purchased in-process research anddevelopment (IPR&D), trade names, trademarks, developed technologyand customer relationships. The Company has received preliminary valuesfrom the appraisers, which have been included in the above table,however, the final appraisals are not yet complete. Thus, the Companyhas not yet completed its allocation of purchase price and may makefurther adjustments to the preliminary allocations. The Company expectsto receive final valuations from the independent appraisers in thefinal quarter of 2004 and complete its purchase accounting by thefourth quarter of 2004.

The Company recorded a one-time chargefor purchased IPR&D expenses of $122.3 million during the ninemonths ended September 30, 2004. The value of purchased IPR&D wascomprised of five ongoing development projects at the date of theAcquisition. Purchased IPR&D was derived by assigning values tothose projects identified by management as having economic value, butthat had not yet reached technological feasibility and had noalternative future use. These products had not been released to themarket as of the date of the Acquisition, but the features andfunctionality of the products had been defined.

During the ninemonths ended September 30, 2004, the Company reduced by $21.5 millionthe estimated fair value of property, plant and equipment to reflectthe most recent updated valuation provided by its independentappraisers.

Trademarks and trade names have been preliminarilyvalued based on the relief of royalty approach. This method allocatesvalue based on what the Company would be willing to pay as a royalty toa third-party owner of the trademark or trade name in order to exploitthe economic benefits. Trademarks and trade names that have been valuedunder this approach have a preliminary value of $830.0 million with anestimated indefinite life.

Patents and developed technology havebeen preliminarily valued based on the relief of royalty approach. Thismethod allocates value based on what the Company would be willing topay as a royalty to a third-party owner of the patent or technology inorder to exploit the economic benefits. The technologies that have beenvalued under this approach have a preliminary value of $100.0million with an estimated weighted average useful life of 10 years.

Customer relationships have been preliminarily valued using anincome approach after considering a fair return on fixed assets,working capital, patents, trade names, trademarks, technology, andassembled workforce. A preliminary value of $480.0  million hasbeen assigned to customer relationships. As of December 31, 2003, anestimated useful life of 10 years had been used based on preliminaryinformation obtained from our independent appraisers. In the ninemonths ended September 30, 2004, we obtained updated information fromour independent appraisers and revised the estimated useful life ofcustomer relationships to 16 years.

Based on the preliminaryestimates, approximately $3.4 billion of goodwill and other intangibleassets will not be deductible for income tax purposes. The primaryreasons for the Acquisition and the primary factors that contributed toa purchase price that resulted in recognition of goodwill include:

8

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2.    Basis ofPresentation  (continued)

|  |              |                                                                                                                                                                                                                                                                     |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The Company'sleading market position as a global provider of integrated watertreatment and process improvement services, chemicals and equipmentprograms for industrial and institutional applications offers acompetitive advantage in competing for newcustomers; |

|  |              |                                                                                                                                                                                                                                                                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The Company being one of only asmall number of companies that can provide turnkey water managementsolutions on a global basis (130 countries across six continents)offers a competitive advantage in meeting the global needs ofmultinational customers and mitigates the potential impact ofvolatility in any individual country orregion; |

|  |              |                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The diverse customer base andindustries served minimizes the potential impact of volatility from anyone customer or industry. |

Other considerations affecting thevalue of goodwill include:

|  |              |                                                                                                                                                                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The potentialfor improved earnings and cash flow gained from operating as astand-alone company with focused management effort and more efficientresource management and from the ability of the assembled work force todrive significant annual cost reductions in the administrative andoverhead functions; |

|  |              |                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------|
|  | •  | The historical heavyinvestment in recruiting and continuously training more than 5,000sales professionals and engineers; |

|  |              |                                                                                                                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Theability of the assembled workforce to develop future innovativetechnologies and products, as has been done in the past through afocused commitment to technology, research and development; |

|  |              |                                                                                                                                                                                                                                 |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The application of purchase accounting,particularly for such items as pension and other post-retirementbenefits for which significant reserve balances were recorded with nocorresponding significant short-term cash outflows. |

Inconjunction with the Acquisition, the Company has formulated a plan toexit or restructure certain activities. The Company has recordedliabilities of $34.4 million, primarily for employee severance andrelated costs, in connection with the Company's plan to exit orrestructure certain activities. As of September 30, 2004, $29.4 millionhas been charged against this accrual. The Company expects that theseactivities will be completed by the end of the third quarter 2005.

The consolidated statement of operations for the nine months endedSeptember 30, 2004 includes an additional $14.5 million in cost ofproducts sold related to the sale of inventory that had been revaluedat selling price less costs to sell in purchase accounting.

3.    Trade AccountsReceivable Securitization

In June 2004, the Company enteredinto a three-year accounts receivable securitization facility with acommercial paper conduit sponsored by one of the lenders under theCompany's senior credit facilities. The facility provides up to$100 million in funding, based on availability of eligible tradeaccounts receivable and other customary factors.

In connectionwith the facility, the Company established a bankruptcy-remote, whollyowned, special purpose limited liability company (the"Transferor"), into which Nalco Company andone of its domestic subsidiaries (the"Sellers") transfer all eligible tradeaccounts receivable (the "Receivables").Pursuant to a Receivables Transfer Agreement, the Transferor thentransfers an undivided interest in the Receivables to the commercialpaper conduit or the related bank sponsor (the"Transferees") in exchange for cash.

The financing fee charged by the Transferees under the facility isbased on the amount funded and the conduit's cost of funds forissuing commercial paper plus a margin that varies based on theleverage ratio as calculated under the Company's senior creditfacilities. A commitment fee that varies based on the same ratio andthe unused portion of the facility is also charged by the conduit.Under 

9

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3.    Trade AccountsReceivable Securitization  (continued)

the facility, Nalco Company services,administers and collects the Receivables, for which it receives amonthly servicing fee of 1% per annum of the average dailyoutstanding balance of Receivables.

Availability of fundingunder the facility depends primarily upon the outstanding Receivablesbalance from time to time. The facility may be terminated for, amongother reasons, material breaches of representations and warranties,bankruptcies of the Sellers or the Transferor, a judgment or order forthe payment of money rendered against the Transferor, cross-defaults tothe Company's other debt, or breach of specified financialcovenants. The Company is currently in compliance with thesecovenants.

The facility is accounted for as a secured borrowing,resulting in the funding and related Receivables being shown asliabilities and assets, respectively, on the Company'sconsolidated balance sheet and the costs associated with the facilitybeing recorded as interest expense. At September 30, 2004, the Companyhad outstanding borrowings of $47.6 million under the facility, whichthe Company had used to repay term loans under the senior creditfacilities.

4.    Goodwill andOther Intangible Assets

The changes in goodwill for the periodwere as follows:

|                                                    |  |        |         |         |  |  |
|----------------------------------------------------|--|--------|---------|---------|--|--|
| Balanceas of December 31, 2003                     |  | $      | 2,500.1 |    |
| Adjustmentto record purchased IPR&D expense    |  |   | (122.3  | )  |
| Adjustment of Ondeo Nalco Grouppurchase price      |  |   | (25.3   | )  |
| Revised fair value ofproperty, plant and equipment |  |   | 21.5    |    |
| Adjustment to fair value of other longterm assets  |  |   | 1.5     |    |
| Adjustment to accruedliabilities                   |  |   | 21.9    |    |
| Adjustment to deferredincome taxes                 |  |   | (22.6   | )  |
| Effect of foreigncurrency translation              |  |   | (15.7   | )  |
| Balance as of September30, 2004                    |  | $      | 2,359.1 |    |
|                                                    |

The followingtable reflects intangible assets and related amortizationinformation:

|                                              |  |                         |         |                         |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|----------------------------------------------|--|-------------------------|---------|-------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                         |  | Asof September 30, 2004 |         | As of December 31,2003  |
|                                         |  | GrossAmount             |         | AccumulatedAmortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangibleassets subject toamortization:     |  |                    |    |                    |  |        |    |                    |  |   |    |   |  |
| Customerrelationships                        |  | $                       | 492.3   |                    |  | $           | (79.3   | )                  |  | $      | 494.4   |   |  | $      | (13.9   | )  |
| Patentsand developed technology              |  |                    | 100.5   |                    |  |        | (9.6    | )                  |  |   | 100.1   |   |  |   | (1.7    | )  |
| Intangibleassets not subject toamortization: |  |                    |    |                    |  |        |    |                    |  |   |    |   |  |
| Trademarksand trade names                    |  |                    | 830.0   |                    |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
|                                         |  | $                       | 1,422.8 |                    |  | $           | (88.9   | )                  |  | $      | 1,424.5 |   |  | $      | (15.6   | )  |
|                                              |

10

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5.    Debt

Debt consists of thefollowing:

|                                              |  |                  |         |                 |  |        |          |        |  |  |
|----------------------------------------------|--|------------------|---------|-----------------|--|--------|----------|--------|--|--|
|                                         |  | September30,2004 |         | December31,2003 |
| **Short-term**                               |  |             |    |            |  |   |     |   |
| Checksoutstanding and bankoverdrafts         |  | $                | 12.3    |            |  | $      | 19.5     |   |
| Notes payableto banks                        |  |             | 0.1     |            |  |   | 1.5      |   |
| Current maturitiesof long-term debt          |  |             | 1.3     |            |  |   | 29.2     |   |
| Notespayable to affiliatedcompanies          |  |             | — |            |  |   | 1.7      |   |
|                                         |  | $                | 13.7    |            |  | $      | 51.9     |   |
| **Long-term**                                |  |             |    |            |  |   |     |   |
| Revolvingcredit facility                     |  | $                | — |            |  | $      | 15.0     |   |
| Securitized trade accountsreceivablefacility |  |             | 47.6    |            |  |   | —  |   |
| Term loan A,due November 2009                |  |             | 225.6   |            |  |   | 311.2    |   |
| Termloan B, due November2010                 |  |             | 1,095.9 |            |  |   | 1,300.0  |   |
| Senior notes,due November 2011               |  |             | 913.1   |            |  |   | 917.7    |   |
| Seniorsubordinated notes, due November2013   |  |             | 713.1   |            |  |   | 717.7    |   |
| Unsecured notes,due May 2008                 |  |             | 27.8    |            |  |   | 27.8     |   |
| Seniordiscount notes due February2014        |  |             | 477.8   |            |  |   | —- |   |
| Other                                        |  |             | 3.9     |            |  |   | 2.6      |   |
|                                         |  |             | 3,504.8 |            |  |   | 3,292.0  |   |
| Less:Currentportion                          |  |             | 1.3     |            |  |   | 29.2     |   |
|                                         |  | $                | 3,503.5 |            |  | $      | 3,262.8  |   |
|                                              |

OnJanuary 21, 2004, the Company, through its 100% ownedsubsidiaries, Nalco Finance Holdings LLC and Nalco Finance HoldingsInc. (together, the Issuers), issued $694.0 million aggregate principalamount at maturity of 9.0% senior discount notes due 2014. Priorto February 1, 2009, interest will accrue on the senior discount notesin the form of an increase in the accreted value of such notes.Thereafter, cash interest on the senior discount notes will accrue andbe payable semiannually in arrears on February 1 and August 1 of eachyear, commencing on August 1, 2009, at a rate of 9.0% per annum.The accreted value of each note will increase from the date of issuanceuntil February 1, 2009 at a rate of 9.0% per annum, reflectingthe accrual of non-cash interest, such that the accreted value willequal the principal amount at maturity on February 1, 2009. AtSeptember 30, 2004, the senior discount notes had an accreted value ofapproximately $683.00 per $1,000 principal amount at maturity of notes,resulting in a total accreted value of $474.0 million. The $3.8 milliondifference between the carrying value of the notes and the totalaccreted value represents a premium which is being amortized over theterm of the notes.

The Company and the Issuers do not generateany revenue, and Nalco Finance Holdings Inc. was incorporated solely toaccommodate the issuance of the notes by Nalco Finance Holdings LLC.All of the Company's consolidated assets are owned, and all ofthe Company's consolidated net sales are earned, by its directand indirect subsidiaries. As of September 30, 2004, theCompany's subsidiaries had $967.5 million of restricted netassets. The terms of Nalco Company's senior credit agreementfully prohibit Nalco Holdings LLC and its subsidiaries from payingdividends or otherwise transferring their assets to the Issuers or theCompany. Further, the terms of the indentures governing the seniornotes and senior subordinated notes of Nalco Company significantlyrestrict Nalco Company and the Issuers' other subsidiaries frompaying dividends or otherwise transferring assets to the Issuers or theCompany. The ability of Nalco Company to make such payments is governedby a formula based on its consolidated net income, as well as meetingcertain other conditions. Notwithstanding such restrictions, suchindentures permit an aggregate of $50.0 million of such payments to bemade whether or not there is availability under the formula or theconditions to its use are met. The Issuers' subsidiaries will bepermitted under the terms of the senior credit facilities and otherindebtedness to 

11

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5.    Debt  (continued)

incur additional indebtedness that mayseverely restrict or prohibit the making of distributions, the paymentof dividends or the making of loans by such subsidiaries to the Issuersor the Company.

6.   Shareholders' Equity

Shareholders' equity consists of thefollowing:

|                                                                                                        |  |                  |         |                   |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                                                                                   |  | September30,2004 |         | December 31, 2003 |
| Commonstock, par value $.01 per share, 500,000,000 shares authorized, 100shares issued and outstanding |  | $                | — |              |  | $      | — |    |
| Additional paid-incapital                                                                              |  |             | 564.3   |              |  |   | — |    |
| Capitalaccount                                                                                         |  |             | — |              |  |   | 1,001.9 |    |
| Accumulateddeficit                                                                                     |  |             | (146.4  | )            |  |   | (24.1   | )  |
| Accumulatedother comprehensiveincome:                                                                  |  |             |    |              |  |   |    |    |
| Foreign currencytranslationadjustments                                                                 |  |             | 72.9    |              |  |   | 91.2    |    |
| Totalshareholders'equity                                                                               |  | $                | 490.8   |              |  | $      | 1,069.0 |    |
|                                                                                                        |

Duringthe nine months ended September 30, 2004, the Company used the netproceeds of the issuance of the senior discount notes due 2014 to makea return of capital distribution of approximately $446.9 million to theSponsor entities.

Also during the nine months ended September30, 2004, the Company received additional capital contributions of $9.3million from its direct parent company, Nalco LLC. This resulted fromcapital contributions received by Nalco LLC, comprised of an additionalequity investment of $1.2 million by Dr. William H. Joyce and $8.1million in proceeds from the sale of equity interests to certainofficers and key employees under the Nalco LLC 2004 Unit Plan.

7.    Pension andOther Postretirement Benefit Plans

The components of netperiodic pension cost and the cost of other postretirement benefits forthe three months and nine months ended September 30, 2004 and 2003 wereasfollows:

|                                  |  |                                      |         |                                      |  |                                     |         |                                     |  |        |         |         |  |        |       |         |  |  |
|----------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|---------|---------|--|--------|-------|---------|--|--|
|                             |  | PensionBenefits                      |
|                             |  | Successor                            |         | Predecessor                          |  | Successor                           |         | Predecessor                         |
|                             |  | ThreeMonths ended September 30, 2004 |         | ThreeMonths ended September 30, 2003 |  | Nine Monthsended September 30, 2004 |         | Nine Months endedSeptember 30, 2003 |
| Servicecost                      |  | $                                    | 6.6     |                                 |  | $                                   | 5.1     |                                |  | $      | 21.1    |    |  | $      | 17.7  |    |
| Interestcost                     |  |                                 | 9.0     |                                 |  |                                | 7.7     |                                |  |   | 29.1    |    |  |   | 27.7  |    |
| Expectedreturn on planassets     |  |                                 | (6.3    | )                               |  |                                | (6.6    | )                              |  |   | (19.9   | )  |  |   | (24.4 | )  |
| Amortizationof prior servicecost |  |                                 | — |                                 |  |                                | (0.5    | )                              |  |   | — |    |  |   | (1.9  | )  |
| Recognizednet actuarialloss      |  |                                 | — |                                 |  |                                | 3.0     |                                |  |   | — |    |  |   | 11.1  |    |
| Specialterminationbenefits       |  |                                 | — |                                 |  |                                | — |                                |  |   | — |    |  |   | 0.6   |    |
| Settlementcharge                 |  |                                 | — |                                 |  |                                | — |                                |  |   | — |    |  |   | 0.7   |    |
| Curtailment                      |  |                                 | — |                                 |  |                                | — |                                |  |   | — |    |  |   | 0.9   |    |
| Netperiodiccost                  |  | $                                    | 9.3     |                                 |  | $                                   | 8.7     |                                |  | $      | 30.3    |    |  | $      | 32.4  |    |
|                                  |

12

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7.    Pension andOther Postretirement Benefit Plans  (continued)

    

|                                  |  |                                      |         |                                      |  |                                     |      |                                     |  |        |         |        |  |        |      |         |  |  |
|----------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|------|-------------------------------------|--|--------|---------|--------|--|--------|------|---------|--|--|
|                             |  | OtherPostretirementBenefits          |
|                             |  | Successor                            |         | Predecessor                          |  | Successor                           |      | Predecessor                         |
|                             |  | ThreeMonths ended September 30, 2004 |         | ThreeMonths ended September 30, 2003 |  | Nine Monthsended September 30, 2004 |      | Nine Months endedSeptember 30, 2003 |
| Servicecost                      |  | $                                    | 1.2     |                                 |  | $                                   | 1.0  |                                |  | $      | 4.1     |   |  | $      | 3.6  |    |
| Interestcost                     |  |                                 | 1.8     |                                 |  |                                | 1.7  |                                |  |   | 6.2     |   |  |   | 6.4  |    |
| Amortizationof prior servicecost |  |                                 | — |                                 |  |                                | (2.0 | )                              |  |   | — |   |  |   | (7.1 | )  |
| Recognizednet actuarialloss      |  |                                 | — |                                 |  |                                | 1.4  |                                |  |   | — |   |  |   | 5.1  |    |
| Netperiodiccost                  |  | $                                    | 3.0     |                                 |  | $                                   | 2.1  |                                |  | $      | 10.3    |   |  | $      | 8.0  |    |
|                                  |

OnDecember 8, 2003, the Medicare Prescription Drug, Improvement andModernization Act of 2003 (the Act) was signed into law. The Actexpands Medicare, primarily adding a prescription drug benefit forMedicare-eligible retirees starting in 2006. The Company has determinedthat prescription drug benefits that it provides to its retirees do notqualify for the federal subsidy provided by the Act. Accordingly, noaccounting recognition is required.

The Company contributed $4.1million to its principal domestic pension plan during the third quarter2004.

8.    EquityCompensation Plan

Nalco LLC, the Company's ultimateparent company, established the Nalco LLC 2004 Unit Plan (the"Plan") for purposes of (i) attracting andretaining exceptional officers and other key employees, non-employeedirectors and consultants of Nalco LLC and the Company and (ii)enabling such individuals to acquire an equity interest in Nalco LLCand to participate in the long-term growth and financial success ofNalco LLC and the Company.

During the second quarter 2004, NalcoLLC granted certain officers and key employees of the Company rights topurchase a designated number of one or more classes of equity interests("Units") in Nalco LLC. Those officers andkey employees who elected to purchase such Units did so at their fairvalue, as determined by an independent valuation advisor.

TheUnits subject to the Plan include Class A, Class B, Class C, and ClassD Units. The Class A Units are fully vested at the time of purchase byan employee and have economic characteristics that are similar to thoseof shares of common stock in a private corporation. The Class B, ClassC, and Class D Units are subject to vesting provisions, meaning that inorder for such Units to be entitled to distributions or other benefits,an employee will have to continue to provide services for a certainperiod of time. However, with respect to the Class C and Class D Units,such vesting will be accelerated if the Company achieves certainperformance targets. The Units also become fully vested 18 months aftera change in control of the Company, subject to certain otherconditions.

Though the Plan was established by theCompany's ultimate parent company, the Company will account forthe Plan since its economic substance is substantially the same for theCompany and its employees. As permitted by SFAS No. 123, Accountingfor Stock-Based Compensation, the Company accounts for employeestock-based compensation in accordance with Accounting Principles BoardOpinion No. 25, Accounting for Stock Issued to Employees. Sincethe price of the Units offered was their fair value, no earned orunearned compensation expense was recognized on the grant date. Thegrant date represents the measurement date for the Class A, Class B,and Class C Units, and these Units will be subject to"fixed" plan accounting. However, due to thevesting provisions of the Class D Units, the measurement date is notyet determined, and the Class D Units will be subject to"variable" plan accounting.

13

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8.    EquityCompensation Plan  (continued)

As a result of the purchase of Units underthe Plan by key officers and employees, the Company received anadditional contribution of capital of $8.1 million.

9.   Business Optimization Expenses

During 2002, thePredecessor began a program to realign its support for the petroleum,petrochemical, pulp, and paper industries to provide one-stop processimprovement and water treatment sales and service to these keycustomers. As a result, the Predecessor incurred expenses of $5.1million and $13.2 million during the three months and nine months endedSeptember 30, 2003, respectively, which consisted primarily ofseverance, outplacement, and employee relocations. This program wascompleted in 2003.

As a result of acquiring Exxon'sinterest in the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon) jointventure in 2001, the Predecessor incurred costs related to integratingthe operations of the joint venture with those of the Predecessor.Certain costs which were related to the integration, includingseverance, relocations, and asset impairments, were accrued as aliability on the date of acquisition. The Predecessor also incurredconsulting and other expenses that were charged to businessoptimization expenses during 2003 and 2002, including $0.4 million and$2.0 million during the three months and nine months ended September30, 2003, respectively.

14

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10. Summary ofOther Income (Expense)

The components of other income(expense), net for the three months and nine months ended September 30,2004 and 2003, include thefollowing:

|                                                 |  |                                      |         |                                      |  |                                     |         |                                     |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | Successor                            |         | Predecessor                          |  | Successor                           |         | Predecessor                         |
|                                            |  | ThreeMonths ended September 30, 2004 |         | Three Monthsended September 30, 2003 |  | Nine Months endedSeptember 30, 2004 |         | Nine Months ended September30, 2003 |
| Gain (loss) on sale ofbusiness                  |  | $                                    | — |                                 |  | $                                   | (5.7    | )                              |  | $      | — |    |  | $      | (5.0    | )  |
| Sponsor monitoringfees                          |  |                                 | (2.7    | )                               |  |                                | — |                                |  |   | (8.4    | )  |  |   | — |    |
| Suezmanagementfees                              |  |                                 | — |                                 |  |                                | (0.8    | )                              |  |   | — |    |  |   | (2.3    | )  |
| Franchisetaxes                                  |  |                                 | (0.8    | )                               |  |                                | 3.8     |                                |  |   | (2.3    | )  |  |   | 1.0     |    |
| Equityin earnings of unconsolidatedsubsidiaries |  |                                 | 1.1     |                                 |  |                                | 0.4     |                                |  |   | 2.4     |    |  |   | 1.7     |    |
| Foreigncurrency exchangeadjustments             |  |                                 | 0.2     |                                 |  |                                | (0.4    | )                              |  |   | (1.0    | )  |  |   | 2.8     |    |
| Terminationof interest rateswap                 |  |                                 | — |                                 |  |                                | (10.9   | )                              |  |   | — |    |  |   | (10.9   | )  |
| Other                                           |  |                                 | 1.0     |                                 |  |                                | 0.8     |                                |  |   | 2.8     |    |  |   | (0.3    | )  |
|                                            |  | $                                    | (1.2    | )                               |  | $                                   | (12.8   | )                              |  | $      | (6.5    | )  |  | $      | (13.0   | )  |
|                                                 |

11.Income Taxes

The difference between the Company'seffective tax rate and the U.S. federal tax rate of 35% for thethree months ended September 30, 2004 is primarily attributable to theone-time impact of creating a tax-efficient method of repatriatingearnings from certain offshore subsidiaries, incremental U.S. taxes onthe repatriation of other non-U.S. earnings, and the recording of avaluation allowance for the tax benefit from the deduction for interestexpense on the senior discount notes issued in January 2004.

Thedifference between the Predecessor's effective tax rate and theU.S. federal tax rate of 35% for the three months endedSeptember 30, 2003 was primarily attributable to the income tax impacton the loss on the sale of the Predecessor's South Africansubsidiary.

The difference between the Company's and thePredecessor's effective tax rate and the U.S. federal tax rate of35% for the nine months ended September 30, 2004 and September30, 2003 is primarily attributable to the nondeductible $122.3 millioncharge for purchased IPR&D and the $244.4 million of nondeductiblegoodwill impairment, respectively. Other factors contributing to thedifference are the incremental tax costs of repatriating non-U.S.earnings, the 2004 valuation allowance for the tax benefit from thededuction for the interest expense on the senior discount notes,non-U.S. taxes, state taxes and other permanent differences.

15

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12. Comprehensive Income

Totalcomprehensive income and its components, net of related tax, for thethree months and nine months ended September 30, 2004 and 2003, are asfollows:

|                                                |  |                                      |         |                                      |  |                                     |        |                                     |  |        |         |         |  |        |        |         |  |  |
|------------------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|--------|-------------------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                           |  | Successor                            |         | Predecessor                          |  | Successor                           |        | Predecessor                         |
|                                           |  | ThreeMonths ended September 30, 2004 |         | Three Monthsended September 30, 2003 |  | Nine Months endedSeptember 30, 2004 |        | Nine Months ended September30, 2003 |
| Net income(loss)                               |  | $                                    | 2.0     |                                 |  | $                                   | 33.7   |                                |  | $      | (122.3  | )  |  | $      | (154.0 | )  |
| Othercomprehensive income, net of incometaxes: |  |                                 |    |                                 |  |                                |   |                                |  |   |    |    |  |   |   |    |
| Gainon derivativeinstruments                   |  |                                 | — |                                 |  |                                | 8.0    |                                |  |   | — |    |  |   | 8.5    |    |
| Foreigncurrency translationadjustments         |  |                                 | 44.3    |                                 |  |                                | 13.2   |                                |  |   | (18.3   | )  |  |   | 50.9   |    |
| Comprehensiveincome(loss)                      |  | $                                    | 46.3    |                                 |  | $                                   | 54.9   |                                |  | $      | (140.6  | )  |  | $      | (94.6  | )  |
|                                                |

13.Segment Information

The Company provides integrated watertreatment and process improvement services for industrial andinstitutional applications, using technologically advanced solutions,combining chemical products and equipment, and consistent, reliableon-site service and expertise. These solutions and services enable theCompany's customers to improve production yields, lowermanufacturing costs, extend asset lives and maintain environmentalstandards at costs that represent a small share of their overallproduction expense.

The Company is organized based on the endmarkets it serves. The organization is comprised of the followingreportable segments:

Industrial and Institutional Services– This segment serves the global water treatment and processchemical needs of the industrial, institutional, and municipalmarkets.

Energy Services – This segment servesthe process chemicals and water treatment needs of the global petroleumand petrochemical industries in both upstream and downstreamapplications.

Paper Services – This segmentserves the process chemicals and water treatment needs of the globalpulp and paper industry.

Other – This segmentserves the alternative channels to market, supply chain activities, andcertain other operating expenses not allocated to a segment. It alsoincludes the Company's subsidiary in India and the Katayama Nalcojoint venture.

Beginning with the three months ended September30, 2004, the Company began reporting Pacific region results related tothe Industrial and Institutional Services segment and the PaperServices segment with those segments. These results had previously beenreported in the Other segment. Amounts for prior periods have beenrestated to conform with this change in the composition of theCompany's reportable segments.

The Company evaluates theperformance of its segments based on "directcontribution", which is defined as net sales, less cost ofproducts sold (excluding variances to standard costs), selling andservice expenses, marketing expenses and research expenses directlyattributable to each segment. There are no intersegment revenues. Prioryear data have been reclassified between segments to conform to thecurrent year presentation.

16

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13.Segment Information  (continued)

Net sales by reportable segment were asfollows:

|                                      |  |                                      |       |                                      |  |                                     |       |                                    |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------|--|--------------------------------------|-------|--------------------------------------|--|-------------------------------------|-------|------------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                 |  | Successor                            |       | Predecessor                          |  | Successor                           |       | Predecessor                        |
|                                 |  | ThreeMonths ended September 30, 2004 |       | Three Monthsended September 30, 2003 |  | Nine Months endedSeptember 30, 2004 |       | Nine Months endedSeptember30, 2003 |
| Industrial and InstitutionalServices |  | $                                    | 355.4 |                                 |  | $                                   | 336.1 |                               |  | $      | 1,036.7 |   |  | $      | 954.6   |   |
| EnergyServices                       |  |                                 | 200.1 |                                 |  |                                | 180.8 |                               |  |   | 592.2   |   |  |   | 531.1   |   |
| PaperServices                        |  |                                 | 164.7 |                                 |  |                                | 159.8 |                               |  |   | 490.0   |   |  |   | 463.2   |   |
| Other                                |  |                                 | 54.0  |                                 |  |                                | 34.7  |                               |  |   | 109.0   |   |  |   | 115.2   |   |
| Netsales                             |  | $                                    | 774.2 |                                 |  | $                                   | 711.4 |                               |  | $      | 2,227.9 |   |  | $      | 2,064.1 |   |
|                                      |

Thefollowing table presents direct contribution by reportable segment andreconciles the total segment direct contribution to earnings (loss)before incometaxes:

|                                            |  |                                      |         |                                      |  |                                     |         |                                    |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                       |  | Successor                            |         | Predecessor                          |  | Successor                           |         | Predecessor                        |
|                                       |  | ThreeMonths ended September 30, 2004 |         | Three Monthsended September 30, 2003 |  | Nine Months endedSeptember 30, 2004 |         | Nine Months endedSeptember30, 2003 |
| Segment directcontribution:                |  |                                 |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Industrialand InstitutionalServices        |  | $                                    | 88.0    |                                 |  | $                                   | 94.0    |                               |  | $      | 257.7   |    |  | $      | 239.9   |    |
| EnergyServices                             |  |                                 | 40.0    |                                 |  |                                | 41.0    |                               |  |   | 124.8   |    |  |   | 121.9   |    |
| PaperServices                              |  |                                 | 35.8    |                                 |  |                                | 39.5    |                               |  |   | 112.1   |    |  |   | 108.2   |    |
| Other                                      |  |                                 | (4.1    | )                               |  |                                | (10.7   | )                             |  |   | (45.4   | )  |  |   | (32.6   | )  |
| Totalsegment directcontribution            |  |                                 | 159.7   |                                 |  |                                | 163.8   |                               |  |   | 449.2   |    |  |   | 437.4   |    |
|                                       |  |                                 |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Income(expenses) not allocated tosegments: |  |                                 |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Administrativeexpenses                     |  |                                 | (42.0   | )                               |  |                                | (51.8   | )                             |  |   | (139.3  | )  |  |   | (158.7  | )  |
| Amortizationof intangibleassets            |  |                                 | (23.9   | )                               |  |                                | (20.5   | )                             |  |   | (73.0   | )  |  |   | (61.8   | )  |
| Impairmentofgoodwill                       |  |                                 | — |                                 |  |                                | — |                               |  |   | — |    |  |   | (244.4  | )  |
| In-processresearch anddevelopment          |  |                                 | — |                                 |  |                                | — |                               |  |   | (122.3  | )  |  |   | — |    |
| Businessoptimizationexpenses               |  |                                 | — |                                 |  |                                | (5.5    | )                             |  |   | — |    |  |   | (15.2   | )  |
| Operatingearnings(loss)                    |  |                                 | 93.8    |                                 |  |                                | 86.0    |                               |  |   | 114.6   |    |  |   | (42.7   | )  |
| Otherincome (expense),net                  |  |                                 | (1.2    | )                               |  |                                | (12.8   | )                             |  |   | (6.5    | )  |  |   | (13.0   | )  |
| Interestincome                             |  |                                 | 2.3     |                                 |  |                                | 1.1     |                               |  |   | 7.7     |    |  |   | 5.4     |    |
| Interestexpense                            |  |                                 | (64.0   | )                               |  |                                | (9.7    | )                             |  |   | (187.7  | )  |  |   | (29.2   | )  |
| Earnings(loss) before incometaxes          |  | $                                    | 30.9    |                                 |  | $                                   | 64.6    |                               |  | $      | (71.9   | )  |  | $      | (79.5   | )  |
|                                            |

14.Contingencies and Litigation

Various claims, lawsuits andadministrative proceedings are pending or threatened against theCompany and its subsidiaries, arising from the ordinary course ofbusiness with respect to commercial, intellectual property, productliability, employee and environmental matters. Historically thesematters have not had a material impact on the consolidated financialposition of the Company. However, the Company cannot predict theoutcome of any litigation or the potential for future litigation.

The Company has been named as a potentially responsible party (PRP)by the Environmental Protection Agency or state enforcement agencies atthree waste sites where some financial contribution is or may berequired. These agencies have also identified many other parties whomay be responsible for clean up costs at these waste disposal sites.The Company's financial contribution to remediate these sites isexpected to be minor. There has been no significant financial impact onthe 

17

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14.Contingencies and Litigation  (Continued)

Company up to the present, nor is itanticipated that there will be in the future, as a result of thesematters. The Company has made and will continue to make provisions forthese costs if the Company's liability becomes probable and whencosts can be reasonably estimated. The Company's undiscountedreserves for known environmental clean up costs were $2.0 million atSeptember 30, 2004.

These environmental reserves representmanagement's current estimate of its proportional clean-up costsand are based upon negotiation and agreement with enforcement agencies,its previous experience with respect to clean-up activities, a detailedreview by the Company of known conditions, and information about otherPRPs. They are not reduced by any possible recoveries from insurancecompanies or other PRPs not specifically identified. Althoughmanagement cannot determine whether or not a material effect on futureoperations is reasonably likely to occur, given the evolving nature ofenvironmental regulations, it believes that the recorded reserve levelsare appropriate estimates of the potential liability. Althoughsettlement will require future cash outlays, it is not expected thatsuch outlays will materially impact the Company's liquidityposition. Expenditures for the three months and nine months endedSeptember 30, 2004, relating to environmental compliance and clean upactivities were not significant.

The Company has been named as adefendant in lawsuits based on claimed involvement in the supply ofallegedly defective or hazardous materials. The plaintiffs in thesecases seek damages for alleged personal injury or potential injuryresulting from exposure to our products or other chemicals. Thesematters have had a de minimis impact on the Company'sbusiness historically and the Company does not anticipate these mattersto present any material risk to the Company's business in thefuture. Notwithstanding, the Company cannot predict the outcome of anysuch lawsuits or the involvement the Company might have in thesematters in the future.

The Company has received subpoenas fromthe U.S. Department of Justice for documents and testimony relating toits storage of claimed hazardous materials and the claimed leakage ofwastewater at its plant in Garyville, Louisiana. No charges orindictments have been filed, but the outcome of this investigation isunknown to the Company.

In the ordinary course of its business,the Company is also a party to a number of lawsuits and is subject tovarious claims relating to trademarks, employee matters, contracts andchemicals, the outcome of which, in the opinion of management, shouldnot have a material effect on the consolidated financial position ofthe Company. However, we cannot predict the outcome of any litigationor the potential for future litigation. The Company maintains accrualsand/or has insurance in those instances where there is reason tobelieve that significant costs might be incurred.

15.Guarantees

No significant guarantees were outstanding atSeptember 30, 2004, other than subsidiary-related performanceguarantees.

The Company had $34.5 million of letters of creditoutstanding at September 30, 2004.

16.Subsequent Event

On November 16, 2004, Nalco Holding Companycompleted an initial public offering of 51,111,111 shares of its commonstock, including 6,666,667 shares sold pursuant to anunderwriters' option to purchase additional shares, at a price of$15.00 per share. Net proceeds from the offering, after deductingunderwriting discounts and estimated offering expenses, wereapproximately $721.5 million.

Approximately $544.6 million ofthe net proceeds was used to pay a dividend that was declared prior tothe consummation of this offering to Nalco LLC, the direct parentcompany of Nalco Holding Company and sole stockholder on the recorddate of the dividend. Approximately $176.9 million of 

18

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16.Subsequent Event  (Continued)

the net proceeds will be used to redeem aportion of the $694.0 million aggregate principal amount at maturity of9.0% senior discount notes due 2014 issued by Nalco HoldingCompany's subsidiaries, Nalco Finance Holdings LLC and NalcoFinance Holdings Inc., including the payment of the applicableredemption premium.

In addition to the aforementioned cashdividend paid from the net proceeds from the offering of shares of itscommon stock, Nalco Holding Company declared a stock dividend payableto Nalco LLC of 90,552,158 shares of Nalco Holding Company common stockand a warrant to purchase, for $0.01 per share, up to 6,191,854 sharesof Nalco Holding Company common stock.

In connection with theoffering, the Company paid affiliates of the Sponsors a $35.0 millionfee to terminate their obligation to provide the Company with servicesunder a monitoring fee agreement. The Company has temporarily fundedthis payment using a portion of the net proceeds from the offering thatwill be used to redeem a portion of the senior discount notes. At thetime those notes are redeemed, the Company intends to borrow $35.0million under its revolving credit facility to fund thispayment.

19

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|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations |

Thefollowing discussion and analysis of our financial condition andresults of operations covers periods prior to the Transactions, definedas the acquisition of Ondeo Nalco Group, comprised of Nalco Company andNalco International SAS Subsidiaries, by Nalco Holdings and the relatedfinancings in connection with such acquisition. Accordingly, thediscussion and analysis of historical periods prior to the Transactionsdo not reflect the significant impact that the Transactions have had onus. In addition, the statements in the discussion and analysisregarding industry outlook, our expectations regarding the performanceof our business and the other non-historical statements in thediscussion and analysis are forward-looking statements. Theseforward-looking statements are subject to numerous risks anduncertainties. Our actual results may differ materially from thosecontained in or implied by any forward-looking statements. You shouldread the following discussion together with the consolidated andcombined financial statements of Nalco Holding Company includedelsewhere in this report.

"SafeHarbor" Statement Under Private Securities LitigationReform Act of 1995

This Quarterly Report for the fiscal quarterended September 30, 2004 (the "QuarterlyReport") includes "forward-lookingstatements" within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. These forward-looking statements include statements concerningour plans, objectives, goals, strategies, future events, future revenueor performance, capital expenditures, financing needs, plans orintentions relating to acquisitions, business trends and otherinformation that is not historical information. When used in thisQuarterly Report, the words "estimates,""expects,""anticipates,""projects,""plans," "intends,"" believes,""forecasts," or future or conditional verbs,such as "will,""should," "could"or "may," and variations of such words orsimilar expressions are intended to identify forward-lookingstatements. All forward-looking statements, including, withoutlimitation, management's examination of historical operatingtrends and data are based upon our current expectations and variousassumptions. Our expectations, beliefs and projections are expressed ingood faith and we believe there is a reasonable basis for them.However, there can be no assurance that management'sexpectations, beliefs and projections will be achieved.

Thereare a number of risks and uncertainties that could cause our actualresults to differ materially from the forward-looking statementscontained in this Quarterly Report. Additionally, important factorscould cause our actual results to differ materially from theforward-looking statements we make in this Quarterly Report. As statedelsewhere in this Quarterly Report, such risks, uncertainties and otherimportant factors include, among others:

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | our substantialleverage; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | limitations onflexibility in operating our business contained in our debtagreements; |

|  |              |                             |
|--|--------------|-----------------------------|
|  | •  | increases ininterest rates; |

|  |              |                                    |
|--|--------------|------------------------------------|
|  | •  | pricingpressure from ourcustomers; |

|  |              |                                     |
|--|--------------|-------------------------------------|
|  | •  | technological changeand innovation; |

|  |              |                                              |
|--|--------------|----------------------------------------------|
|  | •  | risksassociated with our non-U.S.operations; |

|  |              |                                         |
|--|--------------|-----------------------------------------|
|  | •  | fluctuations incurrency exchange rates; |

|  |              |                                                    |
|--|--------------|----------------------------------------------------|
|  | •  | manycompetitors in the markets in which weoperate; |

|  |              |                                                        |
|--|--------------|--------------------------------------------------------|
|  | •  | changes toenvironmental, health and safetyregulations; |

|  |              |                                               |
|--|--------------|-----------------------------------------------|
|  | •  | operating hazardsin our productionfacilities; |

|  |              |                                            |
|--|--------------|--------------------------------------------|
|  | •  | our significantpension benefitobligations; |

|  |              |                                                                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | our ability toattract and retain skilled employees, particularly research scientists,technical sales professionals and engineers;and |

|  |              |                                                                             |
|--|--------------|-----------------------------------------------------------------------------|
|  | •  | the possibility that ourowners' interests will conflict with ours or yours. |

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|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

There may be other factors that may causeour actual results to differ materially from the forward-lookingstatements. All forward-looking statements attributable to us orpersons acting on our behalf apply only as of the date of thisQuarterly Report and are expressly qualified in their entirety by thecautionary statements included in this Quarterly Report. We undertakeno obligation to update or revise forward-looking statements which maybe made to reflect events or circumstances that arise after the datemade or to reflect the occurrence of unanticipated events.

Executive Overview

During the three months ended September30, 2004, we generated strong sales growth compared to the three monthsended September 30, 2003, which enabled us to make discretionary debtreduction payments during the three months ended September 30, 2004,including paying down $90.0 million of term loan debt. Theseaccelerated payments helped reduce our indebtedness, net of our changein cash and cash equivalents, by $81.0 million during the three monthsended September 30, 2004.

Net sales for the three months endedSeptember 30, 2004 increased 8.8% to $774.2 million from $711.4million for the same period last year. Changes in foreign currencytranslation rates accounted for 3.3% of the growth. A total of$4.5 million, or 0.6%, of the increase in sales came from netacquisition/divestiture activity, driven primarily by the addition ofKatayama Nalco sales above the amount we contributed to the Japanesejoint venture, minus sales from our divested South Africa business. Onan organic basis, which excludes the impacts of changes in foreigncurrency translation rates and acquisitions and divestitures, our salesgrew 4.9% even as cool summer weather and hurricane-based plantshutdowns modestly affected sales.

All three of our majorsegments contributed to our sales growth during the three months endedSeptember 30, 2004, led by the Energy Services segment, which increasedsales 10.7% compared to the three months ended September 30,2003. Industrial and Institutional Services sales grew 5.7%,while Paper Services improved sales by 3.1%. The Other segment,consisting mainly of Katayama Nalco, our operations in India, ourIntegrated Channels Group and some miscellaneous sales, grew55.6% compared to the three months ended September 30, 2003,primarily as a result of our consolidation of Katayama Nalco'ssales.

Gross margins declined from 52.5% in the threemonths ended September 30, 2004 to 49.0% in the three monthsended September 30, 2003, largely due to freight and raw material costincreases and changes in product mix, with lower gross margin miningand oil and gas exploration services growing significantly faster thanour other business units, while above-average gross margin coolingwater sales grew more slowly as a result of cooler than normal July andAugust weather in North America.

During the three months endedSeptember 30, 2004, supply constraints of acrylic acid, cationicmonomer and silicone challenged us to raise prices and developalternate suppliers and products. While we had anticipated increasedcosts during this period, the magnitude of the cost increases has beenhigher than we had previously anticipated. We have, however, not facedshortages in a few significant raw materials since vendors haveallocated to us supplies of these materials.

We have a number ofoptions to counter these cost increases, including active pricemanagement, using existing alternative technologies and developing newofferings. All of these options take a period of time before thebenefits can be reflected in our results.

We have quickly movedto replace some products containing supply-constricted materials withalternative products while maintaining or improving customerperformance as fully as possible. We have also announced additionalprice increases in September 2004 designed to begin taking effectduring the fourth quarter of 2004. We expect these price increases tooffset higher freight costs, in addition to offsetting raw materialcosts that continued to rise through the three months ended September30, 2004. Because of the service nature of our business, it generallytakes several months before the full impacts of price increases arereflected in our results.

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|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

Certain of our new product programs alsoreduce our dependence on selected raw materials. Our 3D TRASAR®stress management system for cooling water improves customerperformance while reducing demand for acrylic-acid-based products. Inthe three months ended September 30, 2004, we had approximately $7.0million of sales of our 3D TRASAR® stress management system.

Corporate-level cost reductions contributed to a 9.1%improvement in operating earnings in the three months ended September30, 2004 compared to the same period last year, of which 6.3%was organic (i.e., excluding the impacts of changes in foreign currencytranslation rates and acquisitions and divestitures).

Net incomewas $2.0 million in the three months ended September 30, 2004, comparedto $33.7 million in the three months ended September 30, 2003. Thischange is primarily due to changes in interest expense, which was $64.0million during the three months ended September 30, 2004 compared to$9.7 million during the three months ended September 30, 2003, prior tothe Acquisition.

Our largest capital expenditure project in 2004is for information systems. In October 2004, we successfully completedconversion of our North America business to a new SAP platform. Weexpect our European operations to convert to the SAP platform at thebeginning of January 2005. In anticipation of a possible interruptionin product shipments due to the conversion, we plan to encourage ourEuropean customers to accept product shipments early, under normalterms of sale, which will result in the shifting of some sales from thefirst quarter of 2005 to the fourth quarter of 2004. We cannotreasonably estimate the impact of these sales on our fourth quarterresults at this time, but we expect the amounts to be fairly limited.We intend to clarify these impacts on our results when announcingfourth quarter sales and earnings.

The capital demands on ourbusiness remain low. For the three months ended September 30, 2004, ournet capital expenditures were $22.8 million compared to $26.5 millionin the three months ended September 30, 2003, with nearly one-third ofthe expenditures attributed to our SAP project. We expect capital costsfor information technology to decline in 2005 with the completion ofthe SAP project in Europe. However, we expect our annual capitalspending to remain at approximately $100 million in 2005 as we expandcapacity in a few select areas, such as our supply chain, to meetvolume growth.

Results of Operations

Three Months Ended September 30, 2004 Compared to theThree Months Ended September 30, 2003

Net sales for thequarters ended September 30, 2004 and September 30, 2003 may becompared as follows:

|                                        |  |                   |       |                   |  |         |       |                                               |  |                           |      |         |  |        |     |         |  |        |      |          |  |        |      |         |  |  |
|----------------------------------------|--|-------------------|-------|-------------------|--|---------|-------|-----------------------------------------------|--|---------------------------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|---------|--|--|
|                                   |  | Successor         |       | Predecessor       |  |    |       | Attributableto Changesin the FollowingFactors |
|                                   |  | Three MonthsEnded |       |
| (dollars inmillions)                   |  | September30,2004  |       | September 30,2003 |  | %Change |       | CurrencyTranslation                           |  | Acquisitions/Divestitures |      | Organic |
| Industrial& Institutional Services |  | $                 | 355.4 |              |  | $       | 336.1 |                                          |  |                      | 5.7  | %  |  |   | 3.5 | %  |  |   | (0.4 | )%  |  |   | 2.6  | %  |
| EnergyServices                         |  |              | 200.1 |              |  |    | 180.8 |                                          |  |                      | 10.7 | %  |  |   | 3.2 | %  |  |   | (1.9 | )%  |  |   | 9.4  | %  |
| PaperServices                          |  |              | 164.7 |              |  |    | 159.8 |                                          |  |                      | 3.1  | %  |  |   | 3.0 | %  |  |   | (1.4 | )%  |  |   | 1.5  | %  |
| Other                                  |  |              | 54.0  |              |  |    | 34.7  |                                          |  |                      | 55.6 | %  |  |   | 4.0 | %  |  |   | 33.1 | %   |  |   | 18.5 | %  |
| Netsales                               |  | $                 | 774.2 |              |  | $       | 711.4 |                                          |  |                      | 8.8  | %  |  |   | 3.3 | %  |  |   | 0.6  | %   |  |   | 4.9  | %  |
|                                        |

NetSales.    Net sales for the three months ended September 30,2004 were $774.2 million, an 8.8% increase over the $711.4million reported for the three months ended September  30, 2003.After adjusting for the favorable effects of changes in foreigncurrency translation rates and the impact of 

22

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|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

acquisitions and divestitures, net sales wereup 4.9%. This improvement was driven by favorable sales growthbroadly spread across our customer base. The Energy Services division,led by strong oil and gas production service sales, posted significantorganic growth in sales of 9.4% over the same period last year.The Industrial and Institutional Services division reported broad-basedgrowth across most of the markets and geographic regions it serves, ledby its global mining business. Solid gains in our water treatmentbusiness in the Middle East, Latin America and the Pacific region, alsocontributed to the 2.6% organic growth reported by theIndustrial and Institutional Services division. Organically, PaperServices division sales were slightly favorable compared to a year ago,reflecting continued growth in the Pacific region, Latin America andEurope, partly offset by the lingering effect of 2003 price andcontract concessions in North America. The variation in revenuerecognition adjustments for Europe and North America accounted for mostof the organic change in "other" sales. Inaddition, "other" sales include the sales ofa new Japanese joint venture, Katayama Nalco, which was formed withKatayama Chemical Inc. to accelerate our development in this importantindustrialized market. The increase in"other" sales attributable toacquisitions/divestitures includes the incremental impact of KatayamaNalco, which was partially offset by the effect of the 2003 divestitureof the Predecessor's South African subsidiary.

GrossProfit.    Gross profit, defined as the difference between netsales and costs of products sold, of $379.5 million for the threemonths ended September 30, 2004 increased by $6.0 million, or1.6%, over the $373.5 million reported for the three monthsended September 30, 2003. Adjusted for the favorable effects of changesin foreign currency translation rates and the impact of acquisitionsand divestitures, gross profit decreased by $7.0 million, or1.9%. The most notable factors contributing to this decreasewere the aforementioned increase in sales volumes, which favorablyimpacted gross profit by approximately $15.5 million, but which wasmore than offset by margin erosion mainly due to product mix ($11.0million), increased raw material ($4.5 million), and freight costs($4.0 million). The most significant margin erosion was in theIndustrial and Institutional Services division, whose gross profitmargin declined 3.9% from the three months ended September 30,2003. A significant portion of this decline was driven by the strongersales growth in lower margin business, primarily global mining. Thisunfavorable mix impact was amplified by raw material and freightincreases. In addition, both the Paper Services division and the EnergyServices division gross profit margin declined by more than 3%compared to the three months ended September 30, 2003. Paper Serviceswas mostly affected by the negative price impact resulting fromcontract renegotiations and by increased freight costs, whereas EnergyServices was mostly affected by a combination of mix — strongerorganic growth of lower margin upstream businesses — and higherraw material costs.

Selling, Administrative and ResearchExpenses.    Selling, administrative and research expenses forthe three months ended September 30, 2004 were $261.8 million, anincrease of $0.3 million, or 0.1%, from $261.5 million for thethree months ended September 30, 2003. Adjusted for the unfavorableeffects of changes in foreign currency translation rates and the impactof acquisitions and divestitures, selling, administrative, and researchexpenses decreased by $9.7 million, or 3.7%, primarily due tospending reduction initiatives launched at the end of 2003 andtightened spending controls in 2004.

Amortization ofIntangible Assets.    Amortization of intangible assets was$23.9 million and $20.5 million for the three months ended September30, 2004 and 2003, respectively. The increase resulted from higheramortization of intangible assets as a result of the Acquisition.

Business Optimization Expenses.    Business optimizationexpenses of $5.5 million for the three months ended September 30, 2003primarily represented expenses associated with the Predecessor'ssales and marketing business realignment launched in 2002.

Other Income (Expense), Net.    Other income (expense),net was an expense of $1.2 million and $12.8 million for the threemonths ended September 30, 2004 and 2003, respectively. Included in thethree months ended September 30, 2003 was a $10.9 million chargeresulting from the discontinuance of hedge accounting for an interestrate swap and a $5.3 million loss on the sale of thePredecessor's 

23

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|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

South African subsidiary. Franchise taxeswere $0.8 million for the three months ended September 30, 2004compared to a credit of $3.8 million for the same period in 2003. Thiscredit was due to an adjustment of the Predecessor's franchisetax accruals as a result of the planned sale of the Predecessor and theexpected change in capitalization. Suez management fees incurred by thePredecessor for the three months ended September 30, 2003 were $0.8million, whereas Sponsor monitoring fees for the three months endedSeptember 30, 2004 were $2.7 million.

Net InterestExpense.    Net interest expense, defined as the combination ofinterest income and interest expense, was $61.7 million for the threemonths ended September 30, 2004, an increase of $53.1 million from the$8.6 million reported for the three months ended September 30, 2003.The increase is due primarily to the interest charges incurred on thenew debt used to finance the Acquisition and the issuance of the seniordiscount notes by our subsidiary, Nalco Finance Holdings LLC.

Effective Tax Rate.    The effective tax rate was88.0% for the three months ended September 30, 2004. Theeffective tax rate for the three months ended September 30, 2003, afteradjusting for the aforementioned sale of the Predecessor's SouthAfrican subsidiary, was 37.5%. The effective tax rate in 2004 ishigher than 2003 mostly because of the one-time impact of creating atax-efficient method of repatriating earnings from certain offshoresubsidiaries, incremental U.S. taxes on the repatriation of othernon-U.S. earnings, and the recording of a valuation allowance for thetax benefit from the deduction for interest expense on the seniordiscount notes issued in January 2004. It is expected that future taxbenefits from the deduction for senior discount note interest willbecome realizable upon a structural ownership change.

Minority Interest Expense.    Minority interest expensewas $0.3 million higher for the three months ended September 30, 2004than the $1.4 million for the three months ended September 30,2003.

Nine Months Ended September 30, 2004Compared to the Nine Months Ended September 30, 2003

Net salesfor the nine months ended September 30, 2004 and September 30, 2003 maybe compared as follows:

|                                        |  |                  |         |                   |  |         |         |                                                |  |                           |      |          |  |        |     |         |  |        |      |          |  |        |      |          |  |  |
|----------------------------------------|--|------------------|---------|-------------------|--|---------|---------|------------------------------------------------|--|---------------------------|------|----------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|----------|--|--|
|                                   |  | Successor        |         | Predecessor       |  |    |         | Attributableto Changesin the Following Factors |
|                                   |  | Nine MonthsEnded |         |              |  |
| (dollars inmillions)                   |  | September30,2004 |         | September 30,2003 |  | %Change |         | CurrencyTranslation                            |  | Acquisitions/Divestitures |      | Organic  |
| Industrial& Institutional Services |  | $                | 1,036.7 |              |  | $       | 954.6   |                                           |  |                      | 8.6  | %   |  |   | 4.4 | %  |  |   | (0.2 | )%  |  |   | 4.4  | %   |
| EnergyServices                         |  |             | 592.2   |              |  |    | 531.1   |                                           |  |                      | 11.5 | %   |  |   | 3.8 | %  |  |   | (0.9 | )%  |  |   | 8.6  | %   |
| PaperServices                          |  |             | 490.0   |              |  |    | 463.2   |                                           |  |                      | 5.8  | %   |  |   | 3.7 | %  |  |   | 1.3  | %   |  |   | 0.8  | %   |
| Other                                  |  |             | 109.0   |              |  |    | 115.2   |                                           |  |                      | (5.4 | )%  |  |   | 3.8 | %  |  |   | (4.8 | )%  |  |   | (4.4 | )%  |
| Netsales                               |  | $                | 2,227.9 |              |  | $       | 2,064.1 |                                           |  |                      | 7.9  | %   |  |   | 4.1 | %  |  |   | (0.3 | )%  |  |   | 4.1  | %   |
|                                        |

Netsales for the nine months ended September 30, 2004 were $2,227.9million, a 7.9% increase over the $2,064.1 million reported forthe nine months ended September 30, 2003. After adjusting for thefavorable effects of changes in foreign currency translation rates andthe net impact of acquisitions and divestitures, net sales were up4.1%. The Energy Services division reported organic growth insales of 8.6% over last year, with double-digit improvementsposted by both of its upstream business groups. Led by its globalmining business, the Industrial and Institutional Services divisionreported a 4.4% organic increase in sales. Paper Servicesdivision sales were nearly flat on an organic basis compared to a yearago, as the lingering effect of price and contract concessions in NorthAmerica in 2003 were offset by new business gained and good growth inthe Pacific region, Europe and Latin America. The unfavorable organicgrowth in "other" is mainly due to thedecision made last year to 

24

----

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

reduce certain low-margin business with amajor customer, slightly offset by organic growth in India. The effectof this decision also reduced the organic growth of total net sales by0.4%.

Gross profit, defined as the differencebetween net sales and costs of products sold, of $1,099.5 million forthe nine months ended September 30, 2004 increased by $28.2 million, or2.6%, over the $1,071.3 million reported for the nine monthsended September 30, 2003. Adjusted for the favorable effect of changesin foreign currency translation rates and the net unfavorable impact ofacquisitions and divestitures, gross profit decreased by $9.4 million,or 0.9%. Expensing a portion of the adjustment made to increaseinventories to fair value at the date of the Acquisition unfavorablyimpacted gross profit by $14.5 million. Other significant factorscontributing to the organic change in gross profit were theaforementioned increase in sales volumes, which favorably impactedgross profit by approximately $43.4 million, but which was partlyoffset by margin erosion mainly due to product mix ($25.0 million), rawmaterial cost increases ($6.3 million) and freight increases ($9.0million). Gross profit margin for the nine months ended September 30,2004 declined to 49.4% from 51.9% for the same periodlast year. The impact of the expensing of a portion of the adjustmentmade to increase inventories to fair value at the date of Acquisitionaccounted for approximately one-fourth of this decline.

Selling, administrative, and research expenses for the ninemonths ended September 30, 2004 of $789.6 million decreased by $3.0million, or 0.4%, from the same period last year. Adjusted forthe unfavorable effects of changes in foreign currency translationrates, selling, administrative, and research expenses decreased by$30.6 million, or 3.9%, primarily due to spending reductionsinitiatives launched in the fourth quarter 2003 and tightened spendingcontrols in 2004. The net favorable impact from acquisitions anddivestitures also contributed $1.1 million to the change.

Impairment of goodwill of $244.4 million for the ninemonths ended September 30, 2003 resulted from the Predecessor'sevaluation of its goodwill, based on the purchase price for theAcquisition and the fair value of its assets and liabilities.

Amortization of intangible assets was $73.0 million and$61.8 million for the nine months ended September 30, 2004 and 2003,respectively. The increase resulted from higher amortization ofintangible assets as a result of the Acquisition.

In-processresearch and development was a one-time charge of $122.3 millionrecorded during the nine months ended September 30, 2004, as a resultof preliminary purchase accounting entries related to the Acquisition.The value of purchased IPR&D was comprised of five ongoingdevelopment projects at the date of the Acquisition. PurchasedIPR&D was derived by assigning values to those projects identifiedby management as having economic value, but that had not yet reachedtechnological feasibility and had no alternative future use.

Business optimization expenses of $15.2 million for thenine months ended September 30, 2003 were mostly attributable to thePredecessor's sales and marketing business realignment launchedin 2002.

Other income (expense), net was an expense of$6.5 million and $13.0 million for the nine months ended September 30,2004 and 2003, respectively. This $6.5 million decrease is primarilyattributable to a $10.9 million charge in 2003 resulting from thediscontinuance of hedge accounting for an interest rate swap and a $5.3million loss on the sale of the Predecessor's South Africansubsidiary in 2003, partially offset by unfavorable changes infranchise taxes of $3.3 million. In addition, Suez management feesexpensed by the Predecessor for the nine months ended September 30,2003 were $2.3 million, whereas Sponsor monitoring fees for the ninemonths ended September 30, 2004 were $8.4 million. Lower franchisetaxes partly offset these unfavorable changes.

Net interestexpense, defined as the combination of interest income andinterest expense, of $180.0 million for the nine months ended September30, 2004 increased by $156.2 million from the $23.8 

25

----

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

million reported for the nine months endedSeptember 30, 2003. The increase is due primarily to the interestcharges incurred on the new debt used to finance the Acquisition andthe issuance of the senior discount notes by our subsidiary, NalcoFinance Holdings LLC.

The effective tax rate, excludingthe impact of the aforementioned charge for purchased IPR&D, was92.9% for the nine months ended September 30, 2004. Theeffective tax rate for the nine months ended September 30, 2003,excluding the impact of the goodwill impairment charge and the sale ofthe Predecessor's South African subsidiary, was 39.2%. Theeffective tax rate in 2004 is significantly higher than 2003 mostlybecause of the one-time impact of creating a tax-efficient method ofrepatriating earnings from certain offshore subsidiaries, incrementalU.S. taxes on the repatriation of other non-U.S. earnings, and the taxeffect of interest on the senior discount notes issued by Nalco FinanceHoldings in January 2004. Under U.S. tax law, a portion of thededuction for this interest was passed directly to our owners. Due topotential limitations on the realization of the tax benefit for theportion of the deduction that stayed with us, a valuation allowance hasbeen recorded for this tax benefit.

Minority interestexpense was $0.8 million lower than the $4.4 million for the ninemonths ended September 30, 2003, due mostly to the sale of thePredecessor's South African subsidiary in 2003.

Liquidityand Capital Resources

Operatingactivities.    Historically, the Company's main source ofliquidity has been its solid cash flow generated by operatingactivities. For the nine months ended September 30, 2004, cash providedby operating activities was $256.1 million, a $6.6 million decreasefrom the same period last year. This decrease primarily resulted fromhigher interest payments in 2004, due to higher debt from theAcquisition, partly offset by lower working capital requirements,reflecting efforts to more effectively manage working capital.

Investing activities.    Cash used for investingactivities was $37.5 million for the nine months ended September 30,2004. Net property additions of $57.7 million were partly offset by a$25.3 million purchase price adjustment related to the Acquisition.Approximately 40% of the capital spending was attributable tothe Company's implementation of a common SAP platform in NorthAmerica and Europe.

Net property additions of $66.9 millionaccounted for slightly more than half of the $127.9 million of cashused for investing activities by the Predecessor during the nine monthsended September 30, 2003. The purchase of the remaining 60% ofthe common shares of Oekophil AG and the purchase of a UK company froma related Suez company accounted for most of the $25.6 million net useof cash for business purchases/sales. Other investing activities of$35.4 million were mainly comprised of additional advances to a formerrelated party and an investment in a former affiliated company.

Financing activities.    Net cash used for financingactivities totaled $253.3 million during the nine months endedSeptember 30, 2004. This was primarily comprised of a net repayment ofborrowings, since the proceeds of the senior discount notes issued onJanuary 21, 2004 were used to make a return of capital distribution tothe Company's parent company, Nalco LLC, and to pay fees andexpenses related to that offering.

During the nine months endedSeptember 30, 2004, the Company repaid $287.1 million of term loans and$15.0 million of revolving credit facility debt. These debt repaymentsincluded $99.1 million of mandatory amortization and $203.0 million ofdiscretionary debt repayments.

In June 2004, the Company enteredinto a three-year accounts receivable securitization facility with acommercial paper conduit sponsored by one of the lenders under theCompany's senior credit facilities. The facility provides up to$100 million in funding. Of the $287.1 million of term loan debtrepayments, $92.0 million was funded from the initial proceeds fromborrowings under the facility. As of September 30, 2004, theoutstanding balance for the facility was $47.6 million.

26

----

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

The Company received $9.3 million ofadditional capital during the nine months ended September 30, 2004.This was the direct result of additional equity received by theCompany's parent company, Nalco LLC, and was comprised of anequity investment of $1.2 million from Dr. William H. Joyce, theCompany's Chairman and Chief Executive Officer, and $8.1 millionin proceeds from the sale of equity interests to certain officers andkey employees under the Nalco LLC 2004 Unit Plan, an equitycompensation plan. Using proceeds from the issuance of the seniordiscount notes in January 2004, the Company made a return of capitaldistribution of $446.9 million to its parent company, Nalco LLC.

During the nine months ended September 30, 2003, net cash used forfinancing activities by the Predecessor totaled $106.8 million,reflecting cash dividends of $29.0 million, net repayments of debt of$106.8 million and capital contributions of $31.6 million from NalcoInternational SAS, a former related party owned by Suez.

Priorto the Transactions, the Predecessor obtained short-term financing fromSuez Finance LP, a finance company operated by Suez to provide fundingto its North American subsidiaries, rather than from externalsources.

As a result of the Transactions, the Company is highlyleveraged. Its liquidity requirements are significant, primarily due todebt service requirements as well as research and development andcapital investment. Its primary source of liquidity will continue to becash flow generated from operations, but the Company also hasavailability under a $250 million revolving credit facility, subject tocertain conditions. This revolving credit facility is part of theCompany's senior credit facilities. The revolving credit isavailable for general corporate purposes, subject to certainconditions, and matures in November 2009. The Company's seniorcredit facilities also include a $300 million six-year term loan Afacility (which includes an €88.0 million tranche) whichmatures in November 2009 and a $1,300 million seven-year term loan Bfacility which matures in November 2010. Borrowings under the seniorcredit facilities bear interest at a floating base rate plus anapplicable margin. The initial applicable margin for borrowings underthe revolving credit facility and the term loan A facility is LIBORplus 2.50% and for borrowings under the term loan B facility isLIBOR plus 2.50%.

In addition to paying interest onoutstanding principal under the senior credit facilities, we arerequired to pay a commitment fee to the lenders under the revolvingcredit facility in respect of the unutilized commitments at a rateequal to 0.50%. We also pay customary letter of credit fees.

The term loan A facility amortizes each year in quarterly amounts ata rate of 5% per annum in year one, 10% per annum in yeartwo, 15% per annum in year three, 20% per annum in yearfour and 25% per annum in each of years five and nine.

The term loan B facility amortizes each year in an amount equal to1% per annum in equal quarterly installments for the first sixyears and nine months, with the remaining amount payable on the datethat is seven years from the date of the closing of the senior creditfacilities. Principal amounts outstanding under the revolving creditfacility will be due and payable in full at maturity, six years fromthe date of the closing of the senior credit facilities.

Thesenior credit facilities contain a number of covenants that, amongother things, restrict, subject to certain exceptions, our ability andour subsidiaries' ability, including Nalco Company, to sellassets, incur additional indebtedness or issue preferred stock, repayother indebtedness (including the notes), pay dividends anddistributions or repurchase our capital stock, create liens on assets,make investments, loans or advances, make certain acquisitions, engagein mergers or consolidations, enter into sale and leasebacktransactions, engage in certain transactions with affiliates, amendcertain material agreements governing our indebtedness, including thenotes, change the business conducted by us and our subsidiaries(including Nalco Company) and enter into hedging agreements. Inaddition, the senior credit facilities require Nalco Company tomaintain the following financial covenants: a maximum total leverageratio, a minimum interest coverage ratio and a maximum capitalexpenditures limitation. The Company was in compliance with allcovenants at September 30, 2004.

27

----

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

The indentures governing the senior notesand senior subordinated notes limit our ability and the ability of ourrestricted subsidiariesto:

|  |              |                               |
|--|--------------|-------------------------------|
|  | •  | incur additionalindebtedness; |

|  |              |                                                                             |
|--|--------------|-----------------------------------------------------------------------------|
|  | •  | pay dividends onor make other distributions or repurchase our capitalstock; |

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | make certaininvestments; |

|  |              |                                                         |
|--|--------------|---------------------------------------------------------|
|  | •  | enter into certaintypes of transactions withaffiliates; |

|  |              |                                                                       |
|--|--------------|-----------------------------------------------------------------------|
|  | •  | limit dividends orother payments by our restricted subsidiaries tous; |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | use assets as security inother transactions; and |

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | sellcertain assets or merge with or into other companies. |

Subject tocertain exceptions, the indentures governing the senior notes andsenior subordinated notes permit the Company and its restrictedsubsidiaries to incur additional indebtedness, including securedindebtedness.

Certain of our non-U.S. subsidiaries have lines ofcredit to support local requirements. As of September 30, 2004, theoutstanding balance under these local lines of credit was approximately$14.4 million. Certain of these lines of credit are equally and ratablysecured with obligations under our senior credit facilities.

Webelieve that funds generated from operations and our borrowing capacitywill be adequate to fund these requirements. Our ability to fund theseitems and to reduce debt may be affected by general economic,financial, competitive, legislative and regulatory factors, and thecost of litigation claims, among other things.

We believe thatour financial position and financing structure will provide flexibilityin worldwide financing activities and permit it to respond to changingconditions in credit markets.

Adjusted EBITDA

Our newsenior credit facility and our indentures contain a number ofsignificant covenants as described above. Adjusted EBITDA is used todetermine our compliance with many of these covenants.

AdjustedEBITDA is defined as EBITDA adjusted to exclude unusual items and otheradjustments permitted in calculating covenant compliance under theindentures governing the notes and our senior credit facility. Webelieve that the inclusion of supplementary adjustments to EBITDAapplied in presenting Adjusted EBITDA are appropriate to provideadditional information to investors to demonstrate compliance with ourfinancing covenants.

Any breach of covenants in our new seniorcredit agreement that are tied to ratios based on Adjusted EBITDA couldresult in a default under that agreement and the lenders could elect todeclare all amounts borrowed due and payable. Any such accelerationwould also result in a default under our indentures. Additionally,under our debt agreements, our ability to engage in activities such asincurring additional indebtedness, making investments and payingdividends is also tied to ratios based on Adjusted EBITDA.

28

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|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

Adjusted EBITDA is calculated asfollows:

|                                  |  |                               |         |                                |  |                                  |       |                                  |  |        |         |         |  |        |        |         |  |  |
|----------------------------------|--|-------------------------------|---------|--------------------------------|--|----------------------------------|-------|----------------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                             |  | Successor                     |         | Predecessor                    |  | Successor                        |       | Predecessor                      |
|                             |  | QuarterEndedSeptember 30,2004 |         | Quarter Ended September30,2003 |  | Nine MonthsEndedSeptember30,2004 |       | Nine MonthsEndedSeptember30,2003 |
| Net income (loss)                |  | $                             | 2.0     |                           |  | $                                | 33.7  |                             |  | $      | (122.3  | )  |  | $      | (154.0 | )  |
| Interest,net                     |  |                          | 61.7    |                           |  |                             | 8.6   |                             |  |   | 180.0   |    |  |   | 23.8   |    |
| Incometax provision              |  |                          | 27.2    |                           |  |                             | 29.5  |                             |  |   | 46.8    |    |  |   | 70.1   |    |
| Depreciation                     |  |                          | 23.8    |                           |  |                             | 30.9  |                             |  |   | 80.7    |    |  |   | 91.6   |    |
| Amortization                     |  |                          | 23.9    |                           |  |                             | 20.5  |                             |  |   | 73.0    |    |  |   | 61.8   |    |
| EBITDA                           |  | $                             | 138.6   |                           |  | $                                | 123.2 |                             |  | $      | 258.2   |    |  | $      | 93.3   |    |
| Non-cashcharges(1)               |  |                          | 14.5    |                           |  |                             | 4.7   |                             |  |   | 167.5   |    |  |   | 266.8  |    |
| Businessoptimization expenses(2) |  |                          | — |                           |  |                             | 5.5   |                             |  |   | — |    |  |   | 15.2   |    |
| Unusualitems(3)                  |  |                          | 2.2     |                           |  |                             | 20.6  |                             |  |   | 6.7     |    |  |   | 29.0   |    |
| Otheradjustments(4)              |  |                          | 1.9     |                           |  |                             | (2.8  | )                           |  |   | 5.6     |    |  |   | (5.0   | )  |
| Costsavings(5)                   |  |                          | — |                           |  |                             | 7.5   |                             |  |   | — |    |  |   | 22.5   |    |
| AdjustedEBITDA                   |  | $                             | 157.2   |                           |  | $                                | 158.7 |                             |  | $      | 438.0   |    |  | $      | 421.8  |    |
|                                  |

|  |
|--|
|  |  |
|  |

|     |                                                             |
|-----|-------------------------------------------------------------|
| (1) | Non-cashcharges are further detailed on the followingtable: |

|                                                 |
|-------------------------------------------------|
|                                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                            |  | Successor |  | Predecessor |  | Successor |  | Predecessor |
|                                            |  | QuarterEndedSeptember 30,2004 |  | QuarterEnded/September30,2003 |  | Nine MonthsEndedSeptember30,2004 |  | Nine MonthsEndedSeptember30,2003 |
| Impairment of goodwill                          |  | $ | — |   |  | $ | — |   |  | $ | — |   |  | $ | 244.4 |   |
| In-processresearch and development              |  |   | — |   |  |   | — |   |  |   | 122.3 |   |  |   | — |   |
| Inventorystep-up                                |  |   | — |   |  |   | — |   |  |   | 14.5 |   |  |   | — |   |
| Assetwrite-offs                                 |  |   | — |   |  |   | 0.6 |   |  |   | — |   |  |   | 4.5 |   |
| Profitsharing expense and 401(k) funded by Suez |  |   | 8.0 |   |  |   | 5.7 |   |  |   | 24.0 |   |  |   | 17.4 |   |
| Other                                           |  |   | 6.5 |   |  |   | 1.6 |   |  |   | 6.7 |   |  |   | 0.5 |   |
| Non-cashcharges                                 |  | $ | 14.5 |   |  | $ | 4.7 |   |  | $ | 167.5 |   |  | $ | 266.8 |   |
|                                                 |

Impairmentof goodwill

Goodwill impairment of $244.4 million wasrecorded by the Predecessor in accordance with SFAS No. 142,Goodwill and Other Intangible Assets. Goodwill was evaluated forimpairment based on the purchase price for the Predecessor.

In-process Research and Development

In-process research and development was a one time charge of$122.3 million recorded during the nine months ended September 30,2004, as a result of preliminary purchase accounting entries related tothe Acquisition.

Inventory Step-Up

As aresult of purchase accounting for the Acquisition, we wrote up ourinventory to fair value and subsequently charged the write up to costof sales as the inventory was sold.

29

----

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

Profit Sharing and 401(k)Expense Funded by Suez

In conjunction with theAcquisition, we entered into an agreement with Suez whereby Suez willreimburse us for certain profit-sharing and 401(k) matchingcontributions made by us to the Profit-Sharing Trust.

Other

Other non-cash charges include thenon-cash impact on earnings of our equity investments and minorityinterests. Successor non-cash charges also includes the non-cashportion of rent expense under the sublease that we entered into withSuez in conjunction with the Acquisition.

|     |                                                                                                                                                                                                                                                                                                                                           |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Business optimization expenses for 2003includes cost associated with the integration of the Nalco/Exxon EnergyChemicals, L.P. (Nalco/Exxon) joint venture and the implementation ofglobal cost reduction programs in the sales, marketing, manufacturingand support services operations. See notes 2 and 9 to Item 1 for moreinformation. |

|     |                                                           |
|-----|-----------------------------------------------------------|
| (3) | Unusual items arefurther detailed on the following table: |

|                                            |
|--------------------------------------------|
|                                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                       |  | Successor |  | Predecessor |  | Successor |  | Predecessor |
|                                       |  | QuarterEndedSeptember30,2004 |  | QuarterEndedSeptember30,2003 |  | Nine MonthsEndedSeptember30,2004 |  | Nine MonthsEndedSeptember30,2003 |
| Pension and OPEB settlement andcurtailment |  | $ | — |   |  | $ | — |   |  | $ | — |   |  | $ | 1.6 |   |
| Loss (gain) on sales, net ofexpenses       |  |   | — |   |  |   | 11.4 |   |  |   | — |   |  |   | 11.3 |   |
| Otherunusual items(a)                      |  |   | 2.2 |   |  |   | 8.6 |   |  |   | 6.7 |   |  |   | 14.2 |   |
| Suezmanagement fees, net                   |  |   | — |   |  |   | 0.6 |   |  |   | — |   |  |   | 1.9 |   |
|                                       |  | $ | 2.2 |   |  | $ | 20.6 |   |  | $ | 6.7 |   |  | $ | 29.0 |   |
|                                            |

|  |
|--|
|  |  |  |
|  |

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a) | In2003, our results were impacted by the effects of certain other unusualitems including a termination charge for the settlement of an interestrate swap; executive severance and relocation expenses; legal andenvironmental expenses that mainly related to events that occurredprior to Suez's 1999 acquisition of Nalco Chemical Company andlitigation costs not covered by our excess liability insurance policy;and consultancy expenses incurred on behalf of Suez. Our results for2004 were impacted by the effects of certain other unusual items,including expenses associated with the registration of publiclytradable senior notes and senior subordinated notes that were exchangedfor the privately placed notes issued in connection with theTransactions; costs related to changing the name of our operatingcompany from Ondeo Nalco Company to Nalco Company; and otherTransaction-related expenses. |

|     |                                                                                                                                                                                                                                                                                                                                  |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Weare required to make adjustments to EBITDA for monitoring fees paid tothe Sponsors, franchise taxes, 401(k) matching contributions and otherpro forma adjustments. These pro forma adjustments include purchaseaccounting adjustments for pensions and the incremental rent expense wewill incur under our sublease with Suez. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Our financing agreements also permit usto adjust EBITDA on a pro forma basis for certain cost savings that weexpect to achieve. We have initiated a comprehensive cost reductionplan that was expected to yield annual savings of at least $30 millionon a proforma basis in 2003. We implemented this plan immediately uponconsummation of the Acquisition. The remainder of our cost reductionplan is expected to realize incremental efficiencies through workprocess redesign |

30

----

|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

|  |                                                                                                                                                                            |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | and other targeted cost improvementprograms, which address inefficiencies in our administrative andoverhead functions, as well as other support functions around theworld. |

Our covenant levels and ratios for the four quartersended September 30, 2004 are as follows:

|                                                                                                            |
|------------------------------------------------------------------------------------------------------------|
|                                                                                                            |  |  |  |  |  |  |  |  |  |  |
|                                                                                                       |  | CovenantLevel atSeptember30,2004 |  | Ratios |
| **Seniorcreditfacility**(1)                                                                                |  |   |   |   |  |   |   |   |
| MinimumAdjusted EBITDA to cash interest ratio                                                              |  |   | 1.65x |   |  |   | 3.04x |   |
| Maximum net debtto Adjusted EBITDA ratio                                                                   |  |   | 6.75x |   |  |   | 5.18x |   |
| **Indentures**(2)                                                                                          |  |   |   |   |  |   |   |   |
| MinimumAdjusted EBITDA to fixed charge ratio required to incur additional debtpursuant to ratio provisions |  |   | 2.00x |   |  |   | 2.65x |   |
|                                                                                                            |

|  |
|--|
|  |  |  |
|  |

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (1) | Oursenior credit facility requires us to maintain an Adjusted EBITDA tocash interest ratio starting at a minimum of 1.65x and a net debt toAdjusted EBITDA ratio starting at a maximum of 6.75x, in each case forthe most recent four quarter period. Failure to satisfy these ratiorequirements would constitute a default under the senior creditagreement. If our lenders failed to waive any such default, ourrepayment obligations under the senior credit agreement could beaccelerated, which would also constitute a default under ourindentures. |

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (2) | Our abilityto incur additional debt and make certain restricted payments under ourindentures, subject to specified exceptions, is tied to an AdjustedEBITDA to fixed charge ratio of at least 2.0 to 1, except that we mayincur certain debt and make certain restricted payments and certainpermitted investments without regard to the ratio, such as up to anaggregate principal amount of $1,950 million (including $1,321.5million that was outstanding under our term loan facilities as ofSeptember 30, 2004) and investments in similar business and otherinvestments equal to 6% of Nalco Holding Company consolidatedassets. |

Nalco Company entered into a receivables facilityon June 25, 2004 that provides up to $100 million in funding from acommercial paper conduit sponsored by JPMorgan Chase Bank, one of thelenders under Nalco Company's senior credit facilities, based onavailability of eligible receivables and satisfaction of othercustomary conditions.

This facility is treated as a generalfinancing agreement resulting in the funding and related receivablesbeing shown as liabilities and assets, respectively, on ourconsolidated balance sheet and the costs associated with thereceivables facility being recorded as interest expense.

Subsequent Event

On November 16, 2004, Nalco HoldingCompany completed an initial public offering of 51,111,111 shares ofits common stock, including 6,666,667 shares sold pursuant to anunderwriters' option to purchase additional shares, at a price of$15.00 per share. Net proceeds from the offering, after deductingunderwriting discounts and estimated offering expenses, wereapproximately $721.5 million.

Approximately $544.6 million ofthe net proceeds was used to pay a dividend that was declared prior tothe consummation of this offering to Nalco LLC, the direct parentcompany of Nalco Holding Company and sole stockholder on the recorddate of the dividend. Approximately $176.9 million of the net proceedswill be used to redeem a portion of the $694.0 million aggregateprincipal amount at maturity of 9.0% senior discount notes due2014 issued by Nalco Holding Company's subsidiaries, NalcoFinance Holdings LLC and Nalco Finance Holdings Inc., including thepayment of the applicable redemption premium.

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|              |                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations  (continued) |

In addition to the aforementioned cashdividend paid from the net proceeds from the offering of shares of itscommon stock, Nalco Holding Company declared a stock dividend payableto Nalco LLC of 90,552,158 shares of Nalco Holding Company common stockand a warrant to purchase, for $0.01 per share, up to 6,191,854 sharesof Nalco Holding Company common stock.

In connection with theoffering, the Company paid affiliates of the Sponsors a $35.0 millionfee to terminate their obligation to provide the Company with servicesunder a monitoring fee agreement. The Company has temporarily fundedthis payment using a portion of the net proceeds from the offering thatwill be used to redeem a portion of the senior discount notes. At thetime those notes are redeemed, the Company intends to borrow $35.0million under its revolving credit facility to fund this payment.

|               |                                                           |
|---------------|-----------------------------------------------------------|
| Item 3.  | Quantitative and Qualitative DisclosuresAbout Market Risk |

There have been no material changes to theCompany's exposures to market risk since December  31,2003.

|               |                         |
|---------------|-------------------------|
| Item 4.  | Controls and Procedures |

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluation of disclosure controls andprocedures. |

The Company's chief executive officerand chief financial officer, after evaluating the effectiveness of theCompany's "disclosure controls andprocedures" (as defined in the Securities Exchange Act of1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period, haveconcluded that the Company's disclosure controls and procedureswere adequate and designed to ensure that material information relatingto the Company and its consolidated subsidiaries would be made known tothem by others within those entities as appropriate to allow timelydecisions regarding requireddisclosures.

|           |                                                       |
|-----------|-------------------------------------------------------|
| (b)  | Changes in internalcontrols over financial reporting. |

There were no changesin the Company's internal controls over financial reporting thatoccurred during the most recent fiscal quarter that have materiallyaffected, or are reasonably likely to affect, the Company'sinternal controls over financialreporting.

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PARTII.    OTHER INFORMATION

Item 1.    Legal Proceedings

Various claims, lawsuits and administrative proceedings are pendingor threatened against the Company and its subsidiaries, arising fromthe ordinary course of business with respect to commercial,intellectual property, product liability, employee and environmentalmatters. Historically these matters have not had a material impact onthe consolidated financial position of the Company. However, theCompany cannot predict the outcome of any litigation or the potentialfor future litigation.

The Company has been named as apotentially responsible party (PRP) by the Environmental ProtectionAgency or state enforcement agencies at three waste sites where somefinancial contribution is or may be required. These agencies have alsoidentified many other parties who may be responsible for clean up costsat these waste disposal sites. The Company's financialcontribution to remediate these sites is expected to be minor. Therehas been no significant financial impact on the Company up to thepresent, nor is it anticipated that there will be in the future, as aresult of these matters. The Company has made and will continue to makeprovisions for these costs if the Company's liability becomesprobable and when costs can be reasonably estimated. TheCompany's undiscounted reserves for known environmental clean upcosts were $2.0 million at September 30, 2004.

Theseenvironmental reserves represent management's current estimate ofits proportional clean-up costs and are based upon negotiation andagreement with enforcement agencies, its previous experience withrespect to clean-up activities, a detailed review by the Company ofknown conditions, and information about other PRPs. They are notreduced by any possible recoveries from insurance companies or otherPRPs not specifically identified. Although management cannot determinewhether or not a material effect on future operations is reasonablylikely to occur, given the evolving nature of environmentalregulations, it believes that the recorded reserve levels areappropriate estimates of the potential liability. Although settlementwill require future cash outlays, it is not expected that such outlayswill materially impact the Company's liquidity position.Expenditures for the three months and nine months ended September 30,2004, relating to environmental compliance and clean up activities werenot significant.

The Company has been named as a defendant inlawsuits based on claimed involvement in the supply of allegedlydefective or hazardous materials. The plaintiffs in these cases seekdamages for alleged personal injury or potential injury resulting fromexposure to our products or other chemicals. These matters have had ade minimis impact on the Company's business historicallyand the Company does not anticipate these matters to present anymaterial risk to the Company's business in the future.Notwithstanding, the Company cannot predict the outcome of any suchlawsuits or the involvement the Company might have in these matters inthe future.

The Company has received subpoenas from the U.S.Department of Justice for documents and testimony relating to itsstorage of claimed hazardous materials and the claimed leakage ofwastewater at its plant in Garyville, Louisiana. No charges orindictments have been filed, but the outcome of this investigation isunknown to the Company.

In the ordinary course of its business,the Company is also a party to a number of lawsuits and is subject tovarious claims relating to trademarks, employee matters, contracts andchemicals, the outcome of which, in the opinion of management, shouldnot have a material effect on the consolidated financial position ofthe Company. However, we cannot predict the outcome of any litigationor the potential for future litigation. The Company maintains accrualsand/or has insurance in those instances where there is reason tobelieve that significant costs might be incurred.

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Item 6.    Exhibits

|               |                                                                                                                                 |
|---------------|---------------------------------------------------------------------------------------------------------------------------------|
| (31.1)   | Certification of Chief ExecutiveOfficer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the SecuritiesExchange Act, as amended |

|              |                                                                                                                                 |
|--------------|---------------------------------------------------------------------------------------------------------------------------------|
| (31.2)  | Certification of Chief Financial Officer pursuantto Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, asamended |

|             |                                                                                                                                                                            |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (32)   | Certification of ChiefExecutive Officer and Chief Financial Officer Pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 |

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SIGNATURE

The Company has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

|  | NALCO HOLDING COMPANY |
|--|-----------------------|

|  | /s/BRADLEY J.BELL |
|--|-------------------|

|  |
|--|
|  |  |  |
|  |

|  | Name:  BradleyJ. Bell |
|--|---------------------------------|

|  |              |                                                     |
|--|--------------|-----------------------------------------------------|
|  | Title:  | ExecutiveVice President and Chief Financial Officer |

Dated:November 17, 2004

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