**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  **FORM
        10-Q**
 
 **(** Mark
        One)
  x
              Quarterly
                  report pursuant to section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934 for the quarterly period ended September 30, 2007
                  or
  o
              Transition
                  report pursuant to section 13 or 15(d) of the Securities Exchange
                  act of
                  1934 for the transition period from _______ to
                  _______
 
 Commission
        file number 1-10776
 
 CALGON
        CARBON CORPORATION
 (Exact
        name of registrant as specified in its charter)
 
 Delaware
              25-0530110(State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization)
              Identification
                  No.)
  P.O.
        Box 717, Pittsburgh, PA 15230-0717
 (Address
        of principal executive offices)
 (Zip
        Code)
 
 **(412)
        787-6700**
 **(Registrant’s
        telephone number, including area code)**
 
  
 **(Former
        name, former address and former fiscal year**
 **if
        changed since last report)**
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 
 Yes
x   No o
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
 
 Large
        accelerated filer o    Accelerated
        filer  x  Non-accelerated
        filer o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Securities Exchange Act of 1934).
 
 Yes o   No x
 
 **Applicable
        only to corporate issuers:**
  **Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        stock, as of the latest practicable date.**
  Class
              
              Outstanding
                  at November 7, 2007Common
                  Stock, $.01 par value
              
              40,472,992
                  shares
  
  CALGON
        CARBON CORPORATION
 FORM
        10-Q
 QUARTER
        ENDED September 30, 2007
 
 The
        Quarterly Report on Form 10-Q contains historical information and
        forward-looking statements. Statements looking forward in time are included
        in
        this Form 10-Q pursuant to the “safe harbor” provisions of the Private
        Securities Litigation Reform Act of 1995. They involve known and unknown
        risks
        and uncertainties that may cause the Company’s actual results in the future to
        differ from performance suggested herein. In the context of forward-looking
        information provided in this Form 10-Q and in other reports, please refer
        to the
        discussion of risk factors detailed in, as well as the other information
        contained in the Company’s filings with the Securities and Exchange Commission.
  I
        N D
        E X
  PagePART
                  1 - CONDENSED CONSOLIDATED FINANCIAL INFORMATIONItem
                  I.
              
              Condensed
                  Consolidated Financial StatementsIntroduction
                  to the Condensed Consolidated Financial Statements
              
              2Condensed
                  Consolidated Statements of Operations (unaudited)
              
              3Condensed
                  Consolidated Balance Sheets (unaudited)
              
              4Condensed
                  Consolidated Statements of Cash Flows (unaudited)
              
              5Notes
                  to Condensed Consolidated Financial Statements (unaudited)
              
              6Item
                  2.
              
              Management's
                  Discussion and Analysis of Results of
                  Operations and Financial Condition
              
              25Item
                3.
              
              Quantitative
                and Qualitative Disclosures about Market Risk
              
              32Item
                  4.
              
              Controls
                  and Procedures
              
              32PART
                  II - OTHER INFORMATIONItem
                  1.
              
              Legal
                  Proceedings
              
              33Item
                  1a.
              
              Risk
                  Factors
              
              33Item
                  2c.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              
              33Item
                  6.
              
              Exhibits
              
              33SIGNATURES
              
              34CERTIFICATIONS
 
 1
 
 PART
        I
        - CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 
 Item
        1.  Condensed
        Consolidated Financial Statements
 
 INTRODUCTION
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 The
        unaudited interim condensed consolidated financial statements included herein
        have been prepared by Calgon Carbon Corporation (the Company), without audit,
        pursuant to the rules and regulations of the Securities and Exchange Commission.
        Certain information and footnote disclosures normally included in annual
        financial statements prepared in accordance with accounting principles generally
        accepted in the United States of America have been condensed or omitted pursuant
        to such rules and regulations. Management of the Company believes that the
        disclosures are adequate to make the information presented not misleading
        when
        read in conjunction with the Company's audited consolidated financial statements
        and the notes included therein for the year ended December 31, 2006 filed
        with
        the Securities and Exchange Commission by the Company in Form
 10-K.
 
 In
        management’s opinion, the unaudited interim condensed consolidated financial
        statements reflect all adjustments, which are of a normal and recurring nature,
        and are necessary for a fair presentation, in all material respects, of
        financial results for the interim periods presented. Operating results for
        the
        first nine months of 2007 are not necessarily indicative of the results that
        may
        be expected for the year ending December 31, 2007.
 
 2
  CALGON
        CARBON CORPORATION
 CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars
        in Thousands Except Share and Per Share Data)
 (Unaudited)
  Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Net
                  sales
              
              $
              81,912
              
              $
              77,840
              
              $
              249,579
              
              $
              229,110Net
                  sales to related parties
              
              
              2,949
              
              
              1,840
              
              
              6,740
              
              
              7,659Total
              
              
              84,861
              
              
              79,680
              
              
              256,319
              
              
              236,769Cost
                  of products sold(excluding
                  depreciation and amortization)
              
              
              57,642
              
              
              58,897
              
              
              175,622
              
              
              176,270Depreciation
                  and amortization
              
              
              4,427
              
              
              4,719
              
              
              13,019
              
              
              14,311Selling,
                  general andadministrative
                  expenses
              
              
              15,306
              
              
              16,547
              
              
              44,921
              
              
              47,489Research
                  and developmentexpenses
              
              
              966
              
              
              1,146
              
              
              2,701
              
              
              3,384Gain
                  on insurance settlement
              
              
              -
              
              
              (3,173
              )
              
              -
              
              
              (8,072
              )Restructuring
                  charge
              
              
              -
              
              
              -
              
              
              -
              
              
              778,341
              
              
              78,136
              
              
              236,263
              
              
              233,389Income
                  from operations
              
              
              6,520
              
              
              1,544
              
              
              20,056
              
              
              3,380Interest
                  income
              
              
              455
              
              
              233
              
              
              1,157
              
              
              553Interest
                  expense
              
              
              (1,363
              )
              
              (1,530
              )
              
              (4,223
              )
              
              (4,628
              )Other
                  expense—net
              
              
              (482
              )
              
              (660
              )
              
              (1,293
              )
              
              (2,018
              )Income
                      (loss) from continuing operations before income taxes and equity
                      income
              
              
              5,130
              
              
              (413
              )
              
              15,697
              
              
              (2,713
              )Provision
                  (benefit) for income taxes
              
              
              396
              
              
              114
              
              
              5,923
              
              
              (1,156
              )Income
                  (loss) from continuing operations before equity income
              
              
              4,734
              
              
              (527
              )
              
              9,774
              
              
              (1,557
              )Equity
                  in income from equity investments
              
              
              310
              
              
              31
              
              
              1,766
              
              
              211Income
                  (loss) from continuing operations
              
              
              5,044
              
              
              (496
              )
              
              11,540
              
              
              (1,346
              )Income
                  (loss) from discontinued operations
              
              
              (96
              )
              
              38
              
              
              (96
              )
              
              1,910Net
                  income (loss)
              
              $
              4,948
              
              $
              (458
              )
              $
              11,444
              
              $
              564Net
                  income (loss) per common shareBasic:Income
                  (loss) from continuing operations
              
              $
              .12
              
              $
              (.01
              )
              $
              .28
              
              $
              (.03
              )Income
                  (loss) from discontinued operations
              
              
              -
              
              
              -
              
              
              -
              
              
              .05Net
                  income (loss)
              
              $
              .12
              
              $
              (.01
              )
              $
              .28
              
              $
              .01Diluted:Income
                  (loss) from continuing operations
              
              $
              .10
              
              $
              (.01
              )
              $
              .24
              
              $
              (.03
              )Income
                  (loss) from discontinued operations
              
              
              -
              
              
              -
              
              
              -
              
              
              .05Net
                  income (loss)
              
              $
              .10
              
              $
              (.01
              )
              $
              .24
              
              $
              .01Weighted
                  average shares outstandingBasic
              
              
              40,357,325
              
              
              39,881,805
              
              
              40,289,260
              
              
              39,870,778Diluted
              
              
              50,358,179
              
              
              39,881,805
              
              
              47,324,443
              
              
              39,870,778
  The
        accompanying notes are an integral part of these unaudited condensed
        consolidated financial statements.
 
 3
  CALGON
        CARBON CORPORATION
 CONDENSED
        CONSOLIDATED BALANCE SHEETS
 (Dollars
        in Thousands except share data)
 (Unaudited)
 September
                    30,
                
                December
                    31,2007
                
                2006ASSETSCurrent
                    assets:Cash
                    and cash equivalents
                
                $
                19,371
                
                $
                5,631Receivables
                    (net of allowance of $3,113 and $1,981)
                
                
                55,806
                
                
                53,239Receivables
                    from related parties
                
                
                2,351
                
                
                1,797Revenue
                    recognized in excess of billings on uncompletedcontracts
                
                
                6,454
                
                
                7,576Inventories
                
                
                78,227
                
                
                70,339Deferred
                    income taxes - current
                
                
                9,902
                
                
                5,761Other
                    current assets
                
                
                3,713
                
                
                4,369Total
                    current assets
                
                
                175,824
                
                
                148,712Property,
                    plant and equipment, net
                
                
                103,187
                
                
                106,101Equity
                    investments
                
                
                9,006
                
                
                6,971Intangibles
                
                
                8,212
                
                
                8,521Goodwill
                
                
                27,965
                
                
                27,497Deferred
                    income taxes - long-term
                
                
                5,326
                
                
                20,225Other
                    assets
                
                
                4,401
                
                
                4,337Total
                    assets
                
                $
                333,921
                
                $
                322,364LIABILITIES
                    AND SHAREHOLDERS' EQUITYCurrent
                    liabilities:Short-term
                    debt
                
                $
                63,818
                
                $
                -Accounts
                    payable and accrued liabilities
                
                
                33,711
                
                
                36,446Accounts
                    payable to related parties
                
                
                -
                
                
                168Billings
                    in excess of revenue recognized on uncompletedcontracts
                
                
                3,961
                
                
                2,516Accrued
                    interest
                
                
                542
                
                
                1,440Payroll
                    and benefits payable
                
                
                8,704
                
                
                6,533Accrued
                    income taxes
                
                
                2,765
                
                
                8,423Total
                    current liabilities
                
                
                113,501
                
                
                55,526Long-term
                    debt
                
                
                12,925
                
                
                74,836Deferred
                    income taxes - long-term
                
                
                -
                
                
                1,679Accrued
                    pension and other liabilities
                
                
                46,073
                
                
                42,450Total
                    liabilities
                
                
                172,499
                
                
                174,491Commitments
                    and contingencies (Note 7)Shareholders'
                    equity:Common
                    shares, $.01 par value, 100,000,000 sharesauthorized,
                    42,726,577 and 42,550,290 shares issued
                
                
                427
                
                
                425Additional
                    paid-in capital
                
                
                73,861
                
                
                70,345Retained
                    earnings
                
                
                101,878
                
                
                94,035Accumulated
                    other comprehensive income
                
                
                12,650
                
                
                10,305188,816
                
                
                175,110Treasury
                    stock, at cost, 2,845,012 and 2,819,690 shares
                
                
                (27,394
                )
                
                (27,237
                )Total
                    shareholders' equity
                
                
                161,422
                
                
                147,873Total
                    liabilities and shareholders’ equity
                
                $
                333,921
                
                $
                322,364
 The
          accompanying notes are an integral part of these unaudited condensed
          consolidated financial statements.
  4
  CALGON
        CARBON CORPORATION
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars
        in Thousands)
 (Unaudited)
 
 Nine
                  Months EndedSeptember
                  30,2007
              
              2006Cash
                  flows from operating activitiesNet
                  income
              
              $
              11,444
              
              $
              564Adjustments
                  to reconcile net income tonet
                  cash provided by (used in) operating activities:Gain
                  on insurance settlement
              
              
              -
              
              
              (8,072
              )Gain
                  from divestitures
              
              
              -
              
              
              (6,719
              )Depreciation
                  and amortization
              
              
              13,019
              
              
              14,313Equity
                  income from equity investments
              
              
              (1,766
              )
              
              (211
              )Distributions
                  received from equity investments
              
              
              739
              
              
              -Employee
                  benefit plan provisions
              
              
              947
              
              
              2,283Non-cash
                  pension curtailment (gain) loss
              
              
              (265
              )
              
              788Decrease
                  in deferred income taxes
              
              
              5,648
              
              
              835Changes
                  in assets and liabilities:Increase
                  in receivables
              
              
              (1,890
              )
              
              (81
              )Increase
                  in inventories
              
              
              (6,513
              )
              
              (3,024
              )Increase
                  in revenue in excess of billings onuncompleted
                  contracts and other current assets
              
              
              1,920
              
              
              (1,772
              )Decrease
                  in accounts payable, accrued liabilities,and
                  billings in excess of revenue
              
              
              (2,566
              )
              
              (4,724
              )Decrease
                  in accrued pension
              
              
              (6,914
              )
              
              (10,588
              )Other
                  items - net
              
              
              3,086
              
              
              1,327Net
                  cash provided by (used in) operating activities
              
              
              16,889
              
              
              (15,081
              )Cash
                  flows from investing activitiesProceeds
                  from divestitures
              
              
              -
              
              
              21,213Property,
                  plant and equipment expenditures
              
              
              (7,639
              )
              
              (9,989
              )Proceeds
                  from insurance settlement for plantand
                  equipment
              
              
              -
              
              
              4,595Proceeds
                  from disposals of property, plant and equipment
              
              
              187
              
              
              676Net
                  cash (used in) provided by investing activities
              
              
              (7,452
              )
              
              16,495Cash
                  flows from financing activitiesProceeds
                  from borrowings
              
              
              6,233
              
              
              147,105Repayments
                  of borrowings
              
              
              (4,326
              )
              
              (149,337
              )Treasury
                  stock purchases
              
              
              (157
              )
              
              (108
              )Common
                  stock issued through exercise of stock options
              
              
              1,213
              
              
              464Net
                  cash provided by (used in) financing activities
              
              
              2,963
              
              
              (1,876
              )Effect
                  of exchange rate changes on cash
              
              
              1,340
              
              
              87Increase
                  (decrease) in cash and cash equivalents
              
              
              13,740
              
              
              (375
              )Cash
                  and cash equivalents, beginning of period
              
              
              5,631
              
              
              5,446Cash
                  and cash equivalents, end of period
              
              $
              19,371
              
              $
              5,071
 
 The
        accompanying notes are an integral part of these unaudited condensed
        consolidated financial statements.
 
 5
  CALGON
        CARBON CORPORATION
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
        in Thousands)
 (Unaudited)
  1.  Inventories:
  September
                  30, 2007
              
              December
                  31, 2006Raw
                  materials
              
              $
              17,847
              
              $
              16,587Finished
                  goods
              
              
              60,380
              
              
              53,752$
              78,227
              
              $
              70,339
 
 2.
        Supplemental Cash Flow Information:
 
 Cash
        paid
        for interest during the nine months ended September 30, 2007 and 2006 was
        $5.1
        million and $4.2 million, respectively. Income taxes paid, net of refunds,
        were
        $0.8 million and $0.7 million, for the nine months ended September 30, 2007
        and
        2006, respectively.
 
 The
        non-cash vesting of restricted stock-based compensation was $0.6 million
        and
        $0.4 million for the nine months ended September 30, 2007 and 2006,
        respectively. The non-cash impact of FASB Interpretation No. 48, “Accounting for
        Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109,” (“FIN
        48”), which was adopted January 1, 2007, was $4.3 million for the nine months
        ended September 30, 2007.
 
 3.  Dividends:
 
 The
        Company’s Board of Directors did not declare or pay a dividend for the three or
        nine month periods ended September 30, 2007 and 2006.
 4.
                    Comprehensive income (loss):
  Three
                    Months Ended
                
                Nine
                    Months EndedSeptember
                    30,
                
                September
                    30,2007
                
                2006
                
                2007
                
                2006Net
                    income (loss)
                
                $
                4,948
                
                $
                (458
                )
                $
                11,444
                
                $
                564Other
                    comprehensive income(loss),
                    net of taxes
                
                
                (333
                )
                
                (209
                )
                
                2,345
                
                
                3,534Comprehensive
                    income (loss)
                
                $
                4,615
                
                $
                (667
                )
                $
                13,789
                
                $
                4,098
 The
        only
        matters contributing to the other comprehensive income (loss) during the
        three
        and nine months ended September 30, 2007 were the foreign currency translation
        adjustment of $0.1 million and $2.2 million, respectively, the changes in
        employee benefit accounts of $(0.3) million and $(0.3) million, respectively,
        and the change in the fair value of the derivative instruments of $(0.1)
        million
        and $0.4 million as described in Note 6.  The
        only
        matters contributing to the other comprehensive income during the three and
        nine
        months ended September 30, 2006 were the foreign currency translation adjustment
        of $(0.3) million and $3.6 million, respectively, and the change in the fair
        value of the derivative instruments of $0.1 million and $(27) thousand,
        respectively.
 
 6
  5.  Segment
        Information:
 
 The
        Company’s management has identified three segments based on product line and
        associated services. Those segments include Activated Carbon and Service,
        Equipment, and Consumer. The Company’s chief operating decision maker, its chief
        executive officer, receives and reviews financial information in this format.
        The Activated Carbon and Service segment manufactures granular activated
        carbon
        for use in applications to remove organic compounds from liquids, gases,
        water,
        and air. This segment also consists of services related to activated carbon
        including reactivation of spent carbon and the leasing, monitoring, and
        maintenance of carbon fills at customer sites. The service portion of this
        segment also includes services related to the Company’s ion exchange
        technologies for treatment of groundwater and process streams. The Equipment
        segment provides solutions to customers’ gaseous and liquid process problems
        through the design, fabrication, and operation of systems that utilize the
        Company’s enabling technologies: carbon adsorption, ultraviolet light, and
        advanced ion exchange separation. The Consumer segment brings the Company’s
        purification technologies directly to the consumer in the form of products
        and
        services including carbon cloth and activated carbon for household odors.
        The
        following segment information represents the results of the Company’s continuing
        operations .
  Three
                    Months Ended
                
                Nine
                    Months EndedSeptember
                    30,
                
                September
                    30,2007
                
                2006
                
                2007
                
                2006Net
                    SalesActivated
                    Carbon and Service
                
                $
                72,322
                
                $
                67,869
                
                $
                215,728
                
                $
                200,489Equipment
                
                
                9,255
                
                
                8,740
                
                
                30,879
                
                
                26,627Consumer
                
                
                3,284
                
                
                3,071
                
                
                9,712
                
                
                9,653$
                84,861
                
                $
                79,680
                
                $
                256,319
                
                $
                236,769Income
                    (loss) from continuing operationsbefore
                    depreciation, amortization,restructuring,
                    and income taxesActivated
                    Carbon and Service
                
                $
                10,705
                
                $
                6,776
                
                $
                32,197
                
                $
                20,885Equipment
                
                
                (215
                )
                
                (848
                )
                
                (955
                )
                
                (4,520
                )Consumer
                
                
                457
                
                
                335
                
                
                1,833
                
                
                1,33310,947
                
                
                6,263
                
                
                33,075
                
                
                17,698Depreciation
                    and amortizationActivated
                    Carbon and Service
                
                
                4,040
                
                
                4,409
                
                
                11,887
                
                
                13,309Equipment
                
                
                254
                
                
                180
                
                
                737
                
                
                598Consumer
                
                
                133
                
                
                130
                
                
                395
                
                
                4044,427
                
                
                4,719
                
                
                13,019
                
                
                14,311Income
                    from continuing operationsbefore
                    restructuring, equity in incomefrom
                    equity investments, and incometaxes
                
                
                6,520
                
                
                1,544
                
                
                20,056
                
                
                3,387Reconciling
                    items:Restructuring
                    charge
                
                
                -
                
                
                -
                
                
                -
                
                
                (7
                )Interest
                    income
                
                
                455
                
                
                233
                
                
                1,157
                
                
                553Interest
                    expense
                
                
                (1,363
                )
                
                (1,530
                )
                
                (4,223
                )
                
                (4,628
                )Other
                    expense - net
                
                
                (482
                )
                
                (660
                )
                
                (1,293
                )
                
                (2,018
                )Consolidated
                    income (loss) fromcontinuing
                    operations beforeincome
                    taxes and equity in incomefrom
                    equity investments
                
                $
                5,130
                
                $
                (413
                )
                $
                15,697
                
                $
                (2,713
                )
  7
 
 September
                  30, 2007
              
              December
                  31, 2006Total
                  AssetsActivated
                  Carbon and Service
              
              $
              287,906
              
              $
              277,134Equipment
              
              
              32,874
              
              
              34,031Consumer
              
              
              13,141
              
              
              11,199Consolidated
                  total assets
              
              $
              333,921
              
              $
              322,364
   6.
        Derivative Instruments
 
 The
        Company accounts for its foreign exchange derivative instruments under Statement
        of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative
        Instruments and Hedging Activities,” as amended. This standard requires
        recognition of all derivatives as either assets or liabilities at fair value
        and
        may result in additional volatility in both current period earnings and other
        comprehensive income as a result of recording recognized and unrecognized
        gains
        and losses from changes in the fair value of derivative instruments.
 
 The
        Company had fourteen derivative instruments outstanding at September 30,
        2007 of
        which one was a foreign currency swap, six were foreign currency forward
        exchange contracts, and seven were cash flow hedges for forecasted purchases
        of
        natural gas. The Company applied hedge accounting treatment to the foreign
        currency swap and six of the cash flow hedges for forecasted natural gas.
        During
        the period ended September 30, 2007, the Company recorded, in other expense,
        an
        immaterial gain related to the foreign currency forward exchange contracts
        and
        an immaterial loss for the one cash flow hedge for forecasted natural gas
        that
        did not qualify for hedge accounting treatment. The Company had thirteen
        derivative instruments outstanding at September 30, 2006 of which one was
        a
        foreign currency swap, nine were foreign currency forward exchange contracts,
        and three were cash flow hedges for forecasted purchases of natural gas.
        The
        Company applied hedge accounting treatment to the foreign currency swap and
        the
        three cash flow hedges for the forecasted purchases of natural gas. During
        the
        period ended September 30, 2006, the Company recorded an immaterial gain
        in
        other income for the nine foreign currency forward exchange contracts that
        did
        not qualify for hedge accounting treatment .
 
 On
        April
        26, 2004, the Company entered into a ten-year foreign currency swap agreement
        to
        fix the foreign exchange rate on a $6.5 million intercompany loan between
        the
        Company and its foreign subsidiary, Chemviron Carbon Ltd. Since its inception,
        the foreign currency swap has been treated as a foreign exchange cash flow
        hedge. Accordingly, the change in the fair value of the effective hedge portion
        of the foreign currency swap was $27 thousand and $0.2 million,
        respectively, for the three and nine month periods ended September 30, 2007
        and
        $0.4 million and $0.3 million, respectively, for the three and nine month
        periods ended September 30, 2006 was recorded in other comprehensive income
        (loss). The balance of the effective hedge portion of the foreign currency
        swap
        recorded in other long-term liabilities was $1.0 million and $0.7 million,
        respectively, as of September 30, 2007 and 2006.
 
 The
        change in fair value of the cash flow hedges for the forecasted purchase
        of
        natural gas recorded in other long-term liabilities was $(0.1) million and
        $0.2
        million, net of tax, respectively, for the three and nine month periods ended
        September 30, 2007 and $0.5 million and $0.5 million, respectively, for the
        similar 2006 periods. The balance of the cash flow hedges for the forecasted
        purchase of natural gas recorded in other long-term liabilities was $0.6
        million
        and $0.5 million as of September 30, 2007 and 2006, respectively.
 
 No
        component of the derivatives gains or losses has been excluded from the
        assessment of hedge effectiveness. For the three and nine month periods ended
        September 30, 2007 and 2006, the net gain or loss recognized due to the amount
        of hedge ineffectiveness was insignificant.
  8
  7.  Contingencies
 
 The
        Company purchased the common stock of Advanced Separation Technologies
        Incorporated (AST) from Progress Capital Holdings, Inc. and Potomac Capital
        Investment Corporation on December 31, 1996. On January 12, 1998, the Company
        filed a claim for unspecified damages in the United States District Court
        in the
        Western District of Pennsylvania alleging among other things that Progress
        Capital Holdings and Potomac Capital Investment Corporation materially breached
        various AST financial and operational representations and warranties included
        in
        the Stock Purchase Agreement and had defrauded the Company. On January 26,
        2007,
        a jury returned a verdict in favor of the Company and against the defendants
        in
        the amount of $10.0 million, which has not been recorded in operations as
        of
        September 30, 2007.  On
        September 29, 2007, the Court denied all post-trial motions, including the
        defendants’ motion for a new trial and the Company’s award of prejudgment
        interest, which could have been awarded at the discretion of the trial judge
        at
        the rate of 6% per annum (simple) from the date the complaint was filed.
        The
        Company and the defendants have appealed to the United States Circuit Court
        of
        Appeals for the Third Circuit.
 
 The
        Company is a party in three cases involving alleged infringement of its U.S.
        Patent No. 6,129,893 and U.S. Patent No. 6,565,803 B1 (“U.S. Patents”) and its
        Canadian Patent No. 2,331,525 (“525 Patent”) for the method of preventing
        infection from cryptosporidium found in drinking water. In the first case,
        Wedeco Ideal Horizons, Inc. filed suit against the Company in the United
        States
        District Court for the District of New Jersey seeking a declaratory judgment
        that it does not infringe the Company’s U.S. Patents on the grounds that the
        U.S. Patents are invalid and alleging unfair competition by the Company.
        On June
        30, 2006, the District Court granted Wedeco’s motion for summary judgment on the
        issue of validity of the U.S. Patents, denied the Company’s motion for summary
        judgment on the infringement claim on the ground that there can be no
        infringement where there is no valid patent and granted the Company’s motion for
        summary judgment on Wedeco’s claim of unfair competition. On April 24, 2007, the
        United States Circuit Court of Appeals for the Federal Circuit Court affirmed
        the District Court’s judgment. The Company did not appeal this decision. In the
        second case, the Company filed suit against the Town of Ontario, New York,
        Trojan Technologies, Inc. (“Trojan”) and Robert Wykle, et al. in the United
        States District Court for the Western District of New York alleging that
        the
        defendants are practicing the method claimed within the U.S. Patents without
        a
        license. In the third case, the Company filed suit against the City of North
        Bay, Ontario, Canada (“North Bay”) and Trojan in the Federal Court of Canada
        alleging infringement of the Canadian Patent by North Bay and inducement
        of
        infringement by Trojan. On November 14, 2006, after a bench trial, the Court
        dismissed the Company’s claim for a declaration that the defendants infringed
        the Canadian Patent and the Company’s claims for an injunction, compensation,
        damages, interest, and costs and declared that the Canadian Patent is invalid.
        In March 2007, the Company and Trojan entered into a settlement whereby in
        exchange for a nominal cash payment and relief from legal fees, the Company
        granted Trojan worldwide immunity from all current and future legal action
        related to Calgon Carbon’s UV patents.
 
 In
        conjunction with the February 2004 purchase of substantially all of Waterlink’s
        operating assets and the stock of Waterlink’s U.K. subsidiary, several
        environmental studies were performed on the Columbus, Ohio property by
        environmental consulting firms which identified and characterized areas of
        contamination. In addition, these firms identified alternative methods of
        remediating the property, identified feasible alternatives and prepared cost
        evaluations of the various alternatives. The Company concluded from the
        information in the studies that a loss at this property is probable and recorded
        the liability as a component of noncurrent other liabilities in the Company’s
        consolidated balance sheet. At December 31, 2005, the balance recorded was
        $5.3
        million. Liability estimates are based on an evaluation of, among other factors,
        currently available facts, existing technology, presently enacted laws and
        regulations, and the remediation experience of other companies. During the
        first
        four months of 2006, the Company undertook a process of evaluating contractors
        and securing bids to perform the remediation work on the Columbus, Ohio
        property. As a result of the evaluation of the additional information gathered
        during that process, the Company reduced its estimate of its liability by
        $1.3
        million to $4.0 million as of September 30, 2006. The reduction of the liability
        was recorded as a reduction of selling, general and administrative expenses
        on
        the Company’s condensed consolidated statement of operations for the nine months
        ended September 30, 2006. The Company has not incurred any environmental
        remediation expense for the three and nine months ended September 30, 2007
        and
        has incurred a total of $0.2 million of environmental remediation expense
        to
        date. It is reasonably possible that a change in the estimate of this obligation
        will occur as remediation preparation and remediation activity commences.
        The
        ultimate remediation costs are dependent upon among other things, the
        requirements of any state or federal environmental agencies, the remediation
        methods employed, the final scope of work being determined, and the extent
        and
        types of contamination which will not be fully determined until experience
        is
        gained through remediation and related activities. The accrued amounts are
        expected to be paid out over the course of several years once work has
        commenced. The Company has not yet determined when it will proceed with
        remediation efforts.
  9
 
 In
        January 2007, the Company received a Notice of Violation (“NOV”) from the United
        States Environmental Protection Agency, Region 4 (“EPA”) alleging multiple
        violations of the Federal Resource Conservation and Recovery Act and
        corresponding EPA and Kentucky Department of Environmental Protection (“KYDEP”)
        hazardous waste management rules and regulations. The alleged violations
        are
        based on information provided by the Company during and after a Multi Media
        Compliance Evaluation inspection of the Company’s Big Sandy Plant, located in
        Catlettsburg, Kentucky, conducted by the EPA and the KYDEP in September 2005,
        and concern the hazardous waste spent activated carbon regeneration facility
        located at the Big Sandy Plant. The Company submitted its initial written
        response to the NOV in June 2007. In August 2007, the EPA notified the Company
        that it believes there are significant RCRA violations that are unresolved
        by
        the information in the Company’s submittals. The EPA notice indicated that the
        EPA is in the process of evaluating its enforcement options and hopes to
        contact
        the Company within the next several months to explore a settlement. The EPA
        has
        not indicated whether or not it will take formal enforcement action, or whether
        such action would involve the assessment of civil penalties, and has not
        specified a monetary amount of any civil penalties it might pursue in connection
        with this matter. The Company is awaiting further clarification from the
        EPA and
        cannot predict with any certainty the outcome of this matter or range of
        potential loss, if any.
 
 In
        June
        2007, the Company received a Notice Letter from the New York State Department
        of
        Environmental Conservation (“NYSDEC”) stating that NYSDEC has determined that
“Calgon Corporation” is a Potentially Responsible Party (“PRP”) at the Frontier
        Chemical Processing Royal Avenue Site in Niagara Falls, New York (the “Site”).
        The Notice Letter requests that “Calgon Corporation” (and other PRPs) develop,
        implement and finance a remedial program for Operable Unit #1 at the Site.
        Operable Unit #1 consists of overburden soils and overburden and upper bedrock
        groundwater. The selected remedy is removal of above grade structures and
        contaminated soil source areas, installation of a cover system, and ground
        water
        control and treatment, which is estimated to cost between approximately $11
        million and $14 million. The Company has not determined what portion of the
        costs associated with the remedial program, if any, it would be obligated
        to
        bear and as such the Company cannot predict with any certainty the outcome
        of
        this matter or range of potential loss, if any. The Notice Letter also demands
        payment of all monies that NYSDEC has already expended for investigation
        and
        remediation of the Site, but does not specify the amount that NYSDEC has
        expended.
 
 In
        July
        2007, the Company received a Notice of Violation (“NOV”) from the KYDEP alleging
        that the Company has violated the KYDEP’s hazardous waste management regulations
        in connection with the Company’s hazardous waste spent activated carbon
        regeneration facility located at the Big Sandy Plant in Catlettsburg, Kentucky.
        The NOV alleges that the Company has failed to correct deficiencies identified
        by KYDEP in the Company’s Part B hazardous waste management facility permit
        application and related documents and directs the Company to submit a complete
        and accurate Part B application and related documents and to respond to KYDEP’s
        comments which are appended to the NOV. The Company is preparing a response
        to
        the NOV and KYDEP’s comments. The KYDEP has not indicated whether or not it will
        take formal enforcement action, and has not specified a monetary amount of
        civil
        penalties it might pursue in any such action, if any. On October 18, 2007,
        the
        Company received an NOV from the EPA related to this permit application and
        has
        until December 3, 2007 to completely respond to all deficiencies noted and
        to
        file a revised permit application. At this time the Company cannot predict
        with
        any certainty the outcome of this matter or range of loss, if any.
 
 The
        Company owns a 49% interest in a joint venture, Calgon Mitsubishi Chemical
        Corporation, which was formed on October 1, 2002. At September 30, 2007,
        Calgon
        Mitsubishi Chemical Corporation had $4.8
        million in borrowings from an affiliate of the majority owner of the joint
        venture. The Company has agreed with the joint venture and the lender that,
        upon
        request by the lender, the Company will execute a guarantee for up to 49%
        of
        such borrowings. At September 30, 2007, the lender had not requested, and
        the
        Company has not provided, such guarantee.
  10
 
 In
        addition to the matters described above, the Company is involved in various
        legal proceedings, lawsuits and claims, including employment, product warranty
        and environmental matters of a nature considered normal to its business.
        It is
        the Company’s policy to accrue for amounts related to these legal matters when
        it is probable that a liability has been incurred and the loss amount is
        reasonably estimable. Management believes that the ultimate liabilities,
        if any,
        resulting from such lawsuits and claims will not materially affect the
        consolidated financial position or liquidity of the Company, but an adverse
        outcome could be material to the results of operations in a particular period
        in
        which a liability is recognized.
 
 8.  Goodwill
        & Intangible Assets
 
 The
        Company has elected to do the annual impairment test of its goodwill, as
        required by SFAS No. 142, on December 31 of each year or earlier if certain
        indicators exist. For purposes of the test, the Company has identified reporting
        units, as defined within SFAS No. 142, at a regional level for the Activated
        Carbon and Service segment and at the technology level for the Equipment
        segment
        and has allocated goodwill to these reporting units accordingly.
 
 The
        changes in the carrying amounts of goodwill by segment for the nine month
        period
        ended September 30, 2007 are as follows:
  ActivatedCarbon
                  &Service
              
              
              Equipment
              
              
              ConsumerSegment
              
              
              Segment
              
              
              Segment
              
              
              TotalBalance
                  as of January 1, 2007
              
              $
              21,056
              
              $
              6,381
              
              $
              60
              
              $
              27,497Foreign
                  exchange
              
              
              184
              
              
              284
              
              
              -
              
              
              468Balance
                  as of September 30, 2007
              
              $
              21,240
              
              $
              6,665
              
              $
              60
              
              $
              27,965
  The
        following is a summary of the Company’s identifiable intangible assets as of
        September 30, 2007 and December 31, 2006 respectively:
  Weighted
              
              September
                    30, 2007Average
              
              Gross
              
              
              
              
              
              NetAmortization
              
              Carrying
              
              Foreign
              
              Accumulated
              
              CarryingPeriod
              
              Amount
              
              Exchange
              
              Amortization
              
              AmountAmortized
                  Intangible Assets:Patents
              
              
              15.4
                  Years
              
              $
              1,369
              
              $
              -
              
              $
              (856
              )
              $
              513Customer
                  Relationships
              
              
              17.0
                  Years
              
              
              9,323
              
              
              67
              
              
              (4,492
              )
              
              4,898License
                  Agreement
              
              
              5.0
                  Years
              
              
              500
              
              
              -
              
              
              (391
              )
              
              109Product
                  Certification
              
              
              7.9
                  Years
              
              
              1,682
              
              
              -
              
              
              (548
              )
              
              1,134Unpatented
                  Technology
              
              
              20.0
                  Years
              
              
              2,875
              
              
              -
              
              
              (1,317
              )
              
              1,558Total
              
              
              16.6
                  Years
              
              $
              15,749
              
              $
              67
              
              $
              (7,604
              )
              $
              8,212
 
 11


Weighted
                  Average Amortization Period
              
              Gross
                  Carrying Amount
              
              Foreign
                  Exchange
              
              Accumulated
                  Amortization
              
              Net
                  Carrying AmountAmortized
                  Intangible Assets:Patents
              
              
              15.4
                  Years
              
              $
              1,369
              
              $
              -
              
              $
              (793
              )
              $
              576Customer
                  Relationships
              
              
              17.0
                  Years
              
              
              9,323
              
              
              11
              
              
              (3,596
              )
              
              5,738License
                  Agreement
              
              
              5.0
                  Years
              
              
              500
              
              
              -
              
              
              (317
              )
              
              183Product
                  Certification
              
              
              7.9
                  Years
              
              
              665
              
              
              -
              
              
              (321
              )
              
              344Unpatented
                  Technology
              
              
              20.0
                  Years
              
              
              2,875
              
              
              -
              
              
              (1,195
              )
              
              1,680Total
              
              
              16.6
                  Years
              
              $
              14,732
              
              $
              11
              
              $
              (6,222
              )
              $
              8,521




For
      the
      three and nine months ended September 30, 2007, the Company recognized $0.5
      million and $1.4 million, respectively, of amortization expense related to
      intangible assets. For the three and nine months ended September 30, 2006,
      the
      Company recognized $0.4 million and $1.3 million, respectively, of amortization
      expense related to intangible assets. The Company estimates amortization expense
      to be recognized during the next five years as follows:




*(Thousands)*For
                the year ending December 31:2007
            
            $
            1,7852008
            
            $
            1,5852009
            
            $
            1,3122010
            
            $
            1,1682011
            
            $
            824




9.  Borrowing
      Arrangements





On
      August
      18, 2006, the Company issued $75.0 million in aggregate principal amount of
      5.00% Convertible Senior Notes due in 2036 (the “Notes”) and entered into a new
      revolving credit facility (the “Credit Facility”). The Company used
      $68.4 million of the net proceeds from its offering of the Notes to fully
      repay indebtedness under the Company’s prior revolving credit facility.
      Accordingly, all parties completed their obligations under the Amended and
      Restated Credit Agreement, dated as of January 30, 2006. The material terms
      of
      the Notes and the Credit Facility are described below.





**5.00%
      Convertible Senior Notes due 2036**





The
      Company initially issued $65.0 million in aggregate principal amount of
      5.00% Notes due in 2036 and granted the initial purchaser a 30-day option to
      purchase up to an additional $10.0 million principal amount of Notes solely
      to cover over-allotments, if any. The initial purchaser exercised this option
      in
      full. Accordingly, $75.0 million in aggregate principal amount of Notes
      were issued and sold on August 18, 2006. The Notes accrue interest at the
      rate of 5.00% per annum and are payable in cash semi-annually in arrears on
      each
      February 15 and August 15, which commenced February 15, 2007. The Notes will
      mature on August 15, 2036.





The
      Notes
      can be converted under the following circumstances: (1) during any calendar
      quarter (and only during such calendar quarter) commencing after
      September 30, 2006, if the last reported sale price of the Company’s common
      stock is greater than or equal to 120% of the conversion price of the Notes
      for
      at least 20 trading days in the period of 30 consecutive trading days ending
      on
      the last trading day of the preceding calendar quarter; (2) during the five
      business day period after any 10 consecutive trading-day period (the
“measurement period”) in which the trading price per Note for each day in the
      measurement period was less than 103% of the product of the last reported sale
      price of the Company’s common stock and the conversion rate on such day; or (3)
      upon the occurrence of specified corporate transactions described in the
      Offering Memorandum. On or after June 15, 2011, holders may convert their Notes
      at any time on the business day immediately preceding the maturity date. Upon
      conversion, the Company will pay cash for the principal amount of the Notes
      and
      shares of its common stock, if any, based on a daily conversion value (as
      described herein) calculated on a proportionate basis for each day of the 25
      trading-day observation period.





12




For
      the
      period ended September 30, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      September 30, 2007. As a result, as of September 30, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although the Company does not anticipate that a significant amount of these
      Notes will be converted, if any, as of September 30, 2007 the Company was
      required to reclassify as a current liability that portion of the Notes that
      cannot be refinanced on a long-term basis as provided by SFAS No. 6,
“Classification of Short-Term Obligations Expected to be Refinanced” which was
      $62.4 million at September 30, 2007.





The
      initial conversion rate is 196.0784 shares of the Company’s common stock per
      $1,000 principal amount of Notes, equivalent to an initial conversion price
      of
      approximately $5.10 per share of common stock. The conversion rate is subject
      to
      adjustment in some events, including the payment of a dividend on the Company’s
      common stock, but will not be adjusted for accrued interest, including any
      additional interest. In addition, following certain fundamental changes that
      occur prior to August 15, 2011, the Company will increase the conversion rate
      for holders who elect to convert Notes in connection with such fundamental
      changes in certain circumstances. The Company considered EITF 00-27,
“Application of Issue No. 98-5 to Certain Convertible Instruments,” Issue 7,
      which indicates that if a reset of the conversion rate due to a contingent
      event
      occurs the Company would need to calculate if there is a beneficial conversion
      and record if applicable. Through September 30, 2007, no contingent events
      have
      occurred.





The
      Company may not redeem the Notes before August 20, 2011. On or after that date,
      the Company may redeem all or a portion of the Notes at any time. Any redemption
      of the Notes will be for cash at 100% of the principal amount of the Notes
      to be
      redeemed, plus accrued and unpaid interest, including any additional interest
      to, but excluding, the redemption date.





Holders
      may require the Company to purchase all or a portion of their Notes on each
      of
      August 15, 2011, August 15, 2016, and August 15, 2026. In addition, if the
      Company experiences specified types of fundamental changes, holders may require
      it to purchase the Notes. Any repurchase of the Notes pursuant to these
      provisions will be for cash at a price equal to 100% of the principal amount
      of
      the Notes to be purchased plus any accrued and unpaid interest, including any
      additional interest to, but excluding, the purchase date.





The
      Notes
      are the Company’s senior unsecured obligations, and rank equally in right of
      payment with all of its other existing and future senior indebtedness. The
      Notes
      are guaranteed by certain of the Company’s domestic subsidiaries on a senior
      unsecured basis (“Subsidiary Guarantees”). The Subsidiary Guarantees are general
      unsecured senior obligations of the subsidiary guarantors (“Subsidiary
      Guarantors”) and rank equally in right of payment with all of the existing and
      future senior indebtedness of the Subsidiary Guarantors. If the Company fails
      to
      make payment on the Notes, the Subsidiary Guarantors must make them instead.
      The
      Notes are effectively subordinated to any indebtedness of the Company’s
      non-guarantor subsidiaries. The Notes are effectively junior to all of the
      Company’s existing and future secured indebtedness to the extent of the value of
      the assets securing such indebtedness.





The
      Company sold the Notes to the original purchaser at a discount of
      $3.3 million that will be amortized over a period of five years. The
      discount is reflected as a deduction from the face amount of the debt. As of
      the
      period ended September 30, 2007, the Company recorded interest expense of
      $3.3 million, of which $0.4 million related to the amortization of the
      discount and $2.9 million related to the Notes. The Company incurred
      issuance costs of $1.5 million which were deferred and are being amortized
      over a five year period.





**Credit
      Facility**





The
      Credit Facility was initially a $50.0 million facility and included a
      separate U.K. sub-facility and a separate Belgian sub-facility. On February
      5,
      2007, the Credit Facility was amended to increase the commitment amount to
      $55.0 million and was syndicated to include one additional lender. The
      Credit Facility permits the total revolving credit commitment to be increased
      up
      to $75.0 million. The facility matures on May 15, 2011. The terms of the
      syndicated Credit Facility were not materially different than the original
      facility prior to the February 5, 2007 syndication. Availability for domestic
      borrowings under the Credit Facility is based upon the value of eligible
      inventory, accounts receivable and property, plant and equipment, with separate
      borrowing bases to be established for foreign borrowings under a separate U.K.
      sub-facility and a separate Belgian sub-facility. Availability under the Credit
      Facility is conditioned upon various customary conditions.





13




The
      Credit Facility is secured by a first perfected security interest in
      substantially all of the Company’s assets, with limitations under certain
      circumstances in the case of capital stock of foreign subsidiaries. Certain
      of
      the Company’s domestic subsidiaries unconditionally guarantee all indebtedness
      and obligations related to domestic borrowings under the Credit Facility. The
      Company and certain of its domestic subsidiaries also unconditionally guarantee
      all indebtedness and obligations under the U.K. sub-facility.





As
      of
      September 30, 2007, the carrying amount of assets pledged as collateral was
      $51.6 million. The carrying amount as of September 30, 2007 for domestic,
      U.K., and Belgian borrowers were $40.9 million, $6.3 million, and
      $4.4 million, respectively. The Credit Facility contains a fixed charge
      coverage ratio covenant which becomes effective when total domestic availability
      falls below $11.0 million. As of September 30, 2007, total
      availability was $35.2 million. Availability as of September 30, 2007
      for domestic, U.K., and Belgian borrowers was $30.1 million,
      $5.1 million, and zero, respectively. The Company can issue letters of
      credit up to $20.0 million of the available commitment amount under the
      Credit Facility. Sub-limits for letters of credit under the U.K. sub-facility
      and the Belgian sub-facility are $2.0 million and $6.0 million,
      respectively. Letters of credit outstanding at September 30, 2007 totaled
      $16.4 million.





The
      Credit Facility interest rate is based upon Euro-based (“LIBOR”) rates with
      other interest rate options available. The applicable Euro Dollar margin in
      effect when the Company is in compliance with the terms of the facility ranges
      from 1.25% to 2.25% and is based upon the Company’s overall availability under
      the Credit Facility. The unused commitment fee is equal to 0.375% per annum
      and
      is based upon the unused portion of the revolving commitment.





The
      Credit Facility contains a number of negative and affirmative covenants. For
      the
      period ended September 30, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      September 30, 2007. As a result, as of September 30, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although currently not anticipated by the Company, the ability of holders of
      the
      Notes to convert could be an event of default of the Credit Facility. Included
      in the Credit Facility is a provision for up to $10.0 million where Notes
      converted up to that amount will not be considered an event of default and
      the
      Company was able to classify up to that amount as long-term debt as it has
      the
      ability and intent to refinance it under the Credit Facility. The Credit
      Facility also includes a provision for up to $3.0 million of letters of credit
      under the Company’s U.S., Belgium, and UK sub-limits that can be issued having
      expiration dates that are more than one year but not more than three years
      after
      the date of issuance.





The
      negative covenants provide for certain restrictions on possible acts by the
      Company related to matters such as additional indebtedness, certain liens,
      fundamental changes in the business, certain investments or loans, asset sales
      and other customary requirements. The Company was in compliance with all such
      negative covenants as of September 30, 2007 and is currently in compliance
      with
      such covenants.





Management
      cannot be assured that, after the September 30, 2007 financial statements have
      been provided to the lenders, there will not be any violation in future periods
      of the covenants contained in the Credit Facility.





**Belgian
      Credit Facility**




The
      Company maintains a Belgian credit facility totaling 4.0 million Euros
      which is secured by a U.S. letter of credit provided under the Credit Facility.
      There are no financial covenants, and the Company had no outstanding borrowings
      under the Belgian credit facility as of September 30, 2007. Bank guarantees
      of 0.8 million Euros were issued as of September 30, 2007. The
      maturity date of this facility is December 15, 2007. Availability under
      this facility was 3.2 million Euros at September 30,
      2007.





**United
      Kingdom Credit Facility**




The
      Company maintains a United Kingdom unsecured overdraft facility totaling 200,000
      British Pounds Sterling. There are no financial covenants and the Company had
      no
      outstanding borrowings under this overdraft facility as of September 30,
      2007. This facility is reviewed annually. The bank, in its sole discretion,
      may
      cancel at any time its commitment to provide this facility.




14





**Chinese
      Credit Facility**




The
      Company maintains a Chinese credit facility totaling 11.0 million RMB which
      is secured by a U.S. letter of credit provided under the Credit Facility. There
      are no financial covenants. The maturity date of this facility is
      December 31, 2007. The facility was fully utilized at September 30, 2007.





**Fair
      Value of Debt**




At
      September 30, 2007, the Company had $12.9 million of long-term debt which
      primarily consisted of $10.0 million of fixed rate Senior Convertible Notes
      that
      were entered into in August 2006. The fair value of these Notes at September
      30,
      2007 was $27.6 million. The increase in value is mainly due to the increase
      in
      the Company’s common stock price and its impact on the conversion features of
      the Notes. The remaining $2.9 million of long-term debt is based on prime rates,
      and accordingly, the carrying value of this obligation approximates its fair
      value.





At
      September 30, 2007, the Company had $63.8 million of outstanding short-term
      debt. Substantially all of the Company’s outstanding short-term debt at
      September 30, 2007 consists of $65.0 million, excluding debt discount of $2.7
      million, of fixed rate Senior Convertible Notes that were entered into in August
      2006. The fair value of these Notes at September 30, 2007 was $179.5 million.
      The increase in value is primarily due to the increase in the Company’s common
      stock price and its impact on the conversion features of the Notes.





**Maturities
      of Debt**




The
      Company is obligated to make principal payments on debt outstanding at
      September 30, 2007 of $1.5 million in 2007, $2.9 million in 2009 and
      $75.0 million in 2011. See also the 5.00% Convertible Senior Notes due 2036
      section related to the holders’ optional conversion as of September 30,
      2007.





10.  Pensions





U.S.
      Plans :





For
      U.S.
      plans, the following table provides the components of net periodic pension
      costs
      of the plans for the three and nine months ended September 30, 2007 and
      2006:


Three
                  Months Ended September 30
              
              Nine
                  Months EndedSeptember
                  30Pension
                  Benefits (in thousands)
              
              2007
              
              2006
              
              2007
              
              2006Service
                  cost
              
              $
              247
              
              $
              617
              
              $
              803
              
              $
              1,873Interest
                  cost
              
              
              1,146
              
              
              1,237
              
              
              3,498
              
              
              3,690Expected
                  return on plan assets
              
              
              (1,288
              )
              
              (1,152
              )
              
              (3,746
              )
              
              (3,281
              )Amortization
                  of prior service cost
              
              
              63
              
              
              88
              
              
              186
              
              
              225Net
                  amortization
              
              
              75
              
              
              188
              
              
              263
              
              
              644Settlement
              
              
              -
              
              
              509
              
              
              -
              
              
              509Curtailment
              
              
              -
              
              
              279
              
              
              (265
              )
              
              279Net
                  periodic pension cost
              
              $
              243
              
              $
              1,766
              
              $
              739
              
              $
              3,939





The
      expected long-term rate of return on plan assets is 8.00% in 2007.





Employer
      Contributions





In
      its
      2006 financial statements, the Company disclosed that it expected to contribute
      $3.2 million to its U.S. pension plans in 2007. As of September 30, 2007, the
      Company has contributed $5.4 million and does not anticipate any further
      contributions for the remainder of 2007.





15




European
      Plans :





For
      European plans, the following table provides the components of net periodic
      pension costs of the plans for the three and nine months ended September 30,
      2007 and 2006:


Three
                  Months Ended September
                  30
              
              Nine
                    Months EndedSeptember
                    30Pension
                  Benefits (in thousands)
              
              2007
              
              2006
              
              2007
              
              2006Service
                  cost
              
              $
              185
              
              $
              249
              
              $
              555
              
              $
              747Interest
                  cost
              
              
              434
              
              
              389
              
              
              1,302
              
              
              1,167Expected
                  return on plan assets
              
              
              (324
              )
              
              (272
              )
              
              (972
              )
              
              (816
              )Amortization
                  of prior service cost
              
              
              11
              
              
              12
              
              
              33
              
              
              36Net
                  amortization
              
              
              25
              
              
              44
              
              
              76
              
              
              132Net
                  periodic pension cost
              
              $
              331
              
              $
              422
              
              $
              994
              
              $
              1,266


The
      expected long-term rate of return on plan assets ranges from 5.00% to 6.90%
      in
      2007.





Employer
      Contributions





In
      its
      2006 financial statements, the Company disclosed that it expected to contribute
      $2.3 million to its European pension plans in 2007. As of September 30, 2007,
      the Company contributed $1.5 million. The Company expects to contribute the
      remaining $0.8 million over the remainder of the year.





Defined
      Contribution Plans





The
      Company also sponsors a defined contribution pension plan for certain U.S.
      employees that permits employee contributions of up to 50% of eligible
      compensation in accordance with Internal Revenue Service guidance. In September
      2006, the Company announced the freezing of its defined benefit pension plan
      for
      all U.S. salaried employees replacing it with a defined contribution plan.
      Under
      this defined contribution plan, the Company makes a fixed contribution of 2%
      of
      eligible employee compensation on a quarterly basis and matches contributions
      made by each participant in an amount equal to 100% of the employee contribution
      up to a maximum of 2% of employee compensation. In addition, each of these
      employees is eligible for an additional Company contribution of up to 4% of
      employee compensation based upon annual Company performance at the discretion
      of
      the Company’s Board of Directors. Employer matching contributions for
      non-represented employees vest after two years of service. For bargaining unit
      employees at the Catlettsburg, Kentucky facility, the Company contributes a
      maximum of $25.00 per month to the plan. For bargaining unit employees at the
      Columbus, Ohio facility, the Company began making contributions to the USW
      401(k) Plan of $1.15 per actual hour worked for eligible employees when their
      former Barnebey Sutcliffe Employee USWA Local 23.08 401(k) Plan was discontinued
      and their defined benefit pension plan was frozen effective April 30, 2007.
      The
      Company realized a $0.3 million curtailment gain as a result of freezing the
      aforementioned plan. Employer matching contributions for bargaining unit
      employees vest immediately. Total expenses related to the defined contribution
      plans for the three months ended September 30, 2007 and 2006 were $0.6 million
      and $0.1 million, respectively, and for the nine months ended September 30,
      2007
      and 2006 were $1.4 million and $0.3 million, respectively.





Effective
      December 31, 2006, the Company adopted Statement of Financial Accounting
      Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension
      and Other Postretirement Plans, an amendment of FASB Statements Nos. 87, 88,
      106
      and 132[R] (“SFAS 158”). SFAS 158 required the Company to record a transition
      adjustment to recognize the funded status of postretirement defined benefit
      plans, measured as the difference between the fair value of plan assets and
      the
      benefit obligations, in its balance sheet after adjusting for derecognition
      of
      the Company’s minimum pension liability as of December 31, 2006. Although the
      Company adopted the provisions of SFAS 158; it incorrectly presented the effect
      of this transition adjustment of $5,375,000 as a reduction to 2006 comprehensive
      income on its Consolidated Statements of Income and Comprehensive Income (Loss)
      included in Item 8 of its Annual Report on Form 10-K for the fiscal year ended
      December 31, 2006 (the “2006 Form 10-K”). The impact of removing the SFAS 158
      transition adjustment from the 2006 Consolidated Statements of Income and
      Comprehensive Income (Loss) changes the reported comprehensive income (loss)
      from $(3,935,000) to $1,440,000. The reported net loss of $(7,798,000) for
      2006
      and the related loss per share of $(0.20) are unaffected by this change. The
      Company will report the impact of removing the transition adjustment in its
      2007
      Form 10-K.





16




11. Earnings
      Per Share





Computation
      of basic and diluted net income per common share from continuing operations
      is
      performed as follows:


Three
                  Months Ended September 30,
              
              Nine
                  Months EndedSeptember 30,*(Dollars
                  in thousands, except per share amounts)*
              
              2007
              
              2006
              
              2007
              
              2006Income
                  (loss) from continuing operations available to common
                  shareholders
              
              $
              5,044
              
              $
              (496
              )
              $
              11,540
              
              $
              (1,346
              )Income
                  (loss) from discontinued operations available to common
                  shareholders
              
              
              (96
              )
              
              38
              
              
              (96
              )
              
              1,910Net
                  income (loss) available to common shareholders
              
              $
              4,948
              
              $
              (458
              )
              $
              11,444
              
              $
              564Weighted
                  Average Shares OutstandingBasic
              
              
              40,357,325
              
              
              39,881,805
              
              
              40,289,260
              
              
              39,870,778Effect
                  of Dilutive Securities
              
              
              10,000,854
              
              
              -
              
              
              7,035,183
              
              
              -Diluted
              
              
              50,358,179
              
              
              39,881,805
              
              
              47,324,443
              
              
              39,870,778Net
                  income (loss) per common shareBasic:Income
                  (loss) from continuing operations
              
              $
              .12
              
              $
              (.01
              )
              $
              .28
              
              $
              (.03
              )Income
                  (loss) from discontinued operations
              
              
              -
              
              
              -
              
              
              -
              
              
              .05Net
                  income (loss)
              
              $
              .12
              
              $
              (.01
              )
              $
              .28
              
              $
              .01Diluted:Income
                  (loss) from continuing operations
              
              $
              .10
              
              $
              (.01
              )
              $
              .24
              
              $
              (.03
              )Income
                  (loss) from discontinued operations
              
              
              -
              
              
              -
              
              
              -
              
              
              .05Net
                  income (loss)
              
              $
              .10
              
              $
              (.01
              )
              $
              .24
              
              $
              .01
  The
        stock
        options that were excluded from the dilutive calculations as the effect would
        have been antidilutive were 6,100 and 3,938 for the three months ended September
        30, 2007 and 2006, respectively, and 6,100 and 152,318 for the nine months
        ended
        September 30, 2007 and 2006, respectively.





The
      Company’s obligation under its Senior Convertible Notes is to settle the par
      value of the Notes in cash and to settle the amount in excess of par value
      in
      its common shares. Therefore, the Company is not required to include any shares
      underlying the Notes in its diluted weighted average shares outstanding until
      the average stock price per share for the quarter exceeds the $5.10 conversion
      price. At such time, only the number of shares that would be issuable (under
      the
“treasury stock” method of accounting for share dilution) will be included,
      which is based upon the amount by which the average stock price exceeds the
      conversion price. For the first $0.50 per share that the Company’s average stock
      price exceeds the $5.10 conversion price of the Notes, it will include
      approximately 1,300,000 additional shares in its diluted share count. For the
      second $0.50 per share that the Company’s average stock price exceeds the $5.10
      conversion price, it will include approximately 1,100,000 additional shares,
      for
      a total of approximately 2,400,000 shares, in its diluted share count, and
      so
      on, with the additional shares’ dilution decreasing for each $1 per share that
      the Company’s average stock price exceeds $5.10 if the stock price rises further
      above $5.10 (see table below). As of September 30, 2007, the average stock
      price
      for the 90-day trading period was $12.98 which was higher than the conversion
      price of $5.10 therefore 8,928,396 shares were included in the dilutive share
      calculation for the period of time the Notes were outstanding for the three
      month period ended September 30, 2007. The year-to-date dilutive effect of
      the
      Notes was calculated based on the weighted average number of incremental shares
      included in each quarterly diluted earnings per share computation.




17
 
 **"Treasury
                    Stock" Method of Accounting for Share
                    Dilution**
 
 **Conversion
                    Price:**
                
                $
                5.10**Number
                    of underlying shares:**
                
                
                14,705,880**Principal
                    Amount:**
                
                $
                75,000,000
 
 **Formula:**
                Number
                    of extra dilutive shares created=((Stock
                    Price * Underlying Shares) - Principal)/Stock Price**Condition:**
                Only
                    applies when share price exceeds
                    $5.10
 
 Stock
                    Price
                
                Conversion
                    Price
                
                Price
                    Difference
                
                Included
                    in
                  Share
                  Count
                
                Share
                    Dilution Per $1.00 Share Price Difference$5.10
                
                $
                5.10
                
                $
                0.00
                
                
                -
                
                
                -$5.60
                
                $
                5.10
                
                $
                0.50
                
                
                1,313,023
                
                
                2,626,046$6.10
                
                $
                5.10
                
                $
                1.00
                
                
                2,410,798
                
                
                2,410,798$7.10
                
                $
                5.10
                
                $
                2.00
                
                
                4,142,500
                
                
                2,071,250$8.10
                
                $
                5.10
                
                $
                3.00
                
                
                5,446,621
                
                
                1,815,540$9.10
                
                $
                5.10
                
                $
                4.00
                
                
                6,464,122
                
                
                1,616,031$10.10
                
                $
                5.10
                
                $
                5.00
                
                
                7,280,137
                
                
                1,456,027$11.10
                
                $
                5.10
                
                $
                6.00
                
                
                7,949,123
                
                
                1,324,854$12.10
                
                $
                5.10
                
                $
                7.00
                
                
                8,507,533
                
                
                1,215,362$13.10
                
                $
                5.10
                
                $
                8.00
                
                
                8,980,689
                
                
                1,122,586$14.10
                
                $
                5.10
                
                $
                9.00
                
                
                9,386,731
                
                
                1,042,970$15.10
                
                $
                5.10
                
                $
                10.00
                
                
                9,738,993
                
                
                973,899$16.10
                
                $
                5.10
                
                $
                11.00
                
                
                10,047,495
                
                
                913,409$17.10
                
                $
                5.10
                
                $
                12.00
                
                
                10,319,915
                
                
                859,993
  12.
          Other
          Financial Information





As
      described in Note 9, the Company has issued $75.0 million in aggregate principal
      amount of 5.00% Convertible Senior Notes due in 2036. The Notes are fully and
      unconditionally guaranteed by certain of our domestic subsidiaries on a senior
      unsecured basis. All of the subsidiary guarantors are 100% owned by the parent
      company and the guarantees are joint and several. The Subsidiary Guarantees
      are
      general unsecured senior obligations of the Subsidiary Guarantors and rank
      equally in right of payment with all of the existing and future senior
      indebtedness of the Subsidiary Guarantors. If the Company fails to make payment
      on the Notes, the Subsidiary Guarantors must make them instead. The Notes are
      effectively subordinated to any indebtedness of the Company’s non-guarantor
      subsidiaries. The Notes are effectively junior to all of the Company’s existing
      and future secured indebtedness to the extent of the value of the assets
      securing such indebtedness.




18




Condensed
      consolidating unaudited financial information for Calgon Carbon Corporation
      (issuer); Calgon Carbon Investments Inc., Chemviron Carbon Ltd., Waterlink
      (UK)
      Holdings Ltd., Sutcliffe Speakman Ltd., Lakeland Processing Ltd., Charcoal
      Cloth
      (International) Ltd., BSC Columbus LLC, and CCC Columbus LLC (guarantor
      subsidiaries); and the non-guarantor subsidiaries are as follows:


Condensed
                  Consolidating Statements of OperationsThree
                  months ended September 30, 2007Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedNet
                  sales
              
              $
              73,534
              
              $
              11,731
              
              $
              8,805
              
              $
              (9,209
              )
              $
              84,861Cost
                  of products sold
              
              
              52,776
              
              
              8,486
              
              
              5,589
              
              
              (9,209
              )
              
              57,642Depreciation
                  and amortization
              
              
              3,561
              
              
              276
              
              
              590
              
              
              -
              
              
              4,427Selling,
                  general and administrative expenses
              
              
              12,839
              
              
              1,388
              
              
              1,079
              
              
              -
              
              
              15,306Research
                  and development expense
              
              
              873
              
              
              92
              
              
              1
              
              
              -
              
              
              966Interest
                  (income) expense - net
              
              
              5,277
              
              
              (4,052
              )
              
              (317
              )
              
              -
              
              
              908Other
                  expense - net
              
              
              161
              
              
              515
              
              
              (194
              )
              
              -
              
              
              482Provision
                  (benefit) for income taxes
              
              
              (1,075
              )
              
              211
              
              
              1,260
              
              
              -
              
              
              396Results
                  of affiliates’ operations
              
              
              5,781
              
              
              (163
              )
              
              -
              
              
              (5,618
              )
              
              -Equity
                  income (loss) from equity investments
              
              
              -
              
              
              -
              
              
              311
              
              
              (1
              )
              
              310Income
                  (loss) from continuing operations
              
              
              4,903
              
              
              4,652
              
              
              1,108
              
              
              (5,619
              )
              
              5,044Income
                  (loss) from discontinued operations
              
              
              45
              
              
              (141
              )
              
              -
              
              
              -
              
              
              (96
              )Net
                  income (loss)
              
              $
              4,948
              
              $
              4,511
              
              $
              1,108
              
              $
              (5,619
              )
              $
              4,948


Condensed
                      Consolidating Statements of OperationsNine
                      months ended September 30, 2007Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedNet
                  sales
              
              $
              220,765
              
              $
              34,822
              
              $
              36,576
              
              $
              (35,844
              )
              $
              256,319Cost
                  of products sold
              
              
              158,338
              
              
              26,330
              
              
              26,798
              
              
              (35,844
              )
              
              175,622Depreciation
                  and amortization
              
              
              10,475
              
              
              821
              
              
              1,723
              
              
              -
              
              
              13,019Selling,
                  general and administrative expenses
              
              
              38,046
              
              
              4,012
              
              
              2,863
              
              
              -
              
              
              44,921Research
                  and development expense
              
              
              2,424
              
              
              277
              
              
              -
              
              
              -
              
              
              2,701Interest
                  (income) expense - net
              
              
              15,783
              
              
              (11,932
              )
              
              (785
              )
              
              -
              
              
              3,066Other
                  expense - net
              
              
              859
              
              
              1,008
              
              
              (574
              )
              
              -
              
              
              1,293Provision
                  for income taxes
              
              
              3,300
              
              
              889
              
              
              1,734
              
              
              -
              
              
              5,923Results
                  of affiliates’ operations
              
              
              19,859
              
              
              2,017
              
              
              -
              
              
              (21,876
              )
              
              -Equity
                  in income from equity investments
              
              
              -
              
              
              -
              
              
              1,766
              
              
              -
              
              
              1,766Income
                  (loss) from continuing operations
              
              
              11,399
              
              
              15,434
              
              
              6,583
              
              
              (21,876
              )
              
              11,540Income
                  from (loss) discontinued operations
              
              
              45
              
              
              (141
              )
              
              -
              
              
              -
              
              
              (96
              )Net
                  income (loss)
              
              $
              11,444
              
              $
              15,293
              
              $
              6,583
              
              $
              (21,876
              )
              $
              11,444
  19


Condensed
                    Consolidating Statements of OperationsThree
                    months ended September 30, 2006Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedNet
                  sales
              
              $
              68,788
              
              $
              12,287
              
              $
              8,569
              
              $
              (9,964
              )
              $
              79,680Cost
                  of products sold
              
              
              51,297
              
              
              10,356
              
              
              7,208
              
              
              (9,964
              )
              
              58,897Depreciation
                  and amortization
              
              
              4,279
              
              
              357
              
              
              83
              
              
              -
              
              
              4,719Selling,
                  general and administrative expenses
              
              
              11,254
              
              
              1,269
              
              
              851
              
              
              -
              
              
              13,374Research
                  and development expense
              
              
              1,055
              
              
              91
              
              
              -
              
              
              -
              
              
              1,146Restructuring
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  (income) expense - net
              
              
              5,260
              
              
              (3,774
              )
              
              (189
              )
              
              -
              
              
              1,297Other
                  expense - net
              
              
              209
              
              
              130
              
              
              321
              
              
              -
              
              
              660Provision
                  (benefit) for income taxes
              
              
              (733
              )
              
              4
              
              
              843
              
              
              -
              
              
              114Results
                  of affiliates’ operations
              
              
              (3,381
              )
              
              117
              
              
              -
              
              
              3,264
              
              
              -Equity
                  income (loss) from equity investments
              
              
              -
              
              
              -
              
              
              39
              
              
              (8
              )
              
              31Income
                  (loss) from continuing operations
              
              
              (452
              )
              
              3,737
              
              
              (509
              )
              
              (3,272
              )
              
              (496
              )Income
                  (loss) from discontinued operations
              
              
              (6
              )
              
              (7
              )
              
              51
              
              
              -
              
              
              38Net
                  income (loss)
              
              $
              (458
              )
              $
              3,730
              
              $
              (458
              )
              $
              (3,272
              )
              $
              (458
              )
  Condensed
                    Consolidating Statements of OperationsNine
                    months ended September 30, 2006Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedNet
                  sales
              
              $
              208,518
              
              $
              33,052
              
              $
              32,399
              
              $
              (37,200
              )
              $
              236,769Cost
                  of products sold
              
              
              158,874
              
              
              27,734
              
              
              26,862
              
              
              (37,200
              )
              
              176,270Depreciation
                  and amortization
              
              
              12,928
              
              
              1,147
              
              
              236
              
              
              -
              
              
              14,311Selling,
                  general and administrative expenses
              
              
              34,212
              
              
              2,575
              
              
              2,630
              
              
              -
              
              
              39,417Research
                  and development expense
              
              
              3,119
              
              
              265
              
              
              -
              
              
              -
              
              
              3,384Restructuring
              
              
              7
              
              
              -
              
              
              -
              
              
              -
              
              
              7Interest
                  (income) expense - net
              
              
              15,444
              
              
              (10,845
              )
              
              (524
              )
              
              -
              
              
              4,075Other
                  expense - net
              
              
              941
              
              
              358
              
              
              719
              
              
              -
              
              
              2,018Benefit
                  for income taxes
              
              
              (209
              )
              
              (35
              )
              
              (912
              )
              
              -
              
              
              (1,156
              )Results
                  of affiliates’ operations
              
              
              (17,254
              )
              
              (5,493
              )
              
              -
              
              
              22,747
              
              
              -Equity
                  in income from equity investments
              
              
              -
              
              
              -
              
              
              203
              
              
              8
              
              
              211Income
                  (loss) from continuing operations
              
              
              456
              
              
              17,346
              
              
              3,591
              
              
              (22,739
              )
              
              (1,346
              )Income
                  from (loss) discontinued operations
              
              
              108
              
              
              67
              
              
              2,723
              
              
              (988
              )
              
              1,910Net
                  income (loss)
              
              $
              564
              
              $
              17,413
              
              $
              6,314
              
              $
              (23,727
              )
              $
              564
 
 20
  Condensed
                  Consolidating Balance SheetsSeptember
                  30, 2007Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedCash
                  & Cash Equivalents
              
              $
              12,982
              
              $
              2,861
              
              $
              24,193
              
              $
              (20,665
              )
              $
              19,371Receivables
              
              
              46,693
              
              
              15,619
              
              
              4,229
              
              
              (8,384
              )
              
              58,157Inventories
              
              
              64,436
              
              
              8,539
              
              
              5,219
              
              
              33
              
              
              78,227Other
                  current assets
              
              
              17,423
              
              
              1,273
              
              
              1,373
              
              
              -
              
              
              20,069Total
                  current assets
              
              
              141,534
              
              
              28,292
              
              
              35,014
              
              
              (29,016
              )
              
              175,824Intercompany
                  accounts receivable
              
              
              53,806
              
              
              174,944
              
              
              4,211
              
              
              (232,961
              )
              
              -Property,
                  plant, and equipment, net
              
              
              88,163
              
              
              7,329
              
              
              7,695
              
              
              -
              
              
              103,187Intangibles
              
              
              4,875
              
              
              3,337
              
              
              -
              
              
              -
              
              
              8,212Goodwill
              
              
              16,674
              
              
              8,465
              
              
              2,826
              
              
              -
              
              
              27,965Equity
                  investments
              
              
              240,951
              
              
              104,477
              
              
              8,822
              
              
              (345,244
              )
              
              9,006Other
                  assets
              
              
              3,936
              
              
              2,422
              
              
              3,369
              
              
              -
              
              
              9,727Total
                  assets
              
              $
              549,939
              
              $
              329,266
              
              $
              61,937
              
              $
              (607,221
              )
              $
              333,921Short-term
                  debt
              
              $
              62,356
              
              $
              -
              
              $
              1,462
              
              $
              -
              
              $
              63,818Accounts
                  payable
              
              
              27,607
              
              
              19,678
              
              
              4,377
              
              
              (13,990
              )
              
              37,672Other
                  current liabilities
              
              
              32,009
              
              
              231
              
              
              2,142
              
              
              (22,371
              )
              
              12,011Total
                  current liabilities
              
              
              121,972
              
              
              19,909
              
              
              7,981
              
              
              (36,361
              )
              
              113,501Intercompany
                  accounts payable
              
              
              164,153
              
              
              52,545
              
              
              8,950
              
              
              (225,648
              )
              
              -Long-term
                  debt
              
              
              12,925
              
              
              -
              
              
              -
              
              
              -
              
              
              12,925Other
                  non-current liabilities
              
              
              89,467
              
              
              12,067
              
              
              12,787
              
              
              (68,248
              )
              
              46,073Shareholders'
                  equity
              
              
              161,422
              
              
              244,745
              
              
              32,219
              
              
              (276,964
              )
              
              161,422Total
                  liabilities and shareholders' equity
              
              $
              549,939
              
              $
              329,266
              
              $
              61,937
              
              $
              (607,221
              )
              $
              333,921
  21
 
 Condensed
                  Consolidating Balance SheetsDecember
                  31, 2006Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedCash
                  & Cash Equivalents
              
              $
              -
              
              $
              2,507
              
              $
              19,556
              
              $
              (16,432
              )
              $
              5,631Receivables
              
              
              44,741
              
              
              15,014
              
              
              5,187
              
              
              (9,906
              )
              
              55,036Inventories
              
              
              57,143
              
              
              7,323
              
              
              5,840
              
              
              33
              
              
              70,339Other
                  current assets
              
              
              14,927
              
              
              1,549
              
              
              1,230
              
              
              -
              
              
              17,706Total
                  current assets
              
              
              116,811
              
              
              26,393
              
              
              31,813
              
              
              (26,305
              )
              
              148,712Intercompany
                  accounts receivable
              
              
              54,887
              
              
              157,438
              
              
              384
              
              
              (212,709
              )
              
              -Property,
                  plant, and equipment, net
              
              
              91,670
              
              
              6,986
              
              
              7,445
              
              
              -
              
              
              106,101Intangibles
              
              
              4,835
              
              
              3,686
              
              
              -
              
              
              -
              
              
              8,521Goodwill
              
              
              16,674
              
              
              8,281
              
              
              2,542
              
              
              -
              
              
              27,497Equity
                  investments
              
              
              218,957
              
              
              101,376
              
              
              6,786
              
              
              (320,148
              )
              
              6,971Other
                  assets
              
              
              17,156
              
              
              3,870
              
              
              3,536
              
              
              -
              
              
              24,562Total
                  assets
              
              $
              520,990
              
              $
              308,030
              
              $
              52,506
              
              $
              (559,162
              )
              $
              322,364Accounts
                  payable
              
              $
              30,807
              
              $
              18,626
              
              $
              4,164
              
              $
              (14,467
              )
              $
              39,130Other
                  current liabilities
              
              
              31,256
              
              
              666
              
              
              3,424
              
              
              (18,950
              )
              
              16,396Total
                  current liabilities
              
              
              62,063
              
              
              19,292
              
              
              7,588
              
              
              (33,417
              )
              
              55,526Intercompany
                  accounts payable
              
              
              146,151
              
              
              48,611
              
              
              10,867
              
              
              (205,629
              )
              
              -Long-term
                  debt
              
              
              74,836
              
              
              -
              
              
              -
              
              
              -
              
              
              74,836Other
                  non-current liabilities
              
              
              90,067
              
              
              12,292
              
              
              9,539
              
              
              (67,769
              )
              
              44,129Shareholders'
                  equity
              
              
              147,873
              
              
              227,835
              
              
              24,512
              
              
              (252,347
              )
              
              147,873Total
                  liabilities and shareholders' equity
              
              $
              520,990
              
              $
              308,030
              
              $
              52,506
              
              $
              (559,162
              )
              $
              322,364
  22
 
 Condensed
                    Consolidating Statements of Cash FlowsNine
                    months ended September 30, 2007Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedNet
                  cash (used in) provided by operating activities
              
              $
              (6,724
              )
              $
              14,754
              
              $
              7,632
              
              $
              1,227
              
              $
              16,889Investing
                  activities:Property,
                  plant and equipment expenditures
              
              
              (6,584
              )
              
              (750
              )
              
              (305
              )
              
              -
              
              
              (7,639
              )Investment
                  (in) from affiliates
              
              
              -
              
              
              (450
              )
              
              450
              
              
              -
              
              
              -Other
              
              
              187
              
              
              -
              
              
              -
              
              
              -
              
              
              187Net
                  cash (used in) provided by investing activities
              
              
              (6,397
              )
              
              (1,200
              )
              
              145
              
              
              -
              
              
              (7,452
              )Financing
                  activities:Net
                  borrowings (repayments)
              
              
              5,576
              
              
              -
              
              
              1,458
              
              
              (5,127
              )
              
              1,907Intercompany
                  and equity transactions
              
              
              18,191
              
              
              (13,573
              )
              
              (5,512
              )
              
              894
              
              
              -Other
              
              
              1,056
              
              
              -
              
              
              -
              
              
              -
              
              
              1,056Net
                  cash provided by (used in) financing activities
              
              
              24,823
              
              
              (13,573
              )
              
              (4,054
              )
              
              (4,233
              )
              
              2,963Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              1,281
              
              
              372
              
              
              914
              
              
              (1,227
              )
              
              1,340Increase
                  (decrease) in cash and cash equivalents
              
              
              12,982
              
              
              354
              
              
              4,637
              
              
              (4,233
              )
              
              13,740Cash
                  and cash equivalents, beginning of period
              
              
              -
              
              
              2,507
              
              
              19,556
              
              
              (16,432
              )
              
              5,631Cash
                  and cash equivalents, end of period
              
              $
              12,982
              
              $
              2,861
              
              $
              24,193
              
              $
              (20,665
              )
              $
              19,371
  Condensed
                    Consolidating Statements of Cash FlowsNine
                    months ended September 30, 2006Issuer
              
              Guarantor
                  Subsidiaries
              
              Non-Guarantor
                  Subsidiaries
              
              Consolidating
                  and Eliminating Entries
              
              ConsolidatedNet
                  cash (used in) provided by operating activities
              
              $
              (24,667
              )
              $
              12,413
              
              $
              (2,986
              )
              $
              159
              
              $
              (15,081
              )Investing
                  activities:Proceeds
                  from divestitures
              
              
              778
              
              
              -
              
              
              20,435
              
              
              -
              
              
              21,213Property,
                  plant and equipment expenditures
              
              
              (9,459
              )
              
              (116
              )
              
              (414
              )
              
              -
              
              
              (9,989
              )Proceeds
                  from insurance settlement for property and equipment
              
              
              4,595
              
              
              -
              
              
              -
              
              
              -
              
              
              4,595Investment
                  from (in) affiliates
              
              
              11,217
              
              
              (823
              )
              
              (10,394
              )
              
              -
              
              
              -Other
              
              
              676
              
              
              -
              
              
              -
              
              
              -
              
              
              676Net
                  cash provided by (used in) investing activities
              
              
              7,807
              
              
              (939
              )
              
              9,627
              
              
              -
              
              
              16,495Financing
                  activities:Net
                  borrowings (repayments)
              
              
              2,888
              
              
              (607
              )
              
              25
              
              
              (4,538
              )
              
              (2,232
              )Intercompany
                  and equity transactions
              
              
              10,444
              
              
              (13,672
              )
              
              3,228
              
              
              -
              
              
              -Other
              
              
              356
              
              
              30
              
              
              -
              
              
              (30
              )
              
              356Net
                  cash (used in) provided by financing activities
              
              
              13,688
              
              
              (14,249
              )
              
              3,253
              
              
              (4,568
              )
              
              (1,876
              )Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              1,798
              
              
              844
              
              
              (2,426
              )
              
              (129
              )
              
              87(Decrease)
                  increase in cash and cash equivalents
              
              
              (1,374
              )
              
              (1,931
              )
              
              7,468
              
              
              (4,538
              )
              
              (375
              )Cash
                  and cash equivalents, beginning of period
              
              
              3,049
              
              
              3,681
              
              
              9,836
              
              
              (11,120
              )
              
              5,446Cash
                  and cash equivalents, end of period
              
              $
              1,675
              
              $
              1,750
              
              $
              17,304
              
              $
              (15,658
              )
              $
              5,071
 
 23


13.
      Related Party Transactions





Net
      sales
      to related parties and receivables from related parties primarily reflect sales
      of activated carbon products to equity investees. Generally, transactions are
      conducted under long-term contractual arrangements. Related party sales
      transactions were $2.9 million and $1.8 million for the three months ended
      September 30, 2007 and 2006, respectively, and $6.7 million and $7.7 million
      for
      the nine months ended September 30, 2007 and 2006, respectively.





14.  Income
      Taxes





On
      January 1, 2007, the Company adopted the provisions of Financial Accounting
      Standards Board ("FASB") Interpretation No. 48 ("FIN 48"), "Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
      Accounting for Income Taxes". FIN 48 clarifies the accounting for uncertainty
      in
      income taxes recognized in an enterprise’s financial statements and prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. As a result of the adoption of FIN 48 and recognition of the
      cumulative effect of adoption of a new accounting principle, the Company
      recorded a $5.7 million increase in the gross unrecognized income tax benefits
      and a decrease in retained earnings of $4.3 million. In conjunction with the
      adoption of FIN 48, the Company has classified uncertain tax positions as
      non-current income tax liabilities unless the amount is expected to be paid
      within one year. The Company had previously recorded its tax contingencies
      as
      current liabilities. As of September 30, 2007, the gross unrecognized income
      tax
      benefits were $12.2 million and the change from January 1, 2007 was primarily
      due to the addition of similar tax positions related to 2007 activity as well
      as
      the recognition of certain uncertain tax positions for which expiration of
      the
      statute of limitations occurred during the quarter ended September 30, 2007.
      If
      recognized, $9.7 million of the gross unrecognized income tax benefits would
      affect the effective tax rate.





While
      it
      is expected that the amount of unrecognized tax benefits will change in the
      next
      twelve months, quantification of an estimated range cannot be made at this
      time.
      The Company does not expect this change to have a material impact on its results
      of operations.





The
      Company recognizes interest and penalties related to uncertain tax positions
      in
      the income tax provision (benefit) on its Condensed Consolidated Statement
      of
      Operations. As of September 30, 2007, the Company had approximately $0.7 million
      of accrued interest and penalties related to uncertain tax positions included
      in
      the liability on the condensed consolidated balance sheet.





The
      tax
      years 2003 to 2006 remain open to examination by United States taxing
      jurisdictions, tax years 2003 to 2006 remain open to examination by state taxing
      jurisdictions, and the tax years 2003 to 2006 remain open to examination by
      foreign taxing jurisdictions.




15.  New
      Accounting Pronouncements





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an amendment of FASB Statement No. 115” (SFAS No.
      159). This Statement permits entities to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses on these instruments in earnings. SFAS No. 159 is effective as of
      January 1, 2008. The Company is evaluating the impact that the adoption of
      SFAS No. 159 will have on its financial position, results of operations, and
      cash flows.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      No. 157”), which defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (“GAAP”), and expands
      disclosure about fair value measurements. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company will adopt SFAS
      No.
      157 as required for the fiscal year 2008 and expects that the adoption will
      not
      have a material impact on its financial position or results of
      operations.




24




16.
      Reclassifications





In
      accordance with SFAS No. 123(R), “Share-based Payments,” (“FAS123(R)”) the
      Company has reclassified deferred compensation, related to pre-FAS 123(R)
      options, to additional paid in capital on its Consolidated Balance Sheet from
      the prior year to conform to the 2007 presentation.





Item
      2 .  Management’s
      Discussion and Analysis of Results of Operations
      and Financial Condition





This
      discussion should be read in connection with the information contained in the
      Unaudited Condensed Consolidated Financial Statements and Notes to the Unaudited
      Condensed Financial Statements.





Results
      of Operations





**Continuing
      Operations:**





Consolidated
      net sales increased by $5.2 million or 6.5% and $19.6 million or 8.3% for the
      quarter and year-to-date periods ended September 30, 2007, respectively, versus
      the quarter and year-to-date periods ended September 30, 2006.  Net
      sales
      for the Activated Carbon and Service segment for the quarter and year-to-date
      periods ended September 30, 2007 increased $4.5 million or 6.6% and $15.2
      million or 7.6%, respectively, versus the comparable 2006 periods. The increase
      for the quarter ended September 30, 2007 was primarily due to higher pricing
      for
      certain activated carbon products. The increase for the year-to-date period
      was
      primarily due to higher pricing for certain activated carbon products and
      services as well as increased demand in the industrial process and environmental
      air treatment markets of approximately $13.3 million. Partially offsetting
      this
      increase was lower demand in the specialty carbon market of $3.0 million.
      Foreign currency translation had a positive impact of $1.8 million and $5.5
      million, respectively, for the quarter and year-to-date periods ended September
      30, 2007. Net sales for the Equipment segment increased $0.5 million or 5.9%
      and
      $4.3 million or 16.0% for the quarter and year-to-date periods ended September
      30, 2007, respectively, versus the comparable 2006 periods. The increase was
      primarily due to higher demand for odor control equipment and ultra-violet
      light
      (UV) equipment of $1.1 million for the quarter ended September 30, 2007.
      Partially offsetting this increase was the decline in demand for traditional
      carbon adsorption equipment of $0.4 million. The increase for the year-to-date
      period  was
      primarily due to higher demand for UV and municipal odor equipment. Foreign
      currency translation was comparable for the quarter and year-date periods ended
      September 30, 2007. Net sales for the Consumer segment increased $0.2 million
      or
      6.9% and $0.1 million or 0.6% for the quarter and year-to-date periods ended
      September 30, 2007 versus the comparable 2006 periods. The increase for both
      periods was attributable to higher demand for activated carbon cloth partially
      offset by lower demand for PreZerve® products.  Foreign
      currency translation had a positive impact of $0.2 million and $0.6 million,
      respectively, for the quarter and year-to-date periods ended September 30,
      2007.
      The total positive impact of foreign currency translation on consolidated net
      sales for the quarter and year-to-date periods ended September 30, 2007 was
      $2.0
      million and $6.1 million, respectively.





Net
      sales
      less cost of products sold, as a percentage of net sales, was 32.1% for the
      quarter ended September 30, 2007 compared to 26.1% for the similar 2006 period,
      a 6.0% increase or $6.4 million. The increase was primarily in the Activated
      Carbon and Service segment of 5.7% or $6.1 million which was principally driven
      by higher pricing for certain activated carbon products and services. The
      Equipment segment increased 0.3% or $0.3 million due to volume. The Consumer
      segment was comparable for the quarter ended September 30, 2007 versus the
      similar 2006 period. Net sales less cost of products sold, as a percentage
      of
      net sales, was 31.5% for the year-to-date period ended September 30, 2007
      compared to 25.6% for the similar 2006 period, a 5.9% increase or $20.2 million.
      The increase was primarily in the Activated Carbon and Service segment of 5.8%
      or $19.8 million, which was principally driven by higher pricing for certain
      activated carbon products and services. The Equipment segment was comparable
      for
      the year-to-date period ended September 30, 2007 versus the similar 2006 period.
      The Consumer segment increased 0.1% or $0.5 million due to product mix. The
      Company’s cost of products sold excludes depreciation and amortization;
      therefore it may not be comparable to that of other companies.





The
      depreciation and amortization decrease of $0.3 million and $1.3 million during
      the quarter and year-to-date periods ended September 30, 2007 versus the
      comparable 2006 periods was primarily due to an increase in the number of fully
      depreciated fixed assets.




25




Selling,
      general and administrative expenses for the quarter and year-to-date periods
      ended September 30, 2007 decreased by $1.2 million and $2.6 million,
      respectively, versus the comparable 2006 periods. The decrease in both periods
      was primarily due to decreased legal expenses as a result of the substantial
      completion of the Company’s UV patent cases and anti-dumping petition related to
      steam activated carbon imports from China as well as decreased employee related
      expenses. The year-to-date 2006 period also included a $1.3 million reduction
      related to the change in estimate of the Company’s environmental liabilities
      assumed in the 2004 Waterlink acquisition (Note 7).




Research
      and development expenses for the quarter and year-to-date periods ended
      September 30, 2007 decreased $0.2 million and $0.7 million, respectively, versus
      the comparable 2006 periods primarily due to decreased employee related
      expenses.





The
      gain
      from insurance settlement of $3.2 million and $8.1 million for the quarter
      and
      year-to-date periods ended September 30, 2006 is related to the damage to the
      Company’s Pearlington, Mississippi plant which was caused by Hurricane Katrina
      in 2005.





Restructuring
      charges for the year-to-date period ended September 30, 2006 primarily related
      to charges associated with the closure of two small manufacturing facilities
      as
      a result of the Company’s 2005 re-engineering plan.





Other
      expense- net for the quarter and year-to-date periods ended September 30, 2007
      decreased $0.2 million and $0.7 million as compared to the 2006 periods. The
      decrease for the quarter ended September 30, 2007 was primarily due to a
      decrease in taxes other than income tax. The decrease for the year-to-date
      period is primarily due to the write-off of deferred financing fees associated
      with the Company’s old credit facility that occurred during the quarter ended
      March 31, 2006 as well as the aforementioned decrease in taxes other than income
      tax.




Interest
      expense, net of interest income, for the quarter and year-to-date periods ended
      September 30, 2007 decreased $0.4 million and $1.0 million, respectively, versus
      the comparable 2006 periods. The decline in both periods is as a result of
      lower
      average borrowing levels and lower average interest rates paid on the Company’s
      borrowings in 2007 versus the similar 2006 periods as well as increased interest
      income as a result of higher cash balances on hand.





Income
      tax expense for the quarter and year-to-date periods ended September 30, 2007
      increased $0.3 million and $7.1 million, respectively, versus the comparable
      2006 periods. This increase in both periods was caused primarily by increases
      to
      income from continuing operations before income tax and equity in income from
      equity investments.





The
      effective tax rate for the quarter and year-to-date periods ended September
      30,
      2007 was a provision of 7.7% and 37.7%, respectively compared to a provision
      of
      27.6% and a benefit of 42.6%, respectively, for the quarter and year-to-date
      periods ended September 30, 2006. The tax rate for the quarter ended September
      30, 2007 was impacted by the reduction in the Company’s estimated annualized
      effective tax rate from 52.3% as of June 30, 2007 to 37.7% as of September
      30,
      2007, as discussed below. The year-to-date period ended September 30, 2007
      tax
      rate was higher than the statutory Federal Income Tax Rate due to several
      factors. In foreign jurisdictions, the Company is in an income position without
      a corresponding benefit of a foreign tax credit in the United States which
      accounted for an 6.5% increase in the taxable rate. The impact of state taxes
      and other permanent, non-deductible expenses also increased the rate by
      approximately 0.4% and 3.3%, respectively. In addition to the aforementioned
      increases, the Company is no longer able to claim a benefit due to the
      expiration of the Extraterritorial Income Exclusion Benefit. Partially
      offsetting these factors was an 8.7% decrease due to recognition of certain
      uncertain tax positions for which expiration of the statute of limitations
      occurred during the quarter ended September 30, 2007. The year-to-date period
      ended September 30, 2006 tax rate was higher than the statutory Federal Income
      Tax Rate due to the Company’s lower than expected profit for the quarter and the
      estimated full year and certain benefits, principally the exclusion provided
      under United States income tax laws with respect to the Extraterritorial Income
      Exclusion Benefit and recognition of state income tax benefits.





During
      the preparation of its effective tax rate, the Company uses an annualized
      estimate of pre-tax earnings. Throughout the year this annualized estimate
      may
      change based on actual results and annual earnings estimate revisions. Because
      the Company’s permanent tax benefits are relatively constant, changes in the
      annualized estimate may have a significant impact on the effective tax rate
      in
      future periods.




26





The
      Company provides an estimate for income taxes based on an evaluation of the
      underlying accounts, its tax filing positions and interpretations of existing
      law. Changes in estimates are reflected in the year of settlement or expiration
      of the statute of limitations. Under FIN 48, the Company must recognize the
      tax
      benefit from an uncertain tax position only if it is more likely than not that
      the tax position will be sustained on examination by the taxing authorities,
      based on the technical merits of the position. The tax benefits recognized
      in
      the financial statements from such a position are measured based on the largest
      benefit that has a greater than fifty percent likelihood of being realized
      upon
      ultimate resolution.





Equity
      in
      income from equity investments for the quarter and year-to-date periods ended
      September 30, 2007 increased $0.3 million and $1.6 million, respectively, versus
      the similar 2006 periods. The increase was primarily due to lower cost of
      products sold and a favorable mix for products sold by the company’s joint
      venture with Calgon Mitsubishi Chemical Corporation in Japan. The Company
      expects the joint venture’s results for the fourth quarter of 2007 to be
      approximately breakeven.





**Discontinued
      Operations:**





Income
      (loss) from discontinued operations was ($0.1) million versus $38 thousand
      and
      ($0.1) million versus $1.9 million, respectively, for the quarter and
      year-to-date periods ended September 30, 2007 and 2006 and was primarily due
      to
      the gains (losses) recognized on the 2006 sales of the Company’s Charcoal/Liquid
      and Solvent Recovery businesses.





**Financial
      Condition**





Working
      Capital and Liquidity





Cash
      flows provided by operating activities were $16.9 million for the period ended
      September 30, 2007 compared to cash flows used in operating activities of $15.1
      million for the comparable 2006 period. The $32.0
      million increase is primarily due to improved earnings of $10.9 million; a
      decrease in accrued pension of $3.7 million; and, 2006 gains from the sales
      of
      assets of $6.7 million and a gain on insurance settlement of $8.1 million of
      which the cash effects are reflected in cash flows from investing activities.
      The cash flows discussed for the period ended September 30, 2006 include
      discontinued operations.





Total
      debt at September 30, 2007 was $76.7 million, an increase of $1.9 million from
      December 31, 2006. The increase was primarily the result of the addition of
      short-term debt of $1.5 million related to the Company’s operations in China and
      is more fully described in Note 9. The additional borrowings were used to
      finance normal working capital and capital expenditure activities.





Common
      stock dividends were not declared or paid during the periods ended September
      30,
      2007 and 2006, respectively.





On
      August
      18, 2006, the Company issued $75.0 million in aggregate principal amount of
      5.00% Convertible Senior Notes due in 2036 (the “Notes”) and entered into a new
      revolving credit facility (the “Credit Facility”). The Company used
      $68.4 million of the net proceeds from its offering of the Notes to fully
      repay indebtedness under the Company’s prior revolving credit facility.
      Accordingly, all parties completed their obligations under the Amended and
      Restated Credit Agreement, dated as of January 30, 2006. The material terms
      of
      the Notes and the Credit Facility are described below.





**5.00%
      Convertible Senior Notes due 2036**





The
      Company initially issued $65.0 million in aggregate principal amount of
      5.00% Notes due in 2036 and granted the initial purchaser a 30-day option to
      purchase up to an additional $10.0 million principal amount of Notes solely
      to cover over-allotments, if any. The initial purchaser exercised this option
      in
      full. Accordingly, $75.0 million in aggregate principal amount of Notes
      were issued and sold on August 18, 2006. The Notes accrue interest at the
      rate of 5.00% per annum and are payable in cash semi-annually in arrears on
      each
      February 15 and August 15, which commenced February 15, 2007. The Notes will
      mature on August 15, 2036.





The
      Notes
      can be converted under the following circumstances: (1) during any calendar
      quarter (and only during such calendar quarter) commencing after
      September 30, 2006, if the last reported sale price of the Company’s common
      stock is greater than or equal to 120% of the conversion price of the Notes
      for
      at least 20 trading days in the period of 30 consecutive trading days ending
      on
      the last trading day of the preceding calendar quarter; (2) during the five
      business day period after any 10 consecutive trading-day period (the
“measurement period”) in which the trading price per Note for each day in the
      measurement period was less than 103% of the product of the last reported sale
      price of the Company’s common stock and the conversion rate on such day; or (3)
      upon the occurrence of specified corporate transactions described in the
      Offering Memorandum. On or after June 15, 2011, holders may convert their Notes
      at any time on the business day immediately preceding the maturity date. Upon
      conversion, the Company will pay cash for the principal amount of the Notes
      and
      shares of its common stock, if any, based on a daily conversion value (as
      described herein) calculated on a proportionate basis for each day of the 25
      trading-day observation period.




27





For
      the
      period ended September 30, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      September 30, 2007. As a result, as of September 30, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although the Company does not anticipate that a significant amount of these
      Notes will be converted, if any, as of September 30, 2007 the Company was
      required to reclassify as a current liability that portion of the Notes that
      cannot be refinanced on a long-term basis as provided by SFAS No. 6,
“Classification of Short-Term Obligations Expected to be Refinanced” which
      was
      $62.4 million at September 30, 2007.





The
      initial conversion rate is 196.0784 shares of the Company’s common stock per
      $1,000 principal amount of Notes, equivalent to an initial conversion price
      of
      approximately $5.10 per share of common stock. The conversion rate is subject
      to
      adjustment in some events, including the payment of a dividend on the Company’s
      common stock, but will not be adjusted for accrued interest, including any
      additional interest. In addition, following certain fundamental changes that
      occur prior to August 15, 2011, the Company will increase the conversion rate
      for holders who elect to convert Notes in connection with such fundamental
      changes in certain circumstances. The Company considered EITF 00-27,
“Application of Issue No. 98-5 to Certain Convertible Instruments,” Issue 7,
      which indicates that if a reset of the conversion rate due to a contingent
      event
      occurs the Company would need to calculate if there is a beneficial conversion
      and record if applicable. Through September 30, 2007, no contingent events
      have
      occurred.





The
      Company may not redeem the Notes before August 20, 2011. On or after that date,
      the Company may redeem all or a portion of the Notes at any time. Any redemption
      of the Notes will be for cash at 100% of the principal amount of the Notes
      to be
      redeemed, plus accrued and unpaid interest, including any additional interest
      to, but excluding, the redemption date.





Holders
      may require the Company to purchase all or a portion of their Notes on each
      of
      August 15, 2011, August 15, 2016, and August 15, 2026. In addition, if the
      Company experiences specified types of fundamental changes, holders may require
      it to purchase the Notes. Any repurchase of the Notes pursuant to these
      provisions will be for cash at a price equal to 100% of the principal amount
      of
      the Notes to be purchased plus any accrued and unpaid interest, including any
      additional interest to, but excluding, the purchase date.





The
      Notes
      are the Company’s senior unsecured obligations, and rank equally in right of
      payment with all of its other existing and future senior indebtedness. The
      Notes
      are guaranteed by certain of the Company’s domestic subsidiaries on a senior
      unsecured basis (“Subsidiary Guarantees”). The Subsidiary Guarantees are general
      unsecured senior obligations of the subsidiary guarantors (“Subsidiary
      Guarantors”) and rank equally in right of payment with all of the existing and
      future senior indebtedness of the Subsidiary Guarantors. If the Company fails
      to
      make payment on the Notes, the Subsidiary Guarantors must make them instead.
      The
      Notes are effectively subordinated to any indebtedness of the Company’s
      non-guarantor subsidiaries. The Notes are effectively junior to all of the
      Company’s existing and future secured indebtedness to the extent of the value of
      the assets securing such indebtedness.





The
      Company sold the Notes to the original purchaser at a discount of
      $3.3 million that will be amortized over a period of five years. The
      discount is reflected as a deduction from the face amount of the debt. As of
      the
      period ended September 30, 2007, the Company recorded interest expense of
      $3.3 million, of which $0.4 million related to the amortization of the
      discount and $2.9 million related to the Notes. The Company incurred
      issuance costs of $1.5 million which were deferred and are being amortized
      over a five year period.





28




**Credit
      Facility**





The
      Credit Facility was initially a $50.0 million facility and included a
      separate U.K. sub-facility and a separate Belgian sub-facility. On February
      5,
      2007, the Credit Facility was amended to increase the commitment amount to
      $55.0 million and was syndicated to include one additional lender. The
      Credit Facility permits the total revolving credit commitment to be increased
      up
      to $75.0 million. The facility matures on May 15, 2011. The terms of the
      syndicated Credit Facility were not materially different than the original
      facility prior to the February 5, 2007 syndication. Availability for domestic
      borrowings under the Credit Facility is based upon the value of eligible
      inventory, accounts receivable and property, plant and equipment, with separate
      borrowing bases to be established for foreign borrowings under a separate U.K.
      sub-facility and a separate Belgian sub-facility. Availability under the Credit
      Facility is conditioned upon various customary conditions.





The
      Credit Facility is secured by a first perfected security interest in
      substantially all of the Company’s assets, with limitations under certain
      circumstances in the case of capital stock of foreign subsidiaries. Certain
      of
      the Company’s domestic subsidiaries unconditionally guarantee all indebtedness
      and obligations related to domestic borrowings under the Credit Facility. The
      Company and certain of its domestic subsidiaries also unconditionally guarantee
      all indebtedness and obligations under the U.K. sub-facility.





As
      of
      September 30, 2007, the carrying amount of assets pledged as collateral was
      $51.6 million. The carrying amount as of September 30, 2007 for domestic,
      U.K., and Belgian borrowers were $40.9 million, $6.3 million, and
      $4.4 million, respectively. The Credit Facility contains a fixed charge
      coverage ratio covenant which becomes effective when total domestic availability
      falls below $11.0 million. As of September 30, 2007, total
      availability was $35.2 million. Availability as of September 30, 2007
      for domestic, U.K., and Belgian borrowers was $30.1 million,
      $5.1 million, and zero, respectively. The Company can issue letters of
      credit up to $20.0 million of the available commitment amount under the
      Credit Facility. Sub-limits for letters of credit under the U.K. sub-facility
      and the Belgian sub-facility are $2.0 million and $6.0 million,
      respectively. Letters of credit outstanding at September 30, 2007 totaled
      $16.4 million.





The
      Credit Facility interest rate is based upon Euro-based (“LIBOR”) rates with
      other interest rate options available. The applicable Euro Dollar margin in
      effect when the Company is in compliance with the terms of the facility ranges
      from 1.25% to 2.25% and is based upon the Company’s overall availability under
      the Credit Facility. The unused commitment fee is equal to 0.375% per annum
      and
      is based upon the unused portion of the revolving commitment.





The
      Credit Facility contains a number of negative and affirmative covenants. For
      the
      period ended September 30, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      September 30, 2007. As a result, as of September 30, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although currently not anticipated by the Company, the ability of holders of
      the
      Notes to convert could be an event of default of the Credit Facility. Included
      in the Credit Facility is a provision for up to $10.0 million where Notes
      converted up to that amount will not be considered an event of default and
      the
      Company was able to classify up to that amount as long-term debt as it has
      the
      ability and intent to refinance it under the Credit Facility. The Credit
      Facility also includes a provision for up to $3.0 million of letters of credit
      under the Company’s U.S., Belgium, and UK sub-limits that can be issued having
      expiration dates that are more than one year but not more than three years
      after
      the date of issuance.





The
      negative covenants provide for certain restrictions on possible acts by the
      Company related to matters such as additional indebtedness, certain liens,
      fundamental changes in the business, certain investments or loans, asset sales
      and other customary requirements. The Company was in compliance with all such
      negative covenants as of September 30, 2007 and is currently in compliance
      with
      such covenants.





Management
      cannot be assured that, after the September 30, 2007 financial statements have
      been provided to the lenders, there will not be any violation in future periods
      of the covenants contained in the Credit Facility.




29




**Contractual
      Obligations**





The
      Company is obligated to make future payments under various contracts such as
      debt agreements, lease agreements, and unconditional purchase obligations.
      As of
      September 30, 2007, with the exception of the addition of short-term debt as
      well as the reclassification of a portion of the Company’s Notes to short-term,
      there have been no changes in the payment terms of lease agreements, and
      unconditional purchase obligations since December 31, 2006. The following table
      represents the significant cash contractual obligations and other commercial
      commitments.


Due
                  in(Thousands)
              
              
              2007
              
              
              2008
              
              
              2009
              
              
              2010
              
              
              2011
              
              
              Thereafter
              
              
              TotalShort-term
                  debt *
              
              $
              1,462
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              65,000
              
              $
              -
              
              $
              66,462Long-term
                  debt
              
              
              -
              
              
              -
              
              
              2,925
              
              
              -
              
              
              10,000
              
              
              -
              
              
              12,925Interest
                  on Notes
              
              
              3,750
              
              
              3,750
              
              
              3,750
              
              
              3,750
              
              
              2,369
              
              
              -
              
              
              17,369Operating
                  leases
              
              
              4,127
              
              
              3,056
              
              
              2,673
              
              
              2,357
              
              
              2,000
              
              
              10,604
              
              
              24,817Unconditional
                  purchaseobligations**
              
              
              26,981
              
              
              19,853
              
              
              10,019
              
              
              7,753
              
              
              5,711
              
              
              -
              
              
              70,317Total
                  contractual cashObligations
              
              $
              36,320
              
              $
              26,659
              
              $
              19,367
              
              $
              13,860
              
              $
              85,080
              
              $
              10,604
              
              $
              191,890


**The
      2011 maturity excludes debt discount of $2,645. See additional discussion in
      Note 9.*




***Primarily
      for the purchase of raw materials, transportation, and information systems
      services.*




The
      long-term tax payable of $12.2 million pertaining to the FIN 48 tax liability
      has been excluded from the above table due to the fact that the Company is
      unable to determine the period in which the liability will be
      resolved.





The
      cash
      needs of each of the Company’s reporting segments are principally covered by the
      segment’s operating cash flow on a stand alone basis. Any additional needs will
      be funded by borrowings under the Company’s credit facility. Specifically, the
      Equipment and Consumer segments historically have not required extensive capital
      expenditures; therefore, the Company believes that operating cash flows and
      borrowings will adequately support each of the segments cash needs.





Capital
      Expenditures and Investments





Capital
      expenditures for property, plant and equipment totaled $7.6 million for the
      nine
      months ended September
      30, 2007 compared to expenditures of $10.0 million for the same period in 2006.
      The expenditures for the period ended September 30, 2007 consisted primarily
      of
      improvements to the Company’s manufacturing facilities of $6.5 million and
      customer capital of $0.3 million. The comparable 2006 expenditures consisted
      primarily of $6.1 million for improvements to manufacturing facilities, $2.3
      million related to the repair of the Company’s Pearl River plant as a result of
      Hurricane Katrina, and $1.4 million for customer capital. Capital expenditures
      for 2007 are projected to be approximately $12.0 million and are expected to
      be
      funded by cash flows from operations .





In
      January 2006, the Company announced the temporary idling of its reactivation
      facility in Blue Lake, California in an effort to reduce operating costs and
      to
      more efficiently utilize the capacity at its other existing locations. The
      Company conducted an impairment review, in accordance with SFAS No. 144 of
      the
      plant’s assets having a net book value of $1.1 million in connection with the
      temporary idling of the facility and concluded that the assets were not
      impaired. It is management’s intention to resume operation of the plant in the
      future as market conditions warrant it. If management should determine not
      to
      restart the plant, operating results would be adversely affected by impairment
      charges.




30





The
      September 30, 2006 proceeds from sales of assets of $21.2 million, as shown
      on
      the statement of cash flows, represents the Company’s sales of its
      Charcoal/Liquid and Solvent Recovery businesses.





Regulatory
      Matters





Each
      of
      the Company’s domestic production facilities has permits and licenses regulating
      air emissions and water discharges. All of the Company’s domestic production
      facilities are controlled under permits issued by local, state and federal
      air
      pollution control entities. The Company is presently in compliance with these
      permits. Continued compliance will require administrative control and will
      be
      subject to any new or additional standards. In May 2003, the Company partially
      discontinued operation of one of its three activated carbon lines at its
      Catlettsburg, Kentucky facility. The Company will need to install pollution
      abatement equipment estimated at approximately $7.0 million in order to remain
      in compliance with state requirements regulating air emissions before resuming
      full operation of this line. In the fourth quarter of 2006, management
      authorized preliminary engineering work to be performed to more accurately
      assess the costs and length of time needed to make the idled activated carbon
      line operational again due to a favorable ruling by the International Trade
      Commission (ITC) on the Company’s anti-dumping petition for steam activated
      carbon imported into the U.S. from China and subsequent expected increased
      demand of U.S. manufactured products. During the quarter ended June 30, 2007,
      management began discussions with the State of Kentucky regarding permitting.
      Management continues to refine its assessment regarding the start-up of this
      idled activated carbon line to address potential future market opportunities
      surrounding mercury removal. The Company currently estimates that the restart
      of
      this line, including enhancements, would cost between $20.0 million and $25.0
      million and take approximately 13 months to complete and be funded by cash
      on
      hand as well as borrowings under its Credit Facility. If at any point it is
      determined that a shutdown of the full operation of the activated carbon line
      for other than a temporary period is warranted, the impact to current operating
      results would be insignificant.





In
      January 2007, the Company received a Notice of Violation (“NOV”) from the United
      States Environmental Protection Agency, Region 4 (“EPA”) alleging multiple
      violations of the Federal Resource Conservation and Recovery Act and
      corresponding EPA and Kentucky Department of Environmental Protection (“KYDEP”)
      hazardous waste management rules and regulations. The alleged violations are
      based on information provided by the Company during and after a Multi Media
      Compliance Evaluation inspection of the Company’s Big Sandy Plant, located in
      Catlettsburg, Kentucky, conducted by the EPA and the KYDEP in September 2005,
      and concern the hazardous waste spent activated carbon regeneration facility
      located at the Big Sandy Plant. The Company submitted its initial written
      response to the NOV in June 2007. In August 2007, the EPA notified the Company
      that it believes there are significant RCRA violations that are unresolved
      by
      the information in the Company’s submittals. The EPA notice indicated that the
      EPA is in the process of evaluating its enforcement options and hopes to contact
      the Company within the next several months to explore a settlement. The EPA
      has
      not indicated whether or not it will take formal enforcement action, or whether
      such action would involve the assessment of civil penalties, and has not
      specified a monetary amount of any civil penalties it might pursue in connection
      with this matter. The Company is awaiting further clarification from the EPA
      and
      cannot predict with any certainty the outcome of this matter or range of
      potential loss, if any.





In
      June
      2007, the Company received a Notice Letter from the New York State Department
      of
      Environmental Conservation (“NYSDEC”) stating that NYSDEC has determined that
“Calgon Corporation” is a Potentially Responsible Party (“PRP”) at the Frontier
      Chemical Processing Royal Avenue Site in Niagara Falls, New York (the “Site”).
      The Notice Letter requests that “Calgon Corporation” (and other PRPs) develop,
      implement and finance a remedial program for Operable Unit #1 at the Site.
      Operable Unit #1 consists of overburden soils and overburden and upper bedrock
      groundwater. The selected remedy is removal of above grade structures and
      contaminated soil source areas, installation of a cover system, and ground
      water
      control and treatment, which is estimated to cost between approximately $11
      million and $14 million. The Company has not determined what portion of the
      costs associated with the remedial program, if any, it would be obligated to
      bear and as such the Company cannot predict with any certainty the outcome
      of
      this matter or range of potential loss, if any. The Notice Letter also demands
      payment of all monies that NYSDEC has already expended for investigation and
      remediation of the Site, but does not specify the amount that NYSDEC has
      expended.





In
      July
      2007, the Company received a Notice of Violation (“NOV”) from the KYDEP alleging
      that the Company has violated the KYDEP’s hazardous waste management regulations
      in connection with the Company’s hazardous waste spent activated carbon
      regeneration facility located at the Big Sandy Plant in Catlettsburg, Kentucky.
      The NOV alleges that the Company has failed to correct deficiencies identified
      by KYDEP in the Company’s Part B hazardous waste management facility permit
      application and related documents and directs the Company to submit a complete
      and accurate Part B application and related documents and to respond to KYDEP’s
      comments which are appended to the NOV. The Company is preparing a response
      to
      the NOV and KYDEP’s comments. The KYDEP has not indicated whether or not it will
      take formal enforcement action, and has not specified a monetary amount of
      civil
      penalties it might pursue in any such action, if any. On October 18, 2007,
      the
      Company received an NOV from the EPA related to this permit application and
      has
      until December 3, 2007 to completely respond to all deficiencies noted and
      to
      file a revised permit application. At this time the Company cannot predict
      with
      any certainty the outcome of this matter or range of loss, if any.




31





New
      Accounting Pronouncements





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an amendment of FASB Statement No. 115” (SFAS No.
      159). This Statement permits entities to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses on these instruments in earnings. SFAS No. 159 is effective as of
      January 1, 2008. The Company is evaluating the impact that the adoption of
      SFAS No. 159 will have on its financial position, results of operations, and
      cash flows.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      No. 157”), which defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (“GAAP”), and expands
      disclosure about fair value measurements. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company will adopt SFAS
      No.
      157 as required for the fiscal year 2008 and expects that the adoption will
      not
      have a material impact on its financial position or results of
      operations.





Item
      3. Quantitative and Qualitative Disclosures about Market Risk





There
      were no material changes in the Company’s exposure to market risk from
      December 31, 2006.




Item
      4.  Controls
      and Procedures





Disclosure
      Controls and Procedures:





The
      Company’s principal executive officer and principal financial officer have
      evaluated the effectiveness of the Company’s “disclosure controls and
      procedures,” as such term is defined in Rule 13a-15(e) of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”), at the end of the period
      covered by this Quarterly Report on Form 10-Q. Based upon their evaluation,
      the
      principal executive officer and principal financial officer concluded that
      the
      Company’s disclosure controls and procedures are effective to ensure that
      information required to be disclosed by the Company in the reports filed or
      submitted by it under the Exchange Act is recorded, processed, summarized and
      reported within the time periods specified in the SEC’s rules and forms, and
      include controls and procedures designed to provide reasonable assurance that
      information required to be disclosed by the Company in such reports is
      accumulated and communicated to the Company’s management, including its
      principal executive officer and principal financial officer, as appropriate
      to
      allow timely decisions regarding required disclosure.





Changes
      in Internal Control:





There
      have not been any changes in the Company’s internal controls over financial
      reporting that occurred during the period ended September 30, 2007, that have
      materially affected, or are reasonably likely to materially affect, the
      Company’s internal controls over financial reporting.





32




PART
      II - OTHER INFORMATION





Item
      1 .  Legal
      Proceedings





See
      Note
      7 to the unaudited interim Condensed Consolidated Financial Statements contained
      herein.





Item
      1a .  Risk
      Factors





There
      were no material changes in the Company’s risk factors from the risks disclosed
      in the Company’s Form 10-K for the year ended December 31, 2006.




Item
      2c .  Unregistered
      Sales of Equity Securities and Use of Proceeds





**Period**
            
            **Total**
              **Number**
              **of
                Shares**
              **Purchased
                (a)**
            
            **Average**
              **Price
                Paid**
              **Per
                Share**
            
            **Total
                Number of**
              **Shares
                Purchased**
              **as
                Part of Publicly**
              **Announced**
              **Repurchase
                Plans**
              **or
                Programs**
            
            **Maximum
                Number**
              **(or
                Approximate**
              **Dollar
                Value)**
              **of
                Shares that May**
              **Yet
                be Purchased**
              **Under
                the Plans or**
              **Programs**July
                1 - July 31, 2007
            
            
            —
            
            
            —
            
            
            —
            
            
            —August
                1 - August 31, 2007
            
            
            622
            
            $
            11.70
            
            
            —
            
            
            —September
                1 - September 30, 2007
            
            
            —
            
            
            —
            
            
            —
            
            
            —




(a)
      This
      column includes purchases under Calgon Carbon’s Stock Option Plan which
      represented withholding taxes due from employees relating to the restricted
      share awards issued on July 1, 2007. Future purchases under this plan will
      be
      dependent upon employee elections and forfeitures.





Item
      6 .  Exhibits





Exhibit
      31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to
      Section 302 of the Sarbanes-Oxley Act of 2002.





Exhibit
      31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to
      Section 302 of the Sarbanes-Oxley Act of 2002.





Exhibit
      32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to
      Section 906 of the Sarbanes-Oxley Act of 2002.





Exhibit
      32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to
      Section 906 of the Sarbanes-Oxley Act of 2002.





33




SIGNATURES





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.


CALGON
                CARBON CORPORATION
              (REGISTRANT)Date: November 9, 2007
            
            /s/ Leroy
              M.
              BallLeroy
              M. BallSenior
                Vice President,
              Chief
                Financial Officer


34


EXHIBIT
        INDEX
 Exhibit No.
              
              Description
              
              Method
                of Filing31.1
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith31.2
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith32.1
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith32.2
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith