---

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

|(Mark One)
|----------
|x         
|          
|o         

Commission file number 1-10776

|CALGON   CARBON CORPORATION                                                        
|-----------------------------------------------------------------------------------
|                                                                                   
|(Exact name   of registrant as specified in its charter)                           
|                                                                                   
|Delaware                                                                           
|                                                                                   
|(State or   other jurisdiction of incorporation or organization)                   
|                                                                                   
|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 | o |  | No | x | 
| | --- | - |  | -- | - | 

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).

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 December 7, 2006
|---------------------------- |  | ---------------------------------
|                             |  |                                  
|Common Stock, $.01 par value |  | 39,980,643 shares                

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CALGON CARBON CORPORATION

| | Yes | o |  | No | x | 
| | --- | - |  | -- | - | 

FORM 10-Q
  QUARTER ENDED September 30,
  2006

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

|                                                      |                                                                                       | Page
|----------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|                                                      |                                                                                       |     
|PART 1  CONDENSED CONSOLIDATED FINANCIAL INFORMATION |                                                                                      
|                                                      |                                                                                      
|Item   1.                                             | Condensed   Consolidated Financial Statements                                         | 2   
|                                                      |                                                                                       |     
|                                                      | Introduction to the Condensed Consolidated Financial   Statements                     | 2   
|                                                      |                                                                                       |     
|                                                      | Condensed Consolidated Statements of Operations and Retained Earnings
(unaudited)     | 3   
|                                                      |                                                                                       |     
|                                                      | Condensed Consolidated Balance Sheets (unaudited)                                     | 4   
|                                                      |                                                                                       |     
|                                                      | Condensed Consolidated Statements of Cash Flows (unaudited)                           | 5   
|                                                      |                                                                                       |     
|                                                      | Notes to Condensed Consolidated Financial Statements   (unaudited)                    | 6   
|                                                      |                                                                                       |     
|Item   2.                                             | Managements Discussion and Analysis of Results of Operations and Financial
Condition | 29  
|                                                      |                                                                                       |     
|Item   4.                                             | Controls   and Procedures                                                             | 38  
|                                                      |                                                                                       |     
|PART II -   OTHER INFORMATION                         |                                                                                      
|                                                      |                                                                                       |     
|Item   1.                                             | Legal Proceedings                                                                     | 38  
|                                                      |                                                                                       |     
|Item   1a.                                            | Risk Factors                                                                          | 38  
|                                                      |                                                                                       |     
|Item   6.                                             | Exhibits                                                                              | 50  
|                                                      |                                                                                       |     
|SIGNATURES                                            | 51                                                                                   
|                                                      |                                                                                       |     
|CERTIFICATIONS                                        |                                                                                      

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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, 2005
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, which 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 2006 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2006.

2

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CALGON CARBON CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS(Dollars in Thousands Except Share and Per Share
Data) (Unaudited)

|                                                                 |  | Three   Months Ended   September 30, |            | Nine   Months Ended   September 30, |  
|---------------------------------------------------------------- |  | ------------------------------------ | ---------- | ----------------------------------- | -
|                                                                 |  |                                      |            |                                     |  
|                                                                 |  | 2006                                 |            | 2005                                |  
|                                                                 |  |                                      |            |                                     |  
|Net sales                                                        |  | $                                    | 79,680     |                                     | $
|                                                                 |  |                                      |            |                                     |  
|Cost of products sold   (excluding depreciation)                 |  |                                      | 58,897     |                                     |  
|Depreciation and   amortization                                  |  |                                      | 4,719      |                                     |  
|Selling, general and   administrative expenses                   |  |                                      | 16,547     |                                     |  
|Research and development   expenses                              |  |                                      | 1,146      |                                     |  
|(Gain) loss on insurance   settlement (Note 2)                   |  |                                      | (3,173     | )                                   |  
|Gulf Coast Facility   impairment charge (Note 4)                 |  |                                      |           |                                     |  
|Restructuring charge                                             |  |                                      |           |                                     |  
|                                                                 |  |                                      |            |                                     |  
|                                                                 |  |                                      | 78,136     |                                     |  
|                                                                 |  |                                      |            |                                     |  
|Income (loss) from   operations                                  |  |                                      | 1,544      |                                     |  
|Interest income                                                  |  |                                      | 233        |                                     |  
|Interest expense                                                 |  |                                      | (1,530     | )                                   |  
|Other expensenet                                                |  |                                      | (660       | )                                   |  
|                                                                 |  |                                      |            |                                     |  
|Loss before income taxes,   equity income, and minority interest |  |                                      | (413       | )                                   |  
|Provision (benefit) for   income taxes (Note 16)                 |  |                                      | 114        |                                     |  
|                                                                 |  |                                      |            |                                     |  
|Loss before equity income   and minority interest                |  |                                      | (527       | )                                   |  
|Equity in income from equity   investments                       |  |                                      | 39         |                                     |  
|Minority interest                                                |  |                                      | (8         | )                                   |  
|                                                                 |  |                                      |            |                                     |  
|Loss from continuing   operations                                |  |                                      | (496       | )                                   |  
|Income (loss) from   discontinued operations                     |  |                                      | 38         |                                     |  
|                                                                 |  |                                      |            |                                     |  
|Net income (loss)                                                |  |                                      | (458       | )                                   |  
|Common stock dividends                                           |  |                                      |           |                                     |  
|Retained earnings, beginning   of period                         |  |                                      | 102,855    |                                     |  
|                                                                 |  |                                      |            |                                     |  
|Retained earnings, end of   period                               |  | $                                    | 102,397    |                                     | $
|                                                                 |  |                                      |            |                                     |  
|Net income (loss) per Common   share                             |  |                                      |            |                                     |  
|Basic:                                                           |  |                                      |            |                                     |  
|Loss   from continuing operations                                |  | $                                    | (.01       | )                                   | $
|Income   (loss) from discontinued operations                     |  | $                                    | .00        |                                     | $
|                                                                 |  |                                      |            |                                     |  
|Net   income (loss)                                              |  | $                                    | (.01       | )                                   | $
|Diluted:                                                         |  |                                      |            |                                     |  
|Loss   from continuing operations                                |  | $                                    | (.01       | )                                   | $
|Income   (loss) from discontinued operations                     |  | $                                    | .00        |                                     | $
|                                                                 |  |                                      |            |                                     |  
|Net   income (loss)                                              |  | $                                    | (.01       | )                                   | $
|Weighted average shares   outstanding                            |  |                                      |            |                                     |  
|Basic                                                            |  |                                      | 39,881,805 |                                     |  
|Diluted                                                          |  |                                      | 39,881,805 |                                     |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

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CALGON CARBON CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except share data) (Unaudited)

|                                                                                                      |  | September   30,   2006 |         | December   31,   2005 |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | --------------------- | -
|                                                                                                      |  |                        |         |                       |  
|ASSETS                                                                                                |  |                        |         |                       |  
|Current assets:                                                                                       |  |                        |         |                       |  
|Cash   and cash equivalents                                                                           |  | $                      | 5,071   |                       | $
|Receivables   (net of allowance of $2,210 and $2,172)                                                 |  |                        | 57,828  |                       |  
|Revenue   recognized in excess of billings on uncompleted contracts                                   |  |                        | 6,228   |                       |  
|Inventories                                                                                           |  |                        | 71,026  |                       |  
|Deferred   income taxes  current                                                                     |  |                        | 9,827   |                       |  
|Other   current assets                                                                                |  |                        | 6,149   |                       |  
|Assets   held for sale                                                                                |  |                        |        |                       |  
|                                                                                                      |  |                        |         |                       |  
|Total   current assets                                                                                |  |                        | 156,129 |                       |  
|Property, plant and   equipment, net                                                                  |  |                        | 107,068 |                       |  
|Equity investments                                                                                    |  |                        | 6,975   |                       |  
|Intangibles                                                                                           |  |                        | 8,848   |                       |  
|Goodwill                                                                                              |  |                        | 34,513  |                       |  
|Deferred income taxes    long-term                                                                   |  |                        | 18,056  |                       |  
|Other assets                                                                                          |  |                        | 5,580   |                       |  
|                                                                                                      |  |                        |         |                       |  
|Total   assets                                                                                        |  | $                      | 337,169 |                       | $
|                                                                                                      |  |                        |         |                       |  
|LIABILITIES   AND SHAREHOLDERS EQUITY                                                                |  |                        |         |                       |  
|Current liabilities:                                                                                  |  |                        |         |                       |  
|Accounts   payable and accrued liabilities                                                            |  | $                      | 36,468  |                       | $
|Billings   in excess of revenue recognized on uncompleted contracts                                   |  |                        | 1,182   |                       |  
|Payroll   and benefits payable                                                                        |  |                        | 8,798   |                       |  
|Accrued   income taxes                                                                                |  |                        | 12,318  |                       |  
|Liabilities   held for sale                                                                           |  |                        |        |                       |  
|                                                                                                      |  |                        |         |                       |  
|Total   current liabilities                                                                           |  |                        | 58,766  |                       |  
|Long-term debt                                                                                        |  |                        | 81,693  |                       |  
|Deferred income taxes    long-term                                                                   |  |                        | 1,046   |                       |  
|Accrued pension and other   liabilities                                                               |  |                        | 40,193  |                       |  
|                                                                                                      |  |                        |         |                       |  
|Total   liabilities                                                                                   |  |                        | 181,698 |                       |  
|                                                                                                      |  |                        |         |                       |  
|Commitments and   contingencies                                                                       |  |                        |         |                       |  
|Shareholders equity:                                                                                 |  |                        |         |                       |  
|Common shares, $.01 par value, 100,000,000 shares authorized, 42,517,566 and
42,459,733 shares issued |  |                        | 425     |                       |  
|Additional   paid-in capital                                                                          |  |                        | 71,265  |                       |  
|Retained   earnings                                                                                   |  |                        | 102,397 |                       |  
|Accumulated   other comprehensive income                                                              |  |                        | 9,976   |                       |  
|Deferred   compensation                                                                               |  |                        | (1,355  | )                     |  
|                                                                                                      |  |                        |         |                       |  
|                                                                                                      |  |                        | 182,708 |                       |  
|Treasury   stock, at cost, 2,819,690 and 2,787,258 shares                                             |  |                        | (27,237 | )                     |  
|                                                                                                      |  |                        |         |                       |  
|Total   shareholders equity                                                                          |  |                        | 155,471 |                       |  
|                                                                                                      |  |                        |         |                       |  
|Total   liabilities and shareholders equity                                                          |  | $                      | 337,169 |                       | $
|                                                                                                      |  |                        |         |                       |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

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CALGON CARBON CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in Thousands) (Unaudited)

|                                                                                                                     |  | Nine   Months Ended   September 30, |         
|-------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | --------
|                                                                                                                     |  |                                     |         
|                                                                                                                     |  | 2006                                |         
|                                                                                                                     |  |                                     |         
|Cash flows from operating   activities                                                                               |  |                                     |         
|Net income (loss)                                                                                                    |  | $                                   | 564     
|Adjustments to reconcile   net income (loss) to net cash provided by operating activities:                           |  |                                     |         
|(Gain) loss on insurance   settlement                                                                                |  |                                     | (8,072  
|Gain from divestitures                                                                                               |  |                                     | (6,719  
|Depreciation and   amortization                                                                                      |  |                                     | 14,313  
|Equity income from equity   investments                                                                              |  |                                     | (211    
|Employee benefit plan   provisions                                                                                   |  |                                     | 2,283   
|Distributions received from   Calgon Mitsubishi Chemical Corporation                                                 |  |                                     |        
|Non-cash impairment and   restructuring charges                                                                      |  |                                     | 788     
|Changes in assets and liabilities - net of effects from purchase of business,
non-cash impairment and restructuring: |  |                                     |         
|(Increase)   decrease in receivables                                                                                 |  |                                     | (81     
|Increase   in inventories                                                                                            |  |                                     | (3,024  
|(Increase) decrease in revenue in excess of billings on uncompleted contracts
and other current assets               |  |                                     | (1,772  
|Decrease   in accounts payable and accrued liabilities                                                               |  |                                     | (4,724  
|Increase   (decrease) in long-term deferred income taxes                                                             |  |                                     | 835     
|Decrease   in accrued pensions                                                                                       |  |                                     | (10,588 
|Other   items  net                                                                                                  |  |                                     | 1,327   
|                                                                                                                     |  |                                     |         
|Net   cash (used in) provided by operating activities                                                                |  |                                     | (15,081 
|                                                                                                                     |  |                                     |         
|Cash flows from investing   activities                                                                               |  |                                     |         
|Purchase of business - net   of cash                                                                                 |  |                                     |        
|Proceeds from divestitures                                                                                           |  |                                     | 21,213  
|Property, plant and   equipment expenditures                                                                         |  |                                     | (9,989  
|Proceeds from insurance   settlement for plant and equipment                                                         |  |                                     | 4,595   
|Proceeds from disposals of   property, plant and equipment                                                           |  |                                     | 676     
|                                                                                                                     |  |                                     |         
|Net   cash provided by (used in) investing activities                                                                |  |                                     | 16,495  
|                                                                                                                     |  |                                     |         
|Cash flows from financing   activities                                                                               |  |                                     |         
|Proceeds   from borrowings                                                                                           |  |                                     | 150,338 
|Repayments   of borrowings                                                                                           |  |                                     | (149,337
|Debt   issuance costs                                                                                                |  |                                     | (3,233  
|Treasury   stock purchases                                                                                           |  |                                     | (108    
|Common   stock issued through exercise of stock options                                                              |  |                                     | 464     
|Common   stock dividends                                                                                             |  |                                     |        
|                                                                                                                     |  |                                     |         
|Net   cash (used in) provided by financing activities                                                                |  |                                     | (1,876  
|                                                                                                                     |  |                                     |         
|Effect of exchange rate   changes on cash                                                                            |  |                                     | 87      
|                                                                                                                     |  |                                     |         
|Decrease in cash and cash   equivalents                                                                              |  |                                     | (375    
|Cash and cash equivalents,   beginning of period                                                                     |  |                                     | 5,446   
|                                                                                                                     |  |                                     |         
|Cash and cash equivalents,   end of period                                                                           |  | $                                   | 5,071   
|                                                                                                                     |  |                                     |         

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

5

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CALGON CARBON CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Dollars in Thousands) (Unaudited)

|1. | Acquisition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In December 2004, the Company increased its equity ownership in Datong Carbon
Corporation from 80% to 100% for a purchase price of $0.7 million, which was
paid in the three months ended March 31, 2005.  In May 2005, the Company
formed a joint venture company with C. Gigantic Carbon to provide carbon
reactivation services to the Thailand market.  The joint venture company
was named Calgon Carbon (Thailand) Ltd. and is 20% owned by the Company after an
initial investment of $0.2 million and exchange of technology.  It is
accounted for in the Companys financial statements under the equity
method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Gain on Insurance Settlement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In August 2005, the Companys plant located in Pearlington, Mississippi was
damaged by Hurricane Katrina and the Company recorded $1.0 million of
non-reimbursable expense in the quarter ended September 30, 2005.  In
accordance with FIN 30, Accounting for Involuntary Conversions of
Non-Monetary Assets to Monetary Assets, the Company has written off the net
book value of the destroyed inventory and property totaling $1.8 million. The
replacement value of the inventory and property exceeded its net book value by
approximately $4.9 million, which was recorded as a gain on insurance
settlement. As of September 30, 2006, the Company has also settled its business
interruption insurance claim with its insurance company for $3.8 million. 
This amount, net of costs related to business interruption of $0.6 million, was
recorded as a gain on insurance settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | Discontinued Operations and Assets and Liabilities Held for Sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Companys financial statements for all periods presented were
significantly impacted by activities relating to the divestiture of two of the
Companys businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company reclassified the following businesses from continuing operations to
discontinued operations and assets held for sale for all periods presented:
Charcoal/Liquid in Bodenfelde, Germany and Solvent Recovery in Columbus, Ohio;
Vero Beach, Florida; and Ashton, United Kingdom.  The Charcoal/Liquid and
Solvent Recovery businesses were reported in the Companys Consumer and
Equipment segments, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On February 17, 2006, Calgon Carbon Corporation, through its wholly owned
subsidiary Chemviron Carbon GmbH, executed an agreement (the Charcoal Sale
Agreement) with proFagus GmbH, proFagus Grundstuecksverwaltungs GmbH and
proFagus Beteiligungen GmbH (as Guarantor) to sell, and sold, substantially all
the assets, real estate, and specified liabilities of the Bodenfelde, Germany
facility (the Charcoal/Liquid business).  The facility includes the
production of charcoal for consumer use and liquids that are recovered during
charcoal production.  The products are sold to retail and industrial
markets.  The aggregate sales price, based on an exchange rate of 1.19
Dollars per Euro,consisted of $20.4 million of cash which included a
final working capital adjustment of $1.3 million.  The Company provided
guarantees to the buyer related to pre-divestiture tax liabilities, future
environmental remediation costs related to pre-divestiture activities and other
contingencies.  Management believes the ultimate cost of such guarantees is
not material.  An additional $5.0 million could be paid contingent upon the
business meeting certain earnings targets over the next three years.  As of
September 30, 2006, the Company has recorded a pre-tax gain of $5.0 million or
$2.0 million, net of tax, on the sale of the Charcoal/Liquid
divestiture.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On April 24, 2006, the Company completed the sale of the assets of its Solvent
Recovery business to MEGTEC Systems, Inc. (MEGTEC), a subsidiary of Sequa
Corporation.  The Solvent Recovery unit provides turnkey on-site
regenerable solvent recovery systems, distillation systems, on-site regenerable
volatile organic compound concentrators, vapor-phase biological oxidation
systems, and related services on a worldwide basis.  The purchase price of
$1.8 million included cash proceeds of approximately $0.8 million and $0.7
million of assumed liabilities, primarily accounts payable.  The
transaction was also subject to a working capital adjustment which is currently
estimated at $0.3 million, which management expects to finalize and record in
the fourth quarter of 2006.  As of September 30, 2006, the Company recorded
a pre-tax gain of $0.4 million or $0.3 million, net of tax, on the sale of the
Solvent Recovery business.                                                                                                                                                                                                                                                                                                                                                                                                                                  

6

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| | The following table details selected financial information for the businesses
included within the discontinued operations in the Condensed Consolidated
Statements of Operations and Retained Earnings:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             |  | Charcoal/Liquid                      |     | Solvent   Recovery                  |  
|-------------------------------------------- |  | ------------------------------------ | --- | ----------------------------------- | -
|                                             |  |                                      |     |                                     |  
|                                             |  | Three   Months    Ended September 30 |     | Nine   Months    Ended September 30 |  
|                                             |  |                                      |     |                                     |  
|(Dollars in thousands)                       |  | 2006                                 |     | 2005                                |  
|                                             |  |                                      |     |                                     |  
|Net sales                                    |  | $                                    |    |                                     | $
|                                             |  |                                      |     |                                     |  
|Income (loss) from   operations              |  |                                      | (25 | )                                   |  
|Other income (expense)-net                   |  |                                      | 120 |                                     |  
|                                             |  |                                      |     |                                     |  
|Income (loss) before income   taxes          |  |                                      | 95  |                                     |  
|Income tax expense   (benefit)               |  |                                      | 44  |                                     |  
|                                             |  |                                      |     |                                     |  
|Income (loss) from discontinued   operations |  | $                                    | 51  |                                     | $
|                                             |  |                                      |     |                                     |  

The major classes of assets and liabilities of operations held for sale in the
Condensed Consolidated Balance Sheets are as follows:

|                                           |  | Charcoal/Liquid      |   | Solvent   Recovery  |  
|------------------------------------------ |  | -------------------- | - | ------------------- | -
|                                           |  |                      |   |                     |  
|(Dollars in thousands)                     |  | September   30, 2006 |   | December   31, 2005 |  
|                                           |  |                      |   |                     |  
|Assets:                                    |  |                      |   |                     |  
|Receivables                                |  | $                    |  |                     | $
|Inventories                                |  |                      |  |                     |  
|Property,   plant and equipment, net       |  |                      |  |                     |  
|Goodwill                                   |  |                      |  |                     |  
|Other   assets                             |  |                      |  |                     |  
|                                           |  |                      |   |                     |  
|Total assets held for sale                 |  | $                    |  |                     | $
|                                           |  |                      |   |                     |  
|Liabilities                                |  |                      |   |                     |  
|Accounts   payable and accrued liabilities |  |                      |  |                     |  
|Other   liabilities                        |  |                      |  |                     |  
|                                           |  |                      |   |                     |  
|Total liabilities held for   sale          |  | $                    |  |                     | $
|                                           |  |                      |   |                     |  

|4. | Gulf Coast Facility   Impairment Charge                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | In 2003, the Company temporarily suspended construction of a new facility in the
Gulf Coast region of the United States as it evaluated strategic
alternatives.  On March 22, 2005, the Company concluded, and the Board of
Directors approved, that cancellation of this project was warranted and that
construction of such a facility should be suspended for the foreseeable
future.  Accordingly, the Company recorded an impairment charge of $2.2
million in 2005.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|               |  | September   30, 2006 |        | December   31, 2005 |  
|-------------- |  | -------------------- | ------ | ------------------- | -
|               |  |                      |        |                     |  
|Raw materials  |  | $                    | 16,026 |                     | $
|Finished goods |  |                      | 55,000 |                     |  
|               |  |                      |        |                     |  
|               |  | $                    | 71,026 |                     | $
|               |  |                      |        |                     |  

7

---



|6. | Supplemental   Cash Flow Information:
|-- | -------------------------------------

|                                   |  | Nine   Months Ended September 30, |       
|---------------------------------- |  | --------------------------------- | ------
|                                   |  |                                   |       
|                                   |  |                                   | 2006  
|                                   |  |                                   |       
|Cash paid during the period   for: |  |                                   |       
|Interest                           |  | $                                 | (4,159
|                                   |  |                                   |       
|Income   taxes paid  net          |  | $                                 | (687  
|                                   |  |                                   |       

|7. | Dividends:                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                              
|   | The Companys Board of Directors did not declare or pay a dividend for the
quarter ended September 30, 2006. Common stock dividends declared and paid
during the quarter ended September 30, 2005 were $.03 per common
share.
|   |                                                                                                                                                                                                                              
|8. | Comprehensive income (loss)                                                                                                                                                                                                  

|                                                  |  | Three   Months EndedSeptember 30, |      | Nine   Months EndedSeptember 30, |  
|------------------------------------------------- |  | --------------------------------- | ---- | -------------------------------- | -
|                                                  |  |                                   |      |                                  |  
|                                                  |  | 2006                              |      | 2005                             |  
|                                                  |  |                                   |      |                                  |  
|Net income (loss)                                 |  | $                                 | (458 | )                                | $
|Other   comprehensive income (loss), net of taxes |  |                                   | (209 | )                                |  
|                                                  |  |                                   |      |                                  |  
|Comprehensive income (loss)                       |  | $                                 | (667 | )                                | $
|                                                  |  |                                   |      |                                  |  

|   | The only matter contributing to the other comprehensive income (loss) during the
three and nine months ended September 30, 2006 was 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 as described in Note 10.  The only matters
contributing to the other comprehensive income (loss) during the three and nine
months ended September 30, 2005 were the foreign currency translation adjustment
of $1.1 million and ($4.1) million, respectively, and the change in the fair
value of the derivative instruments of ($0.3) million and $0.1 million,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|9. | 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 John S. Stanik, 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 air and water 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 tarnish prevention and
household odors. The following segment information represents the results of the
Companys continuing operations.

8

---



|                                                                                                             |  | Three   Months Ended   September 30, |        | Nine   Months Ended   September 30, |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------------------------ | ------ | ----------------------------------- | -
|                                                                                                             |  |                                      |        |                                     |  
|                                                                                                             |  | 2006                                 |        | 2005                                |  
|                                                                                                             |  |                                      |        |                                     |  
|Net Sales                                                                                                    |  |                                      |        |                                     |  
|Carbon   and Service                                                                                         |  | $                                    | 67,869 |                                     | $
|Equipment                                                                                                    |  |                                      | 8,740  |                                     |  
|Consumer                                                                                                     |  |                                      | 3,071  |                                     |  
|                                                                                                             |  |                                      |        |                                     |  
|                                                                                                             |  | $                                    | 79,680 |                                     | $
|                                                                                                             |  |                                      |        |                                     |  
|Income (loss) from operations before depreciation, amortization, impairment,
restructuring, and income taxes |  |                                      |        |                                     |  
|Carbon   and Service                                                                                         |  | $                                    | 6,776  |                                     | $
|Equipment                                                                                                    |  |                                      | (848   | )                                   |  
|Consumer                                                                                                     |  |                                      | 335    |                                     |  
|                                                                                                             |  |                                      |        |                                     |  
|                                                                                                             |  |                                      | 6,263  |                                     |  
|Depreciation and   amortization                                                                              |  |                                      |        |                                     |  
|Carbon   and Service                                                                                         |  |                                      | 4,409  |                                     |  
|Equipment                                                                                                    |  |                                      | 180    |                                     |  
|Consumer                                                                                                     |  |                                      | 130    |                                     |  
|                                                                                                             |  |                                      |        |                                     |  
|                                                                                                             |  |                                      | 4,719  |                                     |  
|                                                                                                             |  |                                      |        |                                     |  
|Income (loss) from operations before impairment, restructuring, and income
taxes                             |  | $                                    | 1,544  |                                     | $
|                                                                                                             |  |                                      |        |                                     |  
|Reconciling items:                                                                                           |  |                                      |        |                                     |  
|Gulf   Coast Facility impairment charge                                                                      |  |                                      |       |                                     |  
|Restructuring   charge                                                                                       |  |                                      |       |                                     |  
|Interest   income                                                                                            |  |                                      | 233    |                                     |  
|Interest   expense                                                                                           |  |                                      | (1,530 | )                                   |  
|Other   expense  net                                                                                        |  |                                      | (660   | )                                   |  
|                                                                                                             |  |                                      |        |                                     |  
|Consolidated loss before   income taxes, equity in income, and minority interest                             |  | $                                    | (413   | )                                   | $
|                                                                                                             |  |                                      |        |                                     |  

|                                          |  | September   30,   2006 |         | December   31,   2005 |  
|----------------------------------------- |  | ---------------------- | ------- | --------------------- | -
|                                          |  |                        |         |                       |  
|Total Assets                              |  |                        |         |                       |  
|Carbon   and Service                      |  | $                      | 284,432 |                       | $
|Equipment                                 |  |                        | 40,652  |                       |  
|Consumer                                  |  |                        | 12,085  |                       |  
|                                          |  |                        |         |                       |  
|Total assets from continuing   operations |  | $                      | 337,169 |                       | $
|Assets   held for sale                    |  |                        |        |                       |  
|                                          |  |                        |         |                       |  
|Consolidated   total assets               |  | $                      | 337,169 |                       | $
|                                          |  |                        |         |                       |  

9

---



|10. | Derivative   Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company accounts for its foreign exchange and natural gas 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 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 forecasted
natural gas.  The Company had thirty-one derivative instruments outstanding
at September 30, 2005 of which one was a foreign currency swap and thirty were
foreign currency forward exchange contracts.  The Company applied hedge
accounting treatment to six of the foreign currency forward exchange contracts,
which were treated as foreign exchange cash flow hedges regarding payment for
inventory purchases, and the foreign currency swap.  The change in the fair
market value of the effective hedge portion of the foreign currency forward
exchange contracts was ($0.3) million and ($0.1) million, respectively, for the
three and nine month periods ended September 30, 2005 and was recorded in other
comprehensive (income) loss (see Note 8).  It was released into operations
over 12 months based on the timing of the sales of the underlying
inventory.  The release to operations was reflected in cost of products
sold.  During the periods ended September 30, 2006 and 2005, the Company
recorded an immaterial gain in other income for the remaining nine and
twenty-four 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, net of tax, of $0.4
million and $0.3 million, respectively, for the three and nine month periods
ended September 30, 2006 and $0.1 million for the three and nine month periods
ended September 30, 2005 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 $0.7 million and $0.3 million,
respectively, as of September 30, 2006 and 2005.  The change in fair value
and the balance of the effective hedge portion of the cash flow hedges for the
forecasted purchase of natural gas recorded in other long-term liabilities was
$0.5 million, net of tax, for the three and nine month periods ended September
30, 2006.                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | No component of the derivatives gains or losses has been excluded from the
assessment of hedge effectiveness.  For the periods ended September 30,
2006 and 2005, the net gain or loss recognized due to the amount of hedge
ineffectiveness was insignificant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|11. | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In August 2005, the Companys Pearl River plant was impacted by Hurricane
Katrina.  In June 2006, the Company settled its property damage claim with
its insurance carrier for approximately $8.8 million, resulting in a pre-tax
gain of $4.9 million.  In September 2006, the Company also settled its
business interruption claim with its insurance carrier for approximately $3.8
million, resulting in a pre-tax gain of $3.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | On December 31, 1996, the Company purchased the common stock of Advanced
Separation Technologies Incorporated (AST) from Progress Capital Holdings, Inc.
and Potomac Capital Investment Corporation.  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.  Based upon information obtained
since the acquisition and corroborated in the course of pre-trial discovery, the
Company believes that it has a reasonable basis for this claim and intends to
vigorously pursue reimbursement for damages sustained.  Neither the Company
nor its counsel can predict with certainty the amount, if any, of recovery that
will be obtained from the defendants in this matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

10

---



| | The Company is a party in three cases involving challenges to the validity 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 (the Canadian
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
infringement 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.  The Company has appealed the
Courts decision against it to the Federal Circuit Court of Appeals and
expects a decision will be rendered by the Court in eighteen to twenty-four
months.  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 defendant is practicing the method claimed within the
U.S. Patents without a license.  The District Court has stayed this action
pending the outcome of the Companys appeal in the Wedeco case.  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.  A bench trial was completed in April 2006. 
On November 14, 2006 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.  The Court also
found that the defendants are entitled to their costs, to be assessed on
the ordinary scale.  The Company has insufficient information to
estimate the amount of defendants costs, but expects the defendants to
claim that they are entitled to costs exceeding $0.5 million.  The Company
intends to appeal the Courts decision.  The Company cannot predict
the ultimate outcome of the three matters.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The Company has received a demand from the Pennsylvania Department of
Environmental Protection (PADEP) that the Company reimburse PADEP for response
costs the agency alleges have been taken at a site owned by a third party and
located in Allegheny County, Pennsylvania (Site).  The letter
also included an unspecified amount for interest and for any future costs that
might be incurred by PADEP at the Site. The Company understands that the
response costs are approximately $1.3 million.  Based on information
provided by PADEP, the Site is approximately 8 acres and was used from the 1950s
until the 1960s as a disposal site for coke or carbon sweepings and other
industrial wastes.  The Company has been in discussions with PADEP
regarding the Companys position that it is not the entity that disposed of
materials containing the contaminants identified by PADEP at the Site and that
any materials that may have been deposited by the Companys predecessor did
not contain actionable levels of hazardous substances identified by PADEP. 
The Company and the PADEP have agreed to a settlement of the matter, subject to
written documentation, requiring the Company to pay $515,000 in two installments
to resolve the matter.  This amount has been charged to earnings for the
second quarter ended June 30, 2006. The terms of the settlement have been
published for public comment.  The initial public comment period has expired and PADEP has received comments on the proposed settlement. PADEP is expected to timely respond to these comments. If there are no further appeals filed after PADEPs responses to the comments are issued, the Company expects to receive notification from PADEP sometime in the first quarter of 2007 that the settlement has been approved and the first installment payment will be made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | In September 2004, a customer of one of the Companys distributors demanded
payment by the Company of approximately $340,000 as reimbursement for losses
allegedly caused by activated carbon produced by the Company and sold by the
distributor.  The claimant contends that the activated carbon contained
contamination which adversely impacted its production process.  The Company
is evaluating the claim, and at this time, cannot predict the outcome of this
matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The Company is involved in various other 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 if it is probable that a
liability has been incurred and an amount is reasonably estimable. 
Management believes, after consulting with counsel, that the ultimate
liabilities, if any, resulting from such lawsuits and claims will not materially
affect the consolidated results of operations, cash flows, or financial position
of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

11

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|    | 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 March 31, 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 and retained earnings for the
three months ended March 31, 2006.  The Company has not incurred any
environmental remediation expense for the nine months ended September 30, 2006
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 over the
upcoming months.  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 yet to make a determination that
it will proceed with remediation efforts in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company owns a 49% interest in a joint venture, Calgon Mitsubishi Chemical
Corporation, which was formed on October 1, 2002.  At September 30, 2006,
Calgon Mitsubishi Chemical Corporation had $8.5 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, 2006, the lender had not requested, and the Company has not
provided, such guarantee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12. | Goodwill & Intangible   Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company accounts for goodwill and intangible assets in accordance with
Statement of Financial Accounting Standard (SFAS) No. 142,
Goodwill and Other Intangible Assets.  This standard requires
that goodwill and intangible assets with indefinite useful lives not be
amortized but should be tested for impairment at least annually. 
Management has elected to do the annual impairment test on December 31 of each
year.  As required by SFAS No. 142, management has allocated goodwill to
the Companys reporting units.  No such impairment existed based on
the Companys most recent test at December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The following is the categorization of the Companys intangible assets as
of September 30, 2006 and December 31, 2005 respectively:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                             |  |                                               |                             |  | September   30, 2006 |        | December   31, 2005           |  
|---------------------------- |  | --------------------------------------------- | --------------------------- |  | -------------------- | ------ | ----------------------------- | -
|                             |  | Weighted    Average    Amortization    Period |                             |  |                      |        |                              
|                             |  |                                               | Gross    Carrying    Amount |  | Foreign    Exchange  |        | Accumulated      Amortization |  
|                             |  |                                               |                             |  |                      |        |                               |  
|Amortized Intangible Assets: |  |                                               |                             |  |                      |        |                               |  
|Patents                      |  |                                               | 15.4   Years                |  | $                    | 1,369  |                               | $
|Customer   Relationships     |  |                                               | 17.0   Years                |  |                      | 9,323  |                               |  
|Customer   Contracts         |  |                                               | 2.8   Years                 |  |                      | 664    |                               |  
|License   Agreement          |  |                                               | 5.0   Years                 |  |                      | 500    |                               |  
|Unpatented   Technology      |  |                                               | 20.0   Years                |  |                      | 2,875  |                               |  
|Product   Certification      |  |                                               | 7.9   Years                 |  |                      | 665    |                               |  
|                             |  |                                               |                             |  |                      |        |                               |  
|Total                        |  |                                               | 16.0   Years                |  | $                    | 15,396 |                               | $
|                             |  |                                               |                             |  |                      |        |                               |  

12

---



| | For the three and nine months ended September 30, 2006, the Company recognized
$0.4 million and $1.3 million, respectively, of amortization expense.  For
the three and nine months ended September 30, 2005, the Company recognized $0.5
million and $1.5 million, respectively, of amortization expense.  The
Company estimates amortization expense to be recognized during the next five
years as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|For the year ending December 31: |  |   |       | 
|-------------------------------- |  | - | ----- | 
|                                 |  |   |       | 
|2006                             |  | $ | 1,763 | 
|2007                             |  | $ | 1,530 | 
|2008                             |  | $ | 1,330 | 
|2009                             |  | $ | 1,057 | 
|2010                             |  | $ | 914   | 

| | The changes in the carrying amounts of goodwill by segment for the nine months
ended September 30, 2006 are as follows:
| | -----------------------------------------------------------------------------------------------------------------------

|                                   |  | Carbon   &   Service    Segment |        | Equipment    Segment |   | Consumer    Segment |  | Total |   
|---------------------------------- |  | ------------------------------- | ------ | -------------------- | - | ------------------- |  | ----- | --
|                                   |  |                                 |        |                      |   |                     |  |       |   
|Balance as of January 1,   2006    |  | $                               | 20,534 |                      | $ | 13,280              |  | $     | 60
|Foreign exchange                   |  |                                 | 334    |                      |   | 305                 |  |       |  
|                                   |  |                                 |        |                      |   |                     |  |       |   
|Balance as of September 30,   2006 |  | $                               | 20,868 |                      | $ | 13,585              |  | $     | 60
|                                   |  |                                 |        |                      |   |                     |  |       |   

|13. | Borrowing   Arrangements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On August 18, 2006, the Company issued $75.0 million of Convertible Senior Notes
(the Notes) due in 2036 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 Old Credit
Agreement).  The material terms and conditions of the Old Credit
Agreement are more fully discussed in Note 13 to the Companys unaudited
condensed consolidated financial statements contained in its Quarterly Report on
Form 10-Q/A for the fiscal quarter ended June 30, 2006.  As part of the
aforementioned repayment, the Company wrote-off $0.3 million of deferred
financing fees as well as $0.1 million in fees associated with the
repayment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | 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 to the initial purchaser upon completion of the
offering 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, commencing February 15, 2007.  The Notes will
mature on August 15, 2036.                                                                                                                                                                                                                                                

13

---



| | 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 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The initial conversion rate will be 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 will be subject to adjustment in some events 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 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 will be the Companys senior unsecured obligations, and will rank
equally in right of payment with all of its other existing and future senior
indebtedness.  The Notes will be guaranteed by certain of the
Companys domestic subsidiaries on a senior unsecured basis.  The
subsidiary guarantees will be general unsecured senior obligations of the
subsidiary guarantors and will 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 will be effectively subordinated to any
indebtedness of the Companys non-guarantor subsidiaries.  The Notes
will be 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 at a discount of $3.3 million that will be amortized
over a period of five years.  The discount will be reflected as a deduction
from the face amount of the debt.  The Company recorded interest expense of
$0.5 million of which $0.1 million related to the amortization of the discount
and $0.4 million which related to the Notes.  The Company incurred issuance
costs of $1.5 million which have been deferred and will be amortized over a five
year period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Notes and the Guarantees were sold only to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as amended (the
Securities Act).  The notes offered hereby, the subsidiary
guarantees and the common stock issuable upon conversion of the notes have not
been registered. This offering is being conducted in reliance upon an exemption
from registration under the Securities Act and applicable state securities laws.
We and the subsidiary guarantors have agreed, however, to use reasonable best
efforts to file a shelf registration statement with the SEC within 90 days of
the issue date, and to use reasonable efforts to cause such registration
statement to become effective within 240 days from the issue date, in order to
register resales of the notes, the subsidiary guarantees and common stock
issuable upon conversion of the notes under the Securities Act. The 90-day
period expired on November 16, 2006.  The Company did not file a
registration statement within the time period and, as a result, is obligated to
pay predetermined additional interest to holders of the notes as described in
the registration rights agreement.                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Credit Facility initially is a $50.0 million facility and includes a
separate U.K. sub-facility and a separate Belgian sub-facility.  The
Administrative Agent will use commercially reasonable efforts to obtain
commitments from a syndicate of lenders, permitting the total revolving credit
commitment to be increased up to $75.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

14

---



|    | The Company is currently discussing the syndication of its revolving credit
facility and plans to increase the total commitment of the current
facility.  The terms of the Credit Facility are subject to change in the
event that the credit facility is syndicated.  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, 2006, the carrying amount of assets pledged as collateral
was $53.4 million.  The carrying amount as of September 30, 2006 for
domestic, U.K., and Belgian borrowers were $43.0 million, $5.6 million, and $4.8
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, 2006, total availability
was $28.6 million.  Availability as of September 30, 2006 for domestic,
U.K., and Belgian borrowers were $24.3 million, $4.3 million, and zero,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | 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 Company incurred debt issuance costs of $0.5 million which have been
deferred and will be amortized over a five year period.  Borrowings under
the Credit Facility were being charged a weighted average interest rate of 7.08%
at September 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|14. | Stock Compensation Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company has two stock-based compensation plans which are more fully
described in Note 12 of the Companys 2005 Annual Report on Form
10-K.  Prior to January 1, 2006, the Company accounted for awards granted
under those plans following the recognition and measurement principles of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, (APB No. 25) and related interpretations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company adopted SFAS No. 123(R), Share-based Payments, on
January 1, 2006 using the modified prospective application method.  Under
this transition method, compensation cost recognized in the quarter and
year-to-date ended September 30, 2006 includes the applicable amounts of
compensation cost of all stock-based payments granted prior to, but not yet
vested as of January 1, 2006 (based on the grant-date fair value estimated in
accordance with the original provisions of SFAS No. 123 and previously presented
in the pro forma footnote disclosures).  Compensation cost in the future
will also include stock-based payments granted subsequent to January 1, 2006
(based on the grant-date fair value estimated in accordance with the new
provisions of SFAS No. 123(R)).  Results for prior periods have not been
restated.  Prior to the adoption of SFAS No. 123(R), no compensation cost
was reflected in net income for stock options or stock appreciation rights
(SARS) as all options and SARS granted had an exercise price equal to the market
value of the underlying common stock on the date of grant.  In accordance
with SFAS No. 123(R), compensation expense for stock options and SARS is now
recorded over the vesting period using the fair value on the date of grant, as
calculated by the Company using the Black-Scholes model.  The nonvested
restricted stock grant date fair value, which is the market price of the
underlying common stock, is expensed over the vesting period.

15

---



| | Stock-based compensation expense                                                                             
| | -------------------------------------------------------------------------------------------------------------
| |                                                                                                              
| | The following table summarizes the total compensation expense recognized for
stock-based compensation awards:

|(Dollars in thousands except per share data)                |  | Three   Months Ended   September 30   2006 |      | Nine   Months Ended   September 30   2006 |  
|----------------------------------------------------------- |  | ------------------------------------------ | ---- | ----------------------------------------- | -
|                                                            |  |                                            |      |                                           |  
|Stock-based compensation   expense recognized:              |  |                                            |      |                                           |  
|Selling,   general and administrative expenses              |  | $                                          | 409  |                                           | $
|                                                            |  |                                            |      |                                           |  
|Total                                                       |  |                                            | 409  |                                           |  
|                                                            |  |                                            |      |                                           |  
|Tax   effect                                                |  |                                            | 161  |                                           |  
|                                                            |  |                                            |      |                                           |  
|Increase in net   loss/decrease in net income, respectively |  | $                                          | 248  |                                           | $
|                                                            |  |                                            |      |                                           |  
|Decrease in basic and   diluted earnings per share          |  | $                                          | 0.01 |                                           | $
|                                                            |  |                                            |      |                                           |  

Prior period pro forma presentations

The following pro forma information is provided for comparative purposes and
illustrates the pro forma effect on net income and earnings per share as if the
fair value recognition provision of SFAS No. 123 had been applied to stock-based
compensation prior to January 1, 2006:

|(Dollars in thousands except per share data)                                                     |  | Three   Months Ended   September 30   2005 |            | Nine   Months Ended   September 30   2005 |  
|------------------------------------------------------------------------------------------------ |  | ------------------------------------------ | ---------- | ----------------------------------------- | -
|                                                                                                 |  |                                            |            |                                           |  
|Net Loss                                                                                         |  |                                            |            |                                           |  
|As   reported                                                                                    |  | $                                          | (353       | )                                         | $
|Stock-based   employee compensation Expense included in reported net income, net of tax   effect |  |                                            | 65         |                                           |  
|Stock-based   compensation at fair value, net of tax effects                                     |  |                                            | (159       | )                                         |  
|                                                                                                 |  |                                            |            |                                           |  
|Pro   forma                                                                                      |  | $                                          | (447       | )                                         | $
|                                                                                                 |  |                                            |            |                                           |  
|Weighted average shares   outstanding                                                            |  |                                            |            |                                           |  
|Basic                                                                                            |  |                                            | 39,569,277 |                                           |  
|Effect   of dilutive securities                                                                  |  |                                            |           |                                           |  
|                                                                                                 |  |                                            |            |                                           |  
|Diluted                                                                                          |  |                                            | 39,569,277 |                                           |  
|                                                                                                 |  |                                            |            |                                           |  
|Net loss per common share                                                                        |  |                                            |            |                                           |  
|Basic   and Diluted                                                                              |  |                                            |            |                                           |  
|As   reported                                                                                    |  | $                                          | (.01       | )                                         | $
|Pro   forma                                                                                      |  | $                                          | (.01       | )                                         | $
|                                                                                                 |  |                                            |            |                                           |  

The above disclosures of the effect of stock-based compensation expense for the
three and nine months ended September 30, 2006 and the pro forma effect as if
SFAS No. 123 had been applied to the three and nine months ended September 30,
2005, are based on the fair value of stock option awards estimated on the date
of grant using the Black-Scholes option valuation model with the assumptions
listed below:

|                                                                         |  | Nine   Months Ended September 30 |           
|------------------------------------------------------------------------ |  | -------------------------------- | ----------
|                                                                         |  |                                  |           
|                                                                         |  | 2006                             |           
|                                                                         |  |                                  |           
|Average grant date exercise price per share of stock appreciation
rights |  | $                                | 6.19      
|Average grant date exercise price per share of unvested awards 
options |  | $                                | 7.48      
|Dividend yield                                                           |  |                                  | .00-.70   
|Expected volatility                                                      |  |                                  | 34-37     
|Risk-free interest rates                                                 |  |                                  | 3.62%-5.20
|Expected lives of options                                                |  |                                  | 3 -6 years
|Average grant date fair   value per share of stock appreciation rights   |  | $                                | 1.85      
|Average grant date fair   value per share of unvested option awards      |  | $                                | 3.06      
|                                                                         |  |                                  |           

16

---



The Dividend yield is based on the latest annualized dividend rate and
the current market price of the underlying common stock at the date of
grant.

Expected volatility is based on the historical volatility of the
Companys stock and the implied volatility calculated from traded options
on the Companys stock.

The Risk-free interest rates are based on the U.S. Treasury strip rate
for the expected life of the option.

The Expected lives of options are determined from primarily historical
stock option exercise data.  The Company applied the simplified method in
accordance with Staff Accounting Bulletin No. 107 for all plain-vanilla
options.

Stock Appreciation Rights

Stock appreciation rights (SARS) granted to employees are valued at the grant
date fair value which is the market price of common stock on the date of
grant.  The grants vest over a service period of three years and are
payable in cash.  The following table shows a summary of the status and
activity of stock appreciation rights for the nine months ended September 30,
2006:

|                                    |  | Shares |        | Weighted-   Average   Exercise   Price |   | Weighted-   Average   Remaining   Contractual   Term   (in years) |  | Aggregate   Intrinsic   Value   (in thousands) |     
|----------------------------------- |  | ------ | ------ | -------------------------------------- | - | ----------------------------------------------------------------- |  | ---------------------------------------------- | ----
|                                    |  |        |        |                                        |   |                                                                   |  |                                                |     
|Outstanding at beginning of   year  |  |        |       |                                        | $ |                                                                  |  |                                                |     
|Granted                             |  |        | 37,000 |                                        |   | 6.19                                                              |  |                                                |     
|Exercised                           |  |        |       |                                        |   |                                                                  |  |                                                |     
|Canceled                            |  |        |       |                                        |   |                                                                  |  |                                                |     
|                                    |  |        |        |                                        |   |                                                                   |  |                                                |     
|Outstanding at September 30,   2006 |  |        | 37,000 |                                        | $ | 6.19                                                              |  |                                                | 2.75
|                                    |  |        |        |                                        |   |                                                                   |  |                                                |     
|Exercisable at September   30, 2006 |  |        |       |                                        | $ |                                                                  |  |                                                |    
|                                    |  |        |        |                                        |   |                                                                   |  |                                                |     

The weighted-average grant-date fair value of employee stock appreciation rights
granted during the nine months ended September 30, 2006 was $1.33 per share or
$0.1 million.

Stock option activity

The following tables show a summary of the status and activity of stock options
for the nine months ended September 30, 2006:

Employee Stock Option Plan:

|                                    |  | Shares |           | Weighted-   Average   Exercise   Price |   | Weighted-   Average   Remaining   Contractual   Term   (in years) |  | Aggregate   Intrinsic   Value   (in thousands) |     
|----------------------------------- |  | ------ | --------- | -------------------------------------- | - | ----------------------------------------------------------------- |  | ---------------------------------------------- | ----
|                                    |  |        |           |                                        |   |                                                                   |  |                                                |     
|Outstanding at beginning of   year  |  |        | 2,138,900 |                                        | $ | 6.67                                                              |  |                                                |     
|Granted                             |  |        | 120,700   |                                        |   | 7.07                                                              |  |                                                |     
|Exercised                           |  |        | (5,250    | )                                      |   | 5.07                                                              |  |                                                |     
|Canceled                            |  |        | (208,650  | )                                      |   | 6.73                                                              |  |                                                |     
|                                    |  |        |           |                                        |   |                                                                   |  |                                                |     
|Outstanding at September   30, 2006 |  |        | 2,045,700 |                                        | $ | 6.70                                                              |  |                                                | 6.19
|                                    |  |        |           |                                        |   |                                                                   |  |                                                |     
|Exercisable at September   30, 2006 |  |        | 1,876,700 |                                        | $ | 6.62                                                              |  |                                                | 5.91
|                                    |  |        |           |                                        |   |                                                                   |  |                                                |     

The weighted-average grant-date fair value of employee stock options granted
during the nine months ended September 30, 2006 was $2.99 per share or $0.4
million.  The total fair value of options vested during the nine months
ended September 30, 2006 was $2.70 per share or $0.7 million.

17

---



Non-Employee Directors Stock Option Plan:

|                                    |  | Shares |         | Weighted-   Average   Exercise   Price |   | Weighted-   Average   Remaining   Contractual   Term   (in years) |  | Aggregate   Intrinsic   Value   (in thousands) |     
|----------------------------------- |  | ------ | ------- | -------------------------------------- | - | ----------------------------------------------------------------- |  | ---------------------------------------------- | ----
|                                    |  |        |         |                                        |   |                                                                   |  |                                                |     
|Outstanding at beginning of   year  |  |        | 450,737 |                                        | $ | 7.14                                                              |  |                                                |     
|Granted                             |  |        | 59,520  |                                        |   | 7.28                                                              |  |                                                |     
|Exercised                           |  |        |        |                                        |   |                                                                  |  |                                                |     
|Canceled                            |  |        |        |                                        |   |                                                                  |  |                                                |     
|                                    |  |        |         |                                        |   |                                                                   |  |                                                |     
|Outstanding at September   30, 2006 |  |        | 510,257 |                                        | $ | 7.16                                                              |  |                                                | 6.13
|                                    |  |        |         |                                        |   |                                                                   |  |                                                |     
|Exercisable at September   30, 2006 |  |        | 450,737 |                                        | $ | 7.14                                                              |  |                                                | 5.67
|                                    |  |        |         |                                        |   |                                                                   |  |                                                |     

The weighted-average grant-date fair value of non-employee director stock
options granted during the nine months ended September 30, 2006 was $3.15 per
share or $0.2 million.  The total fair value of options vested during the
nine months ended September 30, 2006 was $2.06 per share or $11
thousand.

During the nine months ended September 30, 2006, the total intrinsic value of
stock options exercised (i.e., the difference between the market price at
exercise and the price paid by the employee to exercise the option) was $11
thousand.  The total amount of cash received from the exercise of options
was $27 thousand, and the related net tax benefit realized from the exercise of
these options was immaterial.

Nonvested Restricted stock activity

Nonvested restricted stock granted to employees with a zero exercise price under
the Companys Employee Stock Option Plan is valued at the grant date fair
value, which is the market price of the underlying common stock, and vest over
service periods that range from one to three years.

The following table shows a summary of the status and activity of nonvested
restricted stock grants for the nine months ended September 30, 2006:

|                                  |  | Shares |         | Weighted-   Average   Grant-Date   Fair-Value   (per share) |  
|--------------------------------- |  | ------ | ------- | ----------------------------------------------------------- | -
|                                  |  |        |         |                                                             |  
|Nonvested at January 1, 2006      |  |        | 240,800 |                                                             | $
|Granted                           |  |        | 194,400 |                                                             |  
|Vested                            |  |        | (49,903 | )                                                           |  
|Cancelled                         |  |        | (56,972 | )                                                           |  
|                                  |  |        |         |                                                             |  
|Nonvested at September 30,   2006 |  |        | 328,325 |                                                             | $
|                                  |  |        |         |                                                             |  

Compensation expense related to nonvested restricted stock totaled $0.4 million
for the nine month period ended September 30, 2006.  The related net tax
benefit related to restricted awards was immaterial for the nine month period
ended September 30, 2006.

Total Shareholder Return (TSR) performance stock awards

Performance stock awards vest, subject to the satisfaction of performance goals,
at the end of a three-year performance period.  The number of performance
stock awards that are scheduled to vest is a function of Total Shareholder
Return (TSR) performance. Under the terms of the TSR performance stock award,
the Companys actual TSR for the performance period is compared to the
results of its peer companies for the same period with the Companys
relative position in the group determined by percentile rank.  The actual
award payout is determined by multiplying the target award by the performance
factor percentage provided for the Companys percentile ranking and can
vest at between zero and 200 percent of the target award.  The value of the
TSR performance stock is determined using a Monte Carlo simulation model. 
The following significant assumptions were used:  dividend rate of 0%,
volatility of 45.6%, risk-free interest rate of 4.69%, and a term of three
years.  The Monte Carlo value is expensed on a straight-line basis over the
three-year performance period.

18

---



The following table shows a summary of the TSR performance stock awards granted
during the nine months ended September 30, 2006 and outstanding as of September
30, 2006:

|Performance Period |  | Fair Value   (in thousands) |     | Unrecognized   Compensation   Expense   (in thousands) |   | Minimum   Shares |  | Target   Shares |   | Maximum   Shares | 
|------------------ |  | --------------------------- | --- | ------------------------------------------------------ | - | ---------------- |  | --------------- | - | ---------------- | 
|                   |  |                             |     |                                                        |   |                  |  |                 |   |                  | 
|2006-2008          |  | $                           | 798 |                                                        | $ | 653              |  |                 |  |                  | 
|                   |  |                             |     |                                                        |   |                  |  |                 |   |                  | 

As of September 30, 2006, there was $2.6 million of total future compensation
cost related to nonvested share-based compensation arrangements and the
weighted-average period over which this cost is expected to be recognized is
approximately three years.

|15. | 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,
2006 and 2005:

|                                     |  | Three   Months Ended September 30 |        | Nine   Months Ended September 30 |  
|------------------------------------ |  | --------------------------------- | ------ | -------------------------------- | -
|                                     |  |                                   |        |                                  |  
|Pension Benefits (in thousands)      |  | 2006                              |        | 2005                             |  
|                                     |  |                                   |        |                                  |  
|Service cost                         |  | $                                 | 617    |                                  | $
|Interest cost                        |  |                                   | 1,237  |                                  |  
|Expected return on plan   assets     |  |                                   | (1,152 | )                                |  
|Amortization of prior   service cost |  |                                   | 88     |                                  |  
|Net amortization                     |  |                                   | 188    |                                  |  
|Settlement                           |  |                                   | 509    |                                  |  
|Curtailment                          |  |                                   | 279    |                                  |  
|                                     |  |                                   |        |                                  |  
|Net periodic pension cost            |  | $                                 | 1,766  |                                  | $
|                                     |  |                                   |        |                                  |  

| | The expected long-term rate   of return on plan assets is 8.25% in 2006.                                                                                                                                                                                                                                                              
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                       
| | Employer Contributions                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                       
| | In its 2005 financial statements, the Company disclosed that it expected to
contribute $4.4 million to its U.S. pension plans in 2006.  As of September
30, 2006, the Company has contributed the $4.4 million as well as an additional
$4.7 million.  No further contributions are expected to be made for the
remainder of the year.

19

---



| | 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,
2006 and 2005:

|                                     |  | Three   Months Ended September 30 |      | Nine   Months Ended September 30 |  
|------------------------------------ |  | --------------------------------- | ---- | -------------------------------- | -
|                                     |  |                                   |      |                                  |  
|Pension Benefits (in thousands)      |  | 2006                              |      | 2005                             |  
|                                     |  |                                   |      |                                  |  
|Service cost                         |  | $                                 | 249  |                                  | $
|Interest cost                        |  |                                   | 389  |                                  |  
|Expected return on plan   assets     |  |                                   | (272 | )                                |  
|Amortization of prior   service cost |  |                                   | 12   |                                  |  
|Net amortization                     |  |                                   | 44   |                                  |  
|                                     |  |                                   |      |                                  |  
|Net periodic pension cost            |  | $                                 | 422  |                                  | $
|                                     |  |                                   |      |                                  |  

|    | The expected long-term rate   of return on plan assets ranges from 5.00% to 7.10% in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Employer Contributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | In its 2005 financial statements, the Company disclosed that it expected to
contribute $2.0 million to its European pension plans in 2006.  As of
September 30, 2006, the Company contributed $1.5 million.  The Company
expects to contribute the remaining $0.5 million as well as an additional $0.1
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.  As of
January 1, 2006, for all U.S. salaried employees that elected to
freeze their benefits under the Companys defined benefit
plans, the Company makes a fixed contribution of 2% of employee eligible
compensation 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. In September 2006, the Company announced the freezing of its defined
benefit pension plans for salaried employees replacing it with the
aforementioned defined contribution plan. For all other U.S. salaried employees,
the Company makes matching contributions on behalf of each participant in an
amount equal to 25% of the employee contribution up to a maximum of 4% of
employee eligible compensation.  Employer matching contributions vest
immediately. Total expenses related to this defined contribution plan for the
three months ended September 30, 2006 and 2005 were $0.1 million and $45
thousand, respectively, and for the nine months ended September 30, 2006 and
2005 were $0.3 million and $0.1 million, respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|16. | Taxation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The effective tax rate for the nine month period ended September 30, 2006 was a
benefit of 42.6% compared to a benefit of 55.4% for the period ended September
30, 2005.  The period ended September 30, 2006 tax rate was higher than the
statutory Federal Income Tax Rate due to our lower than expected profit and
certain benefits, principally the exclusion provided under United States income
tax laws with respect to the Extraterritorial Income Exclusion Benefit, benefits
related to foreign tax credits, and recognition of state income tax benefits
combined with a change in estimate of the Companys full year pre-tax
earnings.  The nine month period ended September 30, 2005 tax rate was
higher than the statutory Federal Income Tax Rate due to the Extraterritorial
Income Exclusion Benefit, recognition of foreign tax credit benefits, and
recognition of state income tax benefits. The primary items that contributed to
the change in the effective tax rate between the nine month period ended
September 30, 2006 and the similar period for 2005 was the reduction in estimate
of the Companys full year 2006 pre-tax earnings and its impact on the tax
effect of the aforementioned permanent items.                                                                                                                                                                                                                                                                                                                                             

20

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|    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | 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.  The Company does not believe
that resolution of existing unresolved tax matters will have a material impact
on the consolidated financial condition of the Company, although a resolution
could have a material impact on the Companys consolidated statement of
income and comprehensive income for a particular future period and on the
Companys effective tax rate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|17. | New   Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In November 2004, the FASB issued SFAS No. 151, Inventory Costs  an
amendment of ARB No. 43, Chapter 4, which requires the recognition of
costs of idle facilities, excessive spoilage, double freight and re-handling
costs as a component of current-period expenses.  The provisions of SFAS
No. 151 are effective for inventory costs incurred during fiscal years beginning
after June 15, 2005.  The Company adopted SFAS No. 151 effective January 1,
2006 as required.  Such adoption had no material impact on the accompanying
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which changes the requirements for the accounting for and
reporting of a change in accounting principle.  SFAS No. 154 applies to all
voluntary changes in accounting principle.  It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions.  When a
pronouncement includes specific transition provisions, those provisions should
be followed.  The Company adopted SFAS No. 154 effective January 1, 2006 as
required.  Such adoption had no material impact on the accompanying
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In December 2004, the FASB issued SFAS No. 123R, Share-Based
Payment, which establishes the accounting for transactions in which an
entity exchanges its equity instruments or certain liabilities based upon an
entitys equity instruments for goods or services.  SFAS No. 123R
generally requires that publicly traded companies measure the cost of employee
services received in exchange for an award of equity instruments based on the
fair value of the award at the grant date.  That cost will be recognized
over the period during which an employee is required to provide service in
exchange for the award which is usually the vesting period.  Management
adopted SFAS No. 123R beginning January 1, 2006 as required and the related
costs are reflected in the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In June 2006, the FASB issued FASB Interpretation no. 48 (FIN No.
48), Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Standard No. 109.  FIN No. 48 prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.  FIN No. 48 is effective for fiscal years beginning after
December 15, 2006.  The Company is in the process of evaluating the
financial impact of adopting FIN No. 48.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In September 2006, the FASB issued SFAS No. 157 Fair Value
Measurements, 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 expects to adopt SFAS No. 157 as required for the fiscal year 2008 and
that adoption will not have material impact on the financial
statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In September 2006, the FASB issued SFAS No. 158 Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans  An amendment
of FASB Statements No. 87, 88, 106, and 132(R).  SFAS No. 158
requires recognition of the funded status of a benefit plan on the balance
sheet;  the recognition in other comprehensive income of gains or losses
and prior service costs or credits arising during the period but which are not
included as components of periodic benefit cost; the measurement of defined
benefit plan assets and obligations as of the balance sheet date; and disclosure
of additional information about the effects on periodic benefit cost for the
following fiscal year arising from delayed recognition of gains and losses in
the current period. SFAS No. 158 is effective the Companys year ended
December 31, 2006.  The Company is in the process of evaluating the
financial impact of adopting SFAS No. 158.  However, based on the funded
status of the Companys defined benefit pension plans and other
postretirement plan as of December 31, 2005 (the Companys most recent
measurement date), the Company would be required to increase its net liabilities
for pension and other postretirement benefits, which would result in a decrease
in stockholders equity of approximately $29.0 million.  The actual
impact may vary from the estimated impact  as the ultimate amounts recorded
will depend on a number of assumptions, including, but not limited to, the
discount rates in effect at December 31, 2006, the actual rate of return on the
Companys pension plan assets for the year then ended and the impact of the
Companys pension contributions during the year ended December 31,
2006.  Changes in these assumptions since the Companys last
measurement date could increase or decrease the impact of adopting SFAS No. 158
on the Companys consolidated financial statements at December 31,
2006.

21

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|    | In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements (SAB No.
108). SAB No. 108 provides guidance on how prior year misstatements should
be taken into consideration when quantifying misstatements in current year
financial statements for purposes of determining whether the current years
financial statements are materially misstated. SAB 108 becomes effective during
fiscal year 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|18. | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Calgon Carbon Corporations obligation under the 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, 2006, the
average stock price was $4.32, which was lower than the conversion price of
$5.10, therefore zero shares were included in the dilutive share calculation for
the period of time the Notes were outstanding for the quarter ended September
30, 2006.

22

---



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                             
|---------- | --------------------------------------------------------------
|           | =((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   Price Difference |          
|------------- |  | ------------------ | --------- | ------------------ |  | ----------------------------- |  | --------------------------------------- | ---------
|              |  |                    |           |                    |  |                               |  |                                         |          
|$    5.10     |  |                    | $    5.10 |                    |  | $    0.00                     |  |                                         |         
|$    5.60     |  |                    | $    5.10 |                    |  | $    0.50                     |  |                                         | 1,313,023
|$    6.10     |  |                    | $    5.10 |                    |  | $    1.00                     |  |                                         | 2,410,798
|$    7.10     |  |                    | $    5.10 |                    |  | $    2.00                     |  |                                         | 4,142,500
|$    8.10     |  |                    | $    5.10 |                    |  | $    3.00                     |  |                                         | 5,446,621
|$    9.10     |  |                    | $    5.10 |                    |  | $    4.00                     |  |                                         | 6,464,122
|$   10.10     |  |                    | $    5.10 |                    |  | $    5.00                     |  |                                         | 7,280,137

|19. | Other   Financial Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Calgon Carbon Corporation 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 wholly owned by the parent company and the
guarantees are joint and several.  The subsidiary guarantees will be
general unsecured senior obligations of the subsidiary guarantors and will 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 will be effectively subordinated to any indebtedness of the
Companys non-guarantor subsidiaries.  The Notes will be 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
Notes and the Guarantees were sold only to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as amended (the
Securities Act).

23

---



| | Condensed consolidating 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 Operations Three months ended
September 30, 2006 |       
|---------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------
|                                               |  |                                                                                        |       
|                                               |  | Issuer                                                                                 |       
|                                               |  |                                                                                        |       
|Net sales                                      |  | $                                                                                      | 68,788
|Cost of products sold                          |  |                                                                                        | 51,297
|Depreciation and   amortization                |  |                                                                                        | 4,279 
|Selling, general and   administrative expenses |  |                                                                                        | 11,254
|Research and development   expense             |  |                                                                                        | 1,055 
|Restructuring                                  |  |                                                                                        |      
|Interest expense  net                         |  |                                                                                        | 5,260 
|Other expense  net                            |  |                                                                                        | 209   
|                                               |  |                                                                                        |       
|Provision (benefit) for   income taxes         |  |                                                                                        | (733  
|Results of affiliates   operations            |  |                                                                                        | (3,381
|Equity in income from equity   investments     |  |                                                                                        |      
|Minority interest                              |  |                                                                                        |      
|                                               |  |                                                                                        |       
|Income (loss) from   continuing operations     |  |                                                                                        | (452  
|                                               |  |                                                                                        |       
|Income (loss) from   discontinued operations   |  |                                                                                        | (6    
|                                               |  |                                                                                        |       
|Net income (loss                               |  |                                                                                        | (458  
|                                               |  |                                                                                        |       

|                                                  |  | Condensed Consolidating Statements of Operations Three months ended
September 30, 2005 |       
|------------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------
|                                                  |  |                                                                                        |       
|                                                  |  | Issuer                                                                                 |       
|                                                  |  |                                                                                        |       
|Net sales                                         |  | $                                                                                      | 59,523
|Cost of products sold                             |  |                                                                                        | 46,193
|Depreciation and   amortization                   |  |                                                                                        | 4,655 
|Selling, general and   administrative expenses    |  |                                                                                        | 13,042
|Research and development   expense                |  |                                                                                        | 976   
|Restructuring                                     |  |                                                                                        | 65    
|Interest (income) expense    net                 |  |                                                                                        | 4,237 
|Other expense  net                               |  |                                                                                        | 117   
|                                                  |  |                                                                                        |       
|Provision (benefit) for   income taxes            |  |                                                                                        | (5,638
|Results of affiliates   operations               |  |                                                                                        | (3,676
|Equity in income (loss) from   equity investments |  |                                                                                        |      
|Minority interest                                 |  |                                                                                        |      
|                                                  |  |                                                                                        |       
|Income (loss) from   continuing operations        |  |                                                                                        | (448  
|                                                  |  |                                                                                        |       
|Income (loss) from   discontinued operations      |  |                                                                                        | 95    
|                                                  |  |                                                                                        |       
|Net income (loss)                                 |  | $                                                                                      | (353  
|                                                  |  |                                                                                        |       

24

---



|                                               |  | Condensed Consolidating Statements of Operations Nine months ended September
30, 2006 |        
|---------------------------------------------- |  | ------------------------------------------------------------------------------------- | -------
|                                               |  |                                                                                       |        
|                                               |  | Issuer                                                                                |        
|                                               |  |                                                                                       |        
|Net sales                                      |  | $                                                                                     | 208,518
|Cost of products sold                          |  |                                                                                       | 158,874
|Depreciation and   amortization                |  |                                                                                       | 12,928 
|Selling, general and   administrative expenses |  |                                                                                       | 34,212 
|Research and development   expense             |  |                                                                                       | 3,119  
|Restructuring                                  |  |                                                                                       | 7      
|Interest (income) expense -   net              |  |                                                                                       | 15,444 
|Other expense  net                            |  |                                                                                       | 941    
|                                               |  |                                                                                       |        
|Provision (benefit) for   income taxes         |  |                                                                                       | (209   
|Results of affiliates   operations            |  |                                                                                       | (17,254
|Equity in income from equity   investments     |  |                                                                                       |       
|Minority interest                              |  |                                                                                       |       
|                                               |  |                                                                                       |        
|Income (loss) from   continuing operations     |  |                                                                                       | 456    
|                                               |  |                                                                                       |        
|Income (loss) from   discontinued operations   |  |                                                                                       | 108    
|                                               |  |                                                                                       |        
|Net income (loss)                              |  | $                                                                                     | 564    
|                                               |  |                                                                                       |        

|                                                  |  | Condensed Consolidating Statements of Operations Nine months ended September
30, 2005 |        
|------------------------------------------------- |  | ------------------------------------------------------------------------------------- | -------
|                                                  |  |                                                                                       |        
|                                                  |  | Issuer                                                                                |        
|                                                  |  |                                                                                       |        
|Net sales                                         |  | $                                                                                     | 194,298
|Cost of products sold                             |  |                                                                                       | 145,705
|Depreciation and   amortization                   |  |                                                                                       | 14,611 
|Selling, general and   administrative expenses    |  |                                                                                       | 38,779 
|Research and development   expense                |  |                                                                                       | 3,045  
|Restructuring                                     |  |                                                                                       | 2,581  
|Interest (income) expense -   net                 |  |                                                                                       | 11,941 
|Other expense  net                               |  |                                                                                       | 89     
|                                                  |  |                                                                                       |        
|Provision (benefit) for   income taxes            |  |                                                                                       | (7,038 
|Results of affiliates   operations               |  |                                                                                       | (13,122
|Equity in income (loss) from   equity investments |  |                                                                                       |       
|Minority interest                                 |  |                                                                                       |       
|                                                  |  |                                                                                       |        
|Income (loss) from   continuing operations        |  |                                                                                       | (2,293 
|                                                  |  |                                                                                       |        
|Income (loss) from   discontinued operations      |  |                                                                                       | 527    
|                                                  |  |                                                                                       |        
|Net income (loss)                                 |  | $                                                                                     | (1,766 
|                                                  |  |                                                                                       |        

25

---



|                                             |  | Condensed   Consolidating Balance Sheets    September 30, 2006 |        
|-------------------------------------------- |  | -------------------------------------------------------------- | -------
|                                             |  |                                                                |        
|                                             |  | Issuer                                                         |        
|                                             |  |                                                                |        
|Cash & Cash Equivalents                      |  | $                                                              | 1,675  
|Receivables                                  |  |                                                                | 47,073 
|Inventories                                  |  |                                                                | 58,790 
|Other current assets                         |  |                                                                | 17,948 
|                                             |  |                                                                |        
|Total   current assets                       |  |                                                                | 125,486
|Intercompany accounts   receivable           |  |                                                                | 54,464 
|Property, plant, and   equipment, net        |  |                                                                | 92,805 
|Intangibles                                  |  |                                                                | 5,100  
|Goodwill                                     |  |                                                                | 17,764 
|Equity investments                           |  |                                                                | 221,740
|Other assets                                 |  |                                                                | 12,503 
|                                             |  |                                                                |        
|Total   assets                               |  | $                                                              | 529,862
|                                             |  |                                                                |        
|Accounts payable                             |  | $                                                              | 29,221 
|Other current liabilities                    |  |                                                                | 31,225 
|                                             |  |                                                                |        
|Total   current liabilities                  |  |                                                                | 60,446 
|Intercompany accounts   payable              |  |                                                                | 143,478
|Long-term debt                               |  |                                                                | 81,693 
|Other non-current   liabilities              |  |                                                                | 88,774 
|Shareholders equity                         |  |                                                                | 155,471
|                                             |  |                                                                |        
|Total   liabilities and shareholders equity |  | $                                                              | 529,862
|                                             |  |                                                                |        

26

---



|                                             |  | Condensed   Consolidating Balance Sheets    December 31, 2005 |        
|-------------------------------------------- |  | ------------------------------------------------------------- | -------
|                                             |  |                                                               |        
|                                             |  | Issuer                                                        |        
|                                             |  |                                                               |        
|Cash & Cash Equivalents                      |  | $                                                             | 3,048  
|Receivables                                  |  |                                                               | 45,802 
|Inventories                                  |  |                                                               | 57,099 
|Other current assets                         |  |                                                               | 17,100 
|Assets held for sale                         |  |                                                               | 5,165  
|                                             |  |                                                               |        
|Total   current assets                       |  |                                                               | 128,214
|Intercompany accounts   receivable           |  |                                                               | 51,085 
|Property, plant, and   equipment, net        |  |                                                               | 91,088 
|Intangibles                                  |  |                                                               | 5,991  
|Goodwill                                     |  |                                                               | 17,764 
|Equity investments                           |  |                                                               | 213,606
|Other assets                                 |  |                                                               | 11,798 
|                                             |  |                                                               |        
|Total   assets                               |  | $                                                             | 519,546
|                                             |  |                                                               |        
|Accounts payable                             |  | $                                                             | 33,820 
|Other current liabilities                    |  |                                                               | 28,660 
|Liabilities held for sale                    |  |                                                               | 2,156  
|                                             |  |                                                               |        
|Total   current liabilities                  |  |                                                               | 64,636 
|Intercompany accounts   payable              |  |                                                               | 129,654
|Long-term debt                               |  |                                                               | 83,925 
|Other non-current   liabilities              |  |                                                               | 90,771 
|Shareholders equity                         |  |                                                               | 150,560
|                                             |  |                                                               |        
|Total   liabilities and shareholders equity |  | $                                                             | 519,546
|                                             |  |                                                               |        

27

---



|                                                                |  | Condensed   Consolidating Statements of Cash FlowsNine months ended September 30, 2006 |        
|--------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | -------
|                                                                |  |                                                                                        |        
|                                                                |  | Issuer                                                                                 |        
|                                                                |  |                                                                                        |        
|Net cash (used in) provided   by operating activities           |  | $                                                                                      | (24,667
|                                                                |  |                                                                                        |        
|Investing activities:                                           |  |                                                                                        |        
|Proceeds   from insurance settlement for property and equipment |  |                                                                                        | 4,595  
|Proceeds   from sale of assets                                  |  |                                                                                        | 778    
|Property,   plant and equipment expenditures                    |  |                                                                                        | (9,459 
|Investment   from (in) affiliates                               |  |                                                                                        | 11,217 
|Other                                                           |  |                                                                                        | 676    
|                                                                |  |                                                                                        |        
|Net   cash provided by (used in) investing activities           |  |                                                                                        | 7,807  
|                                                                |  |                                                                                        |        
|Financing activities:                                           |  |                                                                                        |        
|Net   borrowings (repayments)                                   |  |                                                                                        | 6,121  
|Debt   issuance costs                                           |  |                                                                                        | (3,233 
|Intercompany   and equity transactions                          |  |                                                                                        | 10,444 
|Other                                                           |  |                                                                                        | 356    
|                                                                |  |                                                                                        |        
|Net   cash provided by (used in) financing activities           |  |                                                                                        | 13,688 
|                                                                |  |                                                                                        |        
|Effect of exchange rate changes   on cash and cash equivalents  |  |                                                                                        | 1,798  
|(Decrease) increase in cash   and cash equivalents              |  |                                                                                        | (1,374 
|Cash and cash equivalents,   beginning of period                |  |                                                                                        | 3,049  
|                                                                |  |                                                                                        |        
|Cash and cash equivalents,   end of period                      |  | $                                                                                      | 1,675  
|                                                                |  |                                                                                        |        

|                                                                |  | Condensed Consolidating Statements of Cash Flows Nine months ended September
30, 2005 |       
|--------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | ------
|                                                                |  |                                                                                       |       
|                                                                |  | Issuer                                                                                |       
|                                                                |  |                                                                                       |       
|Net cash (used in) provided   by operating activities           |  | $                                                                                     | (7,870
|                                                                |  |                                                                                       |       
|Investing activities:                                           |  |                                                                                       |       
|Proceeds   from insurance settlement for property and equipment |  |                                                                                       |      
|Proceeds   from sales of assets                                 |  |                                                                                       |      
|Property,   plant and equipment expenditures                    |  |                                                                                       | (7,396
|Investment   from (in) affiliates                               |  |                                                                                       |      
|Other                                                           |  |                                                                                       | (116  
|                                                                |  |                                                                                       |       
|Net   cash (used in) provided by investing activities           |  |                                                                                       | (7,512
|                                                                |  |                                                                                       |       
|Financing activities:                                           |  |                                                                                       |       
|Net   borrowings (repayments)                                   |  |                                                                                       | (964  
|Debt   issuance costs                                           |  |                                                                                       |      
|Intercompany   and equity transactions                          |  |                                                                                       | 6,822 
|Other                                                           |  |                                                                                       | 2,986 
|                                                                |  |                                                                                       |       
|Net   cash provided by (used in) financing activities           |  |                                                                                       | 8,844 
|                                                                |  |                                                                                       |       
|Effect of exchange rate   changes on cash and cash equivalents  |  |                                                                                       | 1,369 
|(Decrease) increase in cash   and cash equivalents              |  |                                                                                       | (5,169
|Cash and cash equivalents,   beginning of period                |  |                                                                                       | 11,243
|                                                                |  |                                                                                       |       
|Cash and cash equivalents,   end of period                      |  | $                                                                                     | 6,074 
|                                                                |  |                                                                                       |       

28

---



|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 Consolidated Financial Statements.

Results of Operations

Continuing Operations:

Consolidated net sales increased by $10.8 million or 15.7% and $17.2 million or
7.8% for the quarter and year-to-date period ended September 30, 2006,
respectively, versus the quarter and year-to-date periods ended September 30,
2005.  Net sales for the quarter and year-to-date periods ended September
30, 2006 for the Carbon and Service segment increased $9.9 million or 17.1% and
$19.3 million or 10.7%, respectively, versus the similar 2005 period.  The
increase for both periods was primarily due to increased demand for activated
carbon in the industrial process, food, environmental water treatment, and
respirator markets. Higher prices for certain carbon and service products also
contributed to the increase for both the quarter and year-to-date periods. 
Increased sales of activated carbon in Japan to the Companys joint venture
company also contributed to the year-to-date increase versus the comparable 2005
period.  Sales for this segment were adversely affected by sales losses due
to Hurricane Katrina for the comparative 2005 quarter and year-to date
periods.  Foreign currency translation had a positive impact of $1.2
million for the quarter and had a negative impact of $0.4 million for the
year-to-date period.  Net sales for the Equipment segment increased $0.8
million or 9.6% for the quarter and decreased $2.7 million or 9.2% for the
year-to-date period versus the comparable 2005 periods.  The increase for
the quarter was primarily due to higher demand for carbon adsorption systems in
the U.S. and ISEP® systems in Asia partially offset by the reduced demand
for odor control systems in the U.S.  The decrease for the year-to-date
period was primarily due to non-repeat sales of equipment for perchlorate
removal from ground water and the aforementioned odor control systems. Foreign
currency translation had a negligible impact on sales for the quarter, but a
positive impact on year-to-date sales of $0.1 million.  Net sales for the
quarter and year-to-date periods ended September 30, 2006 for the Consumer
segment increased by $0.1 million or 3.8% and $0.6 million or 6.3% versus the
similar periods of 2005.  The increase for the quarter was attributable to
higher demand for PreZerve® products.  The increase for the
year-to-date period was due to the aforementioned increase in demand for
PreZerve® products as well as increased sales of activated carbon
cloth.  Foreign currency translation had a positive impact on the quarter
sales of $0.1 million, but had a negative impact on year-to-date sales of $0.1
million.  The total impact of foreign currency translation on consolidated
net sales for the quarter ended September 30, 2006 was favorable $1.3 million,
however, it had a negative impact on net sales for the year-to-date period of
$0.4 million. Net sales in the future could be affected by the anti-dumping
ruling as described in the Companys Form 8-K filed on October 6,
2006.  The Company received notification from the United States Department
of Commerce (the DOC) announcing the imposition of preliminary
anti-dumping duties on all imports of steam activated carbon from China. 
The DOC  immediately ordered U.S. Customs and Border Protection to require
importers to post a bond or cash deposit in the amount of the duties.  Over
the next several months the DOC will verify information submitted by various
respondents.  A final determination is expected in April 2007.  The
final dumping duties could be imposed for up to five years.

Net sales less cost of products sold, as a percentage of net sales, was 26.1%
and 25.6% for the quarter and year-to-date periods ended September 30, 2006,
respectively, compared to 25.5% and 27.0% for the similar 2005 periods, a 0.6
percent increase for the quarter and a 1.4 percentage point decrease for the
year-to-date period.  The increase for the quarter was primarily due to
price increases for certain carbon and service products, while the decline in
the year-to-date periods was primarily due to higher raw material, energy, and
transportation costs, as well as inefficiencies at the Companys production
facilities brought about by dealing with the after effects of Hurricane Katrina
which could only be partially offset by the aforementioned price
increases.  The Companys cost of products sold excludes depreciation,
therefore it may not be comparable to that of other companies.

29

---



The depreciation and amortization decrease of $0.4 million and $1.7 million
during the quarter and year-to-date periods ended September 30, 2006 versus the
periods ended September 30, 2005 was primarily decreased depreciation due to an
increase in fully depreciated fixed assets.

Selling, general and administrative expenses for the quarter and year-to-date
periods ended September 30, 2006 increased versus the comparable 2005 periods by
$2.5 million and $3.6 million, respectively.  The increase for the quarter
ended September 30, 2006 period versus the similar 2005 period was primarily due
to an increase in legal expense of $0.5 million, severance related costs of $0.9
million, and pension curtailment and settlement charges of $0.8 million. 
The increase for the year-to-date period is primarily attributable to an
increase in legal expense of approximately $3.2 million, the aforementioned
severance related costs, and pension settlement and curtailment charges.
Partially offsetting this increase was a decrease due to the change in the
estimate of the Companys environmental liabilities assumed in the
Waterlink acquisition of approximately $1.3 million.

Research and development expenses for the quarter and year-to-date periods ended
September 30, 2006 were comparable to the similar 2005 periods.

The gain from insurance settlement is due to Hurricane Katrina as discussed in
Note 2.  The non-recoverable costs of approximately $1.0 million related to
damage caused at the Companys Pearl River plant by Hurricane Katrina were
recorded for the year-to-date period ended September 30, 2005.

The impairment charge of $2.2 million for the year-to-date period ended
September 30, 2005 was as a result of the Companys decision on March 22,
2005 to cancel the construction of a reactivation facility on the U.S. Gulf
Coast and to suspend the construction of such facility for the foreseeable
future.

Restructuring charges for the quarter and year-to-date periods ended September
30, 2006 decreased $0.1 million and $0.4 million versus the comparable 2005
periods.  The restructuring charges for the quarter ended September 30,
2005 were attributable to the Companys closure of two small manufacturing
facilities.  The 2005 year-to-date period includes pension curtailment
charges as a result of employee separations from the Companys 2005
re-engineering plan as well as the aforementioned facility closures.

Other expense for the quarter ended September 30, 2006 was comparable to the
similar 2005 period, however increased $0.7 million for the year-to-date period
ended September 30, 2006, as compared to September 30, 2005.  This increase
was due to a gain on sale of an asset of $0.2 million which occurred in the
period ended September 30, 2005 and the write-off of approximately $0.6 million
of deferred financing fees associated with the Companys old credit
facility during the period ended September 30, 2006.

Interest expense, net of interest income, increased $0.2 million and $1.1
million for the quarter and year-to-date periods ended September 30, 2006 versus
the similar 2005 periods.  The increase for the quarter and year-to-date
periods was primarily the result of higher interest rates paid on the
Companys borrowings under its old credit facility as a result of the
increase in LIBOR rates from 2005.  Also contributing to the quarter
increase were higher interest rates related to the Companys new credit
facility and convertible senior notes. The year-to-date increase was also
impacted by the Company paying higher interest spreads on its borrowings under
its old credit facility during the first six months of 2006 as a result of a
lower trailing twelve months EBITDA.

The effective tax rate for the nine month period ended September 30, 2006 was a
benefit of 42.6% compared to a benefit of 55.4% for the period ended September
30, 2005.  The period ended September 30, 2006 tax rate was higher than the
statutory Federal Income Tax Rate due to our lower than expected profit and
certain benefits, principally the exclusion provided under United States income
tax laws with respect to the Extraterritorial Income Exclusion Benefit, benefits
related to foreign tax credits, and recognition of state income tax benefits
combined with a change in estimate of the Companys full year pre-tax
earnings.  The nine month period ended September 30, 2005 tax rate was
higher than the statutory Federal Income Tax Rate due to the Extraterritorial
Income Exclusion Benefit, recognition of foreign tax credit benefits, and
recognition of state income tax benefits. The primary items that contributed to
the change in the effective tax rate between the nine month period ended
September 30, 2006 and the similar period for 2005 was the reduction in estimate
of the Companys full year 2006 pre-tax earnings and its impact on the tax
effect of the aforementioned permanent items.

30

---



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.

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.  The Company does not believe
that resolution of existing unresolved tax matters will have a material impact
on the consolidated financial condition of the Company, although a resolution
could have a material impact on the Companys consolidated statement of
income and comprehensive income for a particular future period and on the
Companys effective tax rate.

Equity in income from equity investments decreased $0.4 million and $0.8 million
for the quarter and year-to-date periods ended September 30, 2006 versus the
similar 2005 periods.  The decrease was due to reduced margins as a result
of increased sales of its higher cost inventory that was produced at the former
carbon production facility in Japan that was shutdown in December
2005.

Discontinued Operations:

Income from discontinued operations increased $0.4 million and decreased $0.5
million, respectively, for the quarter and year-to-date periods ended September
30, 2006 versus the similar 2005 periods.  The increase for the quarter is
as a result of a net loss in the third quarter of 2005 related to both of the
Companys divested Charcoal/Liquid and Solvent Recovery businesses. 
The year-to-date increase is primarily due to the $2.3 million net of tax gain
recognized on the sale of the Companys Charcoal/Liquid and Solvent
Recovery businesses.  Partially offsetting this increase was lower net
income for the first nine months of 2006 due to the divestiture of both the
Charcoal/Liquid and Solvent Recovery businesses that occurred in the first and
second quarter of 2006.

Financial Condition

Working Capital and Liquidity

The cash flows discussed for the quarter and year-to-date periods ended
September 30, 2006 and 2005 include discontinued operations.  Cash flows
used in operations were ($15.1) million for the period ended September 30, 2006
compared to cash flows provided by operations of $5.4 million for the comparable
2005 period.

The $20.5 million decrease was primarily due to the inclusion of the cash
generated from the divested businesses in 2005 for the full nine months, where
in 2006 the cash flows from the divested businesses were only included
pre-divestiture.  Also contributing to the decrease was the gain from
insurance settlement of $5.3 million  net of cash received related to
Hurricane Katrina, gain from divestitures of $6.7 million, decreased
depreciation and amortization of $2.6 million, and decreased accrued pensions
net of employee benefit plan provisions of $7.9 million.  Operating working
capital (exclusive of debt) increased $1.0 million.  The divestitures are
expected to decrease cash flows from operations by approximately $3.0 million on
an annual, on-going basis.

Common stock dividends were not paid during the quarter ended September 30, 2006
as compared to dividends that were paid during the quarter ended September 30,
2005 which represented $.03 per common share.

On August 18, 2006, the Company issued $75.0 million of Convertible Senior Notes
(the Notes) due in 2036 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 have completed their obligations under the Amended and Restated Credit
Agreement, dated as of January 30, 2006 (the Old Credit
Agreement).  The material terms and conditions of the Old Credit
Agreement are more fully discussed in Note 13 to the Companys unaudited
condensed consolidated financial statements contained in its Quarterly Report on
Form 10-Q/A for the fiscal quarter ended June 30, 2006.  As part of the
aforementioned repayment, the Company wrote-off $0.3 million of deferred
financing fees as well as $0.1 million in fees associated with the
repayment.

31

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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 to the initial purchaser upon completion of the
offering 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, commencing 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 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.

The initial conversion rate will be 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 will be subject to adjustment in some events 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 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 will be the Companys senior unsecured obligations, and will rank
equally in right of payment with all of its other existing and future senior
indebtedness.  The Notes will be guaranteed by certain of the
Companys domestic subsidiaries on a senior unsecured basis.  The
subsidiary guarantees will be general unsecured senior obligations of the
subsidiary guarantors and will 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 will be effectively subordinated to any
indebtedness of the Companys non-guarantor subsidiaries.  The Notes
will be 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 at a discount of $3.3 million that will be amortized
over a period of five years.  The discount will be reflected as a deduction
from the face amount of the debt.  The Company recorded interest expense of
$0.5 million of which $0.1 million related to the amortization of the discount
and $0.4 million which related to the Notes.  The Company incurred issuance
costs of $1.5 million which have been deferred and will be amortized over a five
year period.

The Notes and the Guarantees were sold only to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as amended (the
Securities Act). The notes offered hereby, the subsidiary
guarantees and the common stock issuable upon conversion of the notes have not
been registered. This offering is being conducted in reliance upon an exemption
from registration under the Securities Act and applicable state securities laws.
We and the subsidiary guarantors have agreed, however, to use reasonable best
efforts to file a shelf registration statement with the SEC within 90 days of
the issue date, and to use reasonable efforts to cause such registration
statement to become effective within 240 days from the issue date, in order to
register resales of the notes, the subsidiary guarantees and common stock
issuable upon conversion of the notes under the Securities Act. The 90-day
period expired on November 16, 2006.  The Company did not file a
registration statement within the time period and, as a result, is obligated to
pay predetermined additional interest to holders of the notes as described in
the registration rights agreement.

32

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Credit Facility

The Credit Facility initially is a $50.0 million facility and includes a
separate U.K. sub-facility and a separate Belgian sub-facility.  The
Administrative Agent will use commercially reasonable efforts to obtain
commitments from a syndicate of lenders, permitting the total revolving credit
commitment to be increased up to $75.0 million.  The Company is currently
discussing the syndication of its revolving credit facility and plans to
increase the total commitment of the current facility.  The terms of the
Credit Facility are subject to change in the event that the credit facility is
syndicated.  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, 2006, the carrying amount of assets pledged as collateral
was $53.4 million.  The carrying amount as of September 30, 2006 for
domestic, U.K., and Belgian borrowers were $43.0 million, $5.6 million, and $4.8
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, 2006, total availability
was $28.6 million.  Availability as of September 30, 2006 for domestic,
U.K., and Belgian borrowers were $24.3 million, $4.3 million, and zero,
respectively.

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 Company incurred debt issuance costs of $0.5 million which have been
deferred and will be amortized over a five year period.  Borrowings under
the Credit Facility were being charged a weighted average interest rate of 7.08%
at September 30, 2006.

In its 2005 financial statements, the Company disclosed that it expected to
contribute $6.4 million to its U.S. and European pension plans in 2006.  As
of September 30, 2006, the Company has contributed $10.6 million.  The
Company expects to contribute $0.6 million to its European pension plans over
the remainder of the year.

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, 2006, with the exception of the convertible senior
notes and new credit facility as noted above, there have been no further changes
in the payment terms of other long-term debt, lease agreements, and
unconditional purchase obligations since December 31, 2005.  The following
table represents the significant cash contractual obligations and other
commercial commitments.

|                                      |  | Due in |        |      |   |       
|------------------------------------- |  | ------ | ------ | ---- | - | ------
|                                      |  |        |        |      |   |       
|(Thousands)                           |  | 2006   |        | 2007 |   | 2008  
|                                      |  |        |        |      |   |       
|Debt                                  |  | $      |       |      | $ |      
|Operating leases                      |  |        | 5,019  |      |   | 3,781 
|Unconditional purchase   obligations* |  |        | 26,755 |      |   | 21,626
|                                      |  |        |        |      |   |       
|Total contractual cash   Obligations  |  | $      | 31,774 |      | $ | 25,407
|                                      |  |        |        |      |   |       

|                                                                                                                                                                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*Primarily for the purchase   of raw materials, transportation, and information systems services.                                                                                                                                     
|Note:  Interest is not included in the above schedule.  As of
September 30, 2006 the Companys interest rate was 6.08% and the Company
projects interest payments of approximately $2.0 million for the year ending
December 31, 2006.

33

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Capital Expenditures and Investments

Capital expenditures for property, plant and equipment totaled $10.0 million for
the nine months ended September 30, 2006 compared to expenditures of $8.2
million for the same period in 2005.  The expenditures for the period ended
September 30, 2006 consisted primarily of improvements to the Companys
manufacturing facilities of $6.1 million, $2.3 million related to the repair of
the Companys Pearl River plant as a result of Hurricane Katrina, and
additional customer capital of $1.4 million.  The comparable 2005
expenditures consisted primarily of $7.4 million for improvements to
manufacturing facilities and $0.4 million for customer capital.  Capital
expenditures for 2006 are projected to be approximately $16.0
million.

The September 30, 2005 purchase of business cash usage of $0.9 million, as shown
on the statement of cash flows, represents primarily the Companys
increased equity ownership in Datong Carbon Corporation from 80% to 100% for a
purchase price of $0.7 million.

In 2003, the Company temporarily suspended construction of a new facility in the
Gulf Coast region of the United States as it evaluated strategic
alternatives.  On March 22, 2005, the Company concluded, and the Board of
Directors approved, that cancellation of this project was warranted and that
construction of such a facility should be suspended for the foreseeable
future.  Accordingly, the Company recorded an impairment charge of $2.2
million for the period ended September 30, 2005.

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 of the plants assets having a net
book value of $1.7 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 second half of 2007.  If
management should conclude that the idling of the plant beyond 2007 is
warranted, operating results may be adversely affected by impairment
charges.

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.  Management has not determined its plan of action for compliance
related to this activated carbon line; however, if it is determined that a
shutdown of the full operation of the activated carbon line is warranted, the
impact to current operating results would be insignificant.

New Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, Inventory Costs  an
amendment of ARB No. 43, Chapter 4, which requires the recognition of
costs of idle facilities, excessive spoilage, double freight and re-handling
costs as a component of current-period expenses.  The provisions of SFAS
No. 151 are effective for inventory costs incurred during fiscal years beginning
after June 15, 2005.  The Company adopted SFAS No. 151 effective January 1,
2006 as required.  Such adoption had no material impact on the accompanying
financial statements.

34

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In December 2004, the FASB issued SFAS No. 123R, Share-Based
Payment, which establishes the accounting for transactions in which an
entity exchanges its equity instruments or certain liabilities based upon an
entitys equity instruments for goods or services.  SFAS No. 123R
generally requires that publicly traded companies measure the cost of employee
services received in exchange for an award of equity instruments based on the
fair value of the award at the grant date.  That cost will be recognized
over the period during which an employee is required to provide service in
exchange for the award which is usually the vesting period.  Management
adopted SFAS No. 123R beginning January 1, 2006 as required and the related
costs are reflected in the accompanying financial statements as discussed in
Note 14.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which changes the requirements for the accounting for and
reporting of a change in accounting principle.  SFAS No. 154 applies to all
voluntary changes in accounting principle.  It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions.  When a
pronouncement includes specific transition provisions, those provisions should
be followed.  The Company adopted SFAS No. 154 effective January 1, 2006 as
required.  Such adoption had no material impact on the accompanying
financial statements.

In June 2006, the FASB issued FASB Interpretation no. 48 (FIN No.
48), Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Standard No. 109.  FIN 48 prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.  FIN 48 is effective for fiscal years beginning after December
15, 2006.  The Company is in the process of evaluating the financial impact
of adopting FIN 48.

In September 2006, the FASB issued SFAS No. 157 Fair Value
Measurements, 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 expects to adopt SFAS No. 157 as required for the fiscal year 2008 and
that adoption will not have material impact on the financial
statements.

In September 2006, the FASB issued SFAS No. 158 Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans  An amendment
of FASB Statements No. 87, 88, 106, and 132(R).  SFAS No. 158
requires recognition of the funded status of a benefit plan on the balance
sheet;  the recognition in other comprehensive income of gains or losses
and prior service costs or credits arising during the period but which are not
included as components of periodic benefit cost; the measurement of defined
benefit plan assets and obligations as of the balance sheet date; and disclosure
of additional information about the effects on periodic benefit cost for the
following fiscal year arising from delayed recognition of gains and losses in
the current period.   SFAS No. 158 is effective the Companys
year ended December 31, 2006.  The Company is in the process of evaluating
the financial impact of adopting SFAS No. 158.  However, based on the
funded status of the Companys defined benefit pension plans and other
postretirement plan as of December 31, 2005 (the Companys most recent
measurement date), the Company would be required to increase its net liabilities
for pension and other postretirement benefits, which would result in a decrease
in stockholders equity of approximately $29.0 million.  The actual
impact may vary from the estimated impact  as the ultimate amounts recorded
will depend on a number of assumptions, including, but not limited to, the
discount rates in effect at December 31, 2006, the actual rate of return on the
Companys pension plan assets for the year then ended and the impact of the
Companys pension contributions during the year ended December 31,
2006.  Changes in these assumptions since the Companys last
measurement date could increase or decrease the impact of adopting SFAS No. 158
on the Companys consolidated financial statements at December 31,
2006.

In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements (SAB No.
108). SAB No. 108 provides guidance on how prior year misstatements should
be taken into consideration when quantifying misstatements in current year
financial statements for purposes of determining whether the current years
financial statements are materially misstated. SAB 108 becomes effective during
fiscal year 2006.

35

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Critical Accounting Policies

Management of the Company has evaluated the accounting policies used in the
preparation of the financial statements and related footnotes and believes the
policies to be reasonable and appropriate.  The preparation of the
financial statements in accordance with accounting principles generally accepted
in the United States requires management to make judgments, estimates, and
assumptions regarding uncertainties that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses.  Management uses historical
experience and all available information to make these judgments and estimates,
and actual results will inevitably differ from those estimates and assumptions
that are used to prepare the Companys financial statements at any given
time.  Despite these inherent limitations, management believes that
Managements Discussion and Analysis (MD&A) and the financial
statements and related footnotes provide a meaningful and fair perspective of
the Companys financial condition and results of operations.

The following are the critical accounting policies impacted by managements
judgments, assumptions, and estimates. Management believes that the application
of these policies on a consistent basis enables the Company to provide the users
of the financial statements with useful and reliable information about the
Companys operating results and financial condition.

Revenue Recognition

The Company recognizes revenue and related costs when goods are shipped or
services are rendered to customers provided that ownership and risk of loss have
passed to the customer. Revenue for major equipment projects is recognized under
the percentage of completion method by comparing actual costs incurred to total
estimated costs to complete the respective projects.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. 
The amount of allowance recorded is based upon a quarterly review of specific
customer transactions that remain outstanding at least three months beyond their
respective due dates.  If the financial condition of the Companys
customers were to deteriorate resulting in an impairment of their ability to
make payments, additional allowances may be required.

Inventories

The Companys inventories are carried at the lower of cost or market and
adjusted to net realizable value.  The inventory obsolescence adjustment is
recorded quarterly based upon a review of specific products that have remained
unsold for a prescribed period of time.

Goodwill and Other Intangible Assets

The Company tests goodwill for impairment at least annually by initially
comparing the fair value of the Companys reporting units to their related
carrying values.  If the fair value of a reporting unit were less than its
carrying value, additional steps would be necessary to determine the amount, if
any, of goodwill impairment.  Fair values are estimated using discounted
cash flow and other valuation methodologies that are based on projections of the
amounts and timing of future revenues and cash flows.

Environmental Costs

Liabilities for environmental costs are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably
estimated.  These liabilities are not reduced by possible recoveries from
third parties, and projected cash expenditures are not discounted.

Pensions

Accounting for pensions involves estimating the cost of benefits to be provided
well into the future and attributing that cost over the time period each
employee works.  To accomplish this, extensive use is made of assumptions
about inflation, investment returns, mortality, turnover and discount
rates.  These assumptions are reviewed annually.  In determining the
expected return on plan asset assumption, the Company evaluates long-term actual
return information, the mix of investments that comprise plan assets and future
estimates of long-term investment returns.

36

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Income Taxes

During the ordinary course of business, there are many transactions and
calculations for which the ultimate tax determination is uncertain. 
Significant judgment is required in determining the Companys annual tax
rate and in evaluating tax positions.  The Company establishes reserves
when, despite managements belief that the Companys tax return
positions are fully supportable, it believes that certain positions are probable
to be challenged upon review by tax authorities.  Changes in estimates are
reflected in the year of settlement or expiration of the statute of limitations
or changes in facts and circumstances.  While it is often difficult to
predict the final outcome or the timing of resolution of any particular tax
matter, the Company believes that its reserves reflect the probable outcome of
known tax contingencies.  The resolution of tax matters will not have a
material impact on the consolidated financial condition of the Company, although
a resolution could have a material impact on the Companys consolidated
statements of operations and comprehensive income for a particular future period
and on the Companys effective tax rate.

The Company is subject to varying statutory tax rates in the countries where it
conducts business.  Fluctuations in the mix of the Companys income
between countries result in changes to the Companys overall effective tax
rate.

Litigation

The Company is involved in various asserted and unasserted legal claims. 
An estimate is made to accrue for a loss contingency relating to any of these
legal claims if it is probable that a liability was incurred at the date of the
financial statements and the amount of loss can be reasonably estimated. 
Because of the subjective nature inherent in assessing the outcome of legal
claims and because the potential that an adverse outcome in a legal claim could
have material impact on the Companys legal position or results of
operations, such estimates are considered to be critical accounting
estimates.  After review, it was determined at September 30, 2006, that for
each of the various unresolved legal claims in which the Company is involved,
the conditions mentioned above were not met.  As such, no accrual was
recorded.  The Company will continue to evaluate all legal matters as
additional information becomes available.

Long-Lived Assets

The Company evaluates long-lived assets under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment of long-lived assets, and for
long-lived assets to be disposed of.  For assets to be held and used, the
Company groups a long-lived asset or assets with other assets and liabilities at
the lowest level for which identifiable cash flows are largely independent of
the cash flows of other assets and liabilities.  The Company performs an
impairment assessment whenever events or changes indicate a long-lived
assets carrying value might not be recoverable.  An impairment loss
for an asset group reduces only the carrying amounts of a long-lived asset or
assets of the group being evaluated.  The loss is allocated to the
long-lived assets of the group on a pro-rata basis using the relative carrying
amounts of those assets, except that the loss allocated to an individual
long-lived asset of the group does not reduce the carrying amount of that asset
below its fair value whenever that fair value is determinable without undue cost
and effort.  Estimates of future cash flows used to test the recoverability
of a long-lived asset group include only the future cash flows that are
associated with and that are expected to arise as a direct result of the use and
eventual disposition of the asset group.  The future cash flow estimates
used by the Company exclude interest charges.

37

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|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
ineffective.

On October 30, 2006, management and the
Audit Committee of the Company determined that the Unaudited Condensed
Consolidated Financial Statements for the fiscal quarters ended March 31, and
June 30, 2006 contained errors and should no longer be relied upon.  The
errors were as a result of an error made in the calculation of the
Companys interim tax provision for the quarters ended March 31 and June
30, 2006.  Our interim preparation and review controls surrounding income
taxation failed to fully consider the impact of the disposition that occurred in
the period.

In connection with these restatements,
management evaluated the effectiveness of our disclosure controls and
procedures.  Solely as a result of this material weakness, our principal
executive officer and principal financial officer have concluded that our
disclosure controls and procedures were not effective as of the end of the
fiscal quarter ended September 30, 2006.

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, 2006 that have significantly affected, or are
reasonably likely to significantly affect, the Companys internal controls
over financial reporting.

PART II  OTHER INFORMATION

|Item 1.  | Legal Proceedings                                                                                     
|-------- | ------------------------------------------------------------------------------------------------------
|         |                                                                                                       
|         | See Note 11 to the   unaudited interim Condensed Consolidated Financial Statements contained   herein.
|         |                                                                                                       
|Item 1a. | Risk Factors                                                                                          

Risk relating to our business

Our pension plans are currently
underfunded, and we expect to be subject to significant increases in pension
contributions to our defined benefit pension plans, thereby restricting our cash
flow.

We sponsor various pension plans in the
United States and Europe that are underfunded and require significant cash
payments. We contributed $4.0 million and $2.4 million to our U.S. Pension plans
and $1.0 million and $2.1 million to our European pension plans in 2004 and
2005, respectively. We are required to make minimum aggregate contributions of
$6.4 million in 2006 but plan to contribute $9.1 million during 2006. We
currently expect to be required to contribute approximately $3.1 million to our
U.S. pension plans in 2007. If our cash flow from operations is insufficient to
fund our worldwide pension liability, we may be forced to reduce or delay
capital expenditures, seek additional capital or restructure or refinance our
indebtedness.

The funding status of our pension plans is
determined using many assumptions, such as inflation, investment rates,
mortality, turnover and discount rates, any of which could prove to be different
than projected. If the performance of the assets in our pension plans does not
meet our expectations, or if other actuarial assumptions are modified, we may be
required to contribute more to our pension plans than we currently expect. For
example, an approximate 25-basis point decline in the current liability interest
rate, which is used under the Employee Retirement Income Security Act of 1974,
or ERISA, for funding purposes, would increase our minimum required contribution
to our U.S. pension plans by approximately $2.2 million over the next three
years

38

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Our pension plans in the aggregate are underfunded by approximately $56 million
as of December 31, 2005 (based on the actuarial assumptions used for FAS 87
purposes and comparing our projected benefit obligation to the fair value of
plan assets) and required a certain level of mandatory contributions as
prescribed by law. Our U.S. pension plans, which are underfunded by
approximately $37 million as of December 31, 2005, are subject to ERISA. In the
event our U.S. pension plans are terminated for any reason while the plans are
less than fully funded, we will incur a liability to the Pension Benefit
Guaranty Corporation that may be equal to the entire amount of the underfunding
at the time of the termination. In addition, changes in required pension funding
rules that would be effected by the enactment of the Pension Protection Act of
2006 will significantly increase our funding requirements beginning in 2008,
which will have an adverse effect on our cash flow and could require us to
reduce or delay our capital expenditures, seek additional capital or restructure
or refinance our indebtedness. See Note 13 to our consolidated financial
statements contained in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2005.

Our financial results could be
adversely affected by an interruption of supply or an increase in coal
prices.

We use bituminous coal as the main raw
material in our granular activated carbon production process. We estimate that
coal will represent approximately 34% of our carbon product costs in 2006. We
have various annual and multi-year contracts in place for the supply of coal
that expire at various intervals from 2007 to 2011.  Interruptions in coal
supply caused by mine accidents, labor disputes, transportation delays, or other
events for other than a temporary period could have an adverse effect on our
being able to meet our customer demand. In addition, increases in the prices we
pay for coal under our supply contracts could adversely affect our financial
results by significantly increasing production costs. During 2005, our aggregate
costs for coal increased by $1.5 million, or 15.5%, compared to 2004. Based upon
the estimated usage of coal in 2006, a hypothetical 10% increase in the price of
coal would result in $0.9 million of additional pre-tax expenses to us.
Historically, we have generally not been able to pass through raw materials
price increases to our customers, and we may in the future continue to be
generally unable to do so.

Our financial results could be
adversely affected by shortages in energy supply or increases in energy
costs.

The price for and availability of energy
resources could be volatile as it is affected by political and economic
conditions that are outside our control. We utilize natural gas as a key
component in our activated carbon manufacturing process and have annual and
multi-year contracts for the supply of natural gas at each of our major
facilities. If shortages of or restrictions on the delivery of natural gas
occur, production at our activated carbon facilities would be reduced, which
could result in missed deliveries or lost sales. We also have exposure to
fluctuations in energy costs as they relate to the transportation and
distribution of our products. For example, natural gas prices have increased
significantly in recent years. We may not be able to pass through natural gas
and other fuel price increases to our customers.

Increases in U.S. and European
imports of Chinese manufactured activated carbon could have an adverse effect on
our financial results.

We face pressure and competition in our
U.S. and European markets from brokers of low cost imported activated carbon
products, primarily from China. While we believe we have technically superior
product, if imports increase and Chinese products are accepted in more
applications, we could see declines in net sales. In addition, the supply of low
cost activated carbon may make it more difficult for us to pass through raw
material price increases to our customers. We believe that Chinese activated
carbon producers are selling their products in the United States below the
prices that they could obtain for their product in China. The Company received
notification from the United States Department of Commerce (the DOC)
announcing the imposition of preliminary anti-dumping duties on all imports of
steam activated carbon from China.  The DOC  immediately ordered U.S.
Customs and Border Protection to require importers to post a bond or cash
deposit in the amount of the duties.  Over the next several months the DOC
will verify information submitted by various respondents.  A final
determination is expected in April 2007.  The final dumping duties could be
imposed for up to five years. The Rules will have an adverse impact on
the cost of Chinese manufactured activated carbon imported into the U.S. which
is expected to improve U.S. demand and pricing on our domestically produced
products.  If the final determination results in a reversal of the current
duties being imposed, U.S. demand and pricing for our domestic product could be
adversely impacted.

Our inability to successfully negotiate
new collective bargaining agreements upon expiration of the existing agreements
could have an adverse affect on our financial results.

We have collective bargaining agreements
in place at four of our production facilities covering approximately 31.8% of
our full-time workforce as of December 31, 2005. Those collective bargaining
agreements expire from February 2007 to April 2009. Any work stoppages as a
result of disagreements with any of the labor unions or our failure to
renegotiate any of the contracts as they expire could disrupt production and
significantly increase product costs as a result of less efficient operations
caused by the resulting need to rely on temporary labor.

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We have operations in multiple
foreign countries and, as a result, are subject to foreign exchange translation
risk, which could have an adverse effect on our financial
results.

We conduct significant business operations
in several foreign countries. Of our year-to-date September 2006 net sales,
approximately 44.9% were sales to countries other than the United States, and
year-to-date September 2006 net sales denominated in non-U.S. dollars
represented approximately 33% of our overall net sales. We conduct business in
the local currencies of each of our foreign subsidiaries or affiliates. Those
local currencies are then translated into U.S. dollars at the applicable
exchange rates for inclusion in our consolidated financial statements. The
exchange rates between some of these currencies and the U.S. dollar in recent
years have fluctuated significantly and may continue to do so in the future.
Changes in exchange rates, particularly the strengthening of the U.S. dollar,
could significantly reduce our sales and profitability from foreign subsidiaries
or affiliates from one period to the next as local currency amounts are
translated into fewer U.S. dollars.

Our European and Japanese activated
carbon businesses are sourced from both the United States and China, which
subjects these businesses to foreign exchange translation risk.

Our only production facilities for virgin
granular activated carbon are in the United States and China. Those production
facilities are used to supply all of our global demand for virgin granular
activated carbon. All of our foreign operations purchase from the U.S.
operations in U.S. dollars, yet sell in local currency, resulting in foreign
exchange translation risk. We generally execute foreign currency derivative
contracts of not more than one year in duration to cover our known or projected
foreign currency exposure. However, those contracts do not protect us from
longer term-trends of a strengthening U.S. dollar, which could significantly
increase our cost of activated carbon delivered to our European and Japanese
markets, and we may not be able to offset these costs by increasing our
prices.

Our business includes capital equipment
sales which could have extreme fluctuations due to the cyclical nature of that
type of business.

Our Equipment segment represented
approximately 11% of our 2006 net sales as of the period ended September 30,
2006. This business generally has a long project life cycle from bid
solicitation to project completion and often requires customers to make large
capital commitments well in advance of project execution. In addition, this
business is usually affected by the general health of the overall economy. As a
result, sales and earnings from the Equipment segment could be
volatile.

We could find it difficult to fund the
capital needed to complete our growth strategy due to borrowing restrictions
under our new revolving credit facility.

We are extended credit under our revolving
credit facility subject to compliance with certain financial covenants. For
example, our revolving credit facility contains various affirmative and negative
covenants, including limitations on us with respect to our ability to pay
dividends, make loans, incur indebtedness, grant liens on our property, engage
in certain mergers and acquisitions, dispose of assets and engage in certain
transactions with our affiliates. Borrowing availability under our revolving
credit facility is be based on the value, from time to time, of certain of our
accounts receivable, inventory and equipment. As a result, these restrictions
may prevent us from being able to borrow sufficient funds under our revolving
credit facility to meet our future capital needs, and alternate financing on
terms acceptable to us may not be available.

We have had to amend our prior revolving
credit facility several times within the past year in order to cure violations
or remain compliant as financial results have declined. Through June 30, 2006,
we were in default of our prior revolving credit facility as a result of a
violation of a financial covenant and have been required to reclassify the
borrowings outstanding under our old revolving credit facility as short-term
debt. During the period of default, the lenders had the right to accelerate the
debt. We may have similar issues with respect to our existing revolving credit
facility. If our liquidity remains constrained for more than a temporary period,
we may need to either delay certain strategic growth projects or access higher
cost capital markets in order to fund our projects, which may adversely affect
our financial results.

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Our required capital expenditures may
exceed our estimates.

Our capital expenditures were $16.0
million in 2005, primarily including improvements to our manufacturing
facilities, repair of our Pearl River manufacturing facility as a result of
damage sustained from Hurricane Katrina and equipment to be utilized in our
service business. Our capital expenditures for 2006 are projected to be
approximately $12.0 million, $10.0 million of which were spent in the first nine
months of 2006. Of the amount spent on capital expenditures in the first nine
months of 2006, $2.3 million was funded by insurance proceeds obtained from a
settlement with our insurance carrier related to damage sustained from Hurricane
Katrina. Future capital expenditures may be significantly higher and may vary
substantially if we are required to undertake certain actions to comply with new
regulatory requirements or compete with new technologies.  We may not have
the capital to undertake these capital investments. If we are unable to do so,
we may not be able to effectively compete.

Our financial results could be
adversely affected by the continued idling of one of our reactivation
facilities.

In January 2006, we announced the
temporary idling of our reactivation facility in Blue Lake, California. It
currently is our intention to resume operation of the plant in 2007. If we
conclude that idling of facility beyond 2007 is warranted, our financial results
may be adversely affected by the resulting impairment charges of approximately
$1.5 million.

Declines in the operating performance
of one of our business segments could result in an impairment of the
segments goodwill.

As of September 30, 2006, we had
consolidated goodwill of approximately $34.5 million recorded in our business
segments, primarily from our Activated Carbon and Service and Equipment
segments. We test our goodwill on an annual basis in order to determine whether
the book value of our assets is still supported by the fair value of the
underlying business. To the extent that it is not, we are required to record an
impairment charge to reduce the asset down to fair value. SFAS 142, which came
into effect in 2002, establishes guidance for the accounting for goodwill and
intangibles. Upon implementation, we recorded a pre-tax goodwill impairment
charge of $51.0 million related to goodwill recorded from our acquisition of
Advanced Separation Technologies in 1996. A continued decline in the operating
performance of any of our business segments or sale of a business at an amount
less than book value could result in a goodwill impairment charge which could
have material effect on our financial results.

Delays in enactment of new state or
federal regulations could restrict our ability to reach our strategic growth
targets and lower our return on invested capital.

Our strategic growth initiatives are
reliant upon more restrictive environment regulations being enacted for the
purpose of making water and air cleaner and safer. If stricter regulations are
delayed or are not enacted or enacted but subsequently repealed or amended to be
less strict, or enacted with prolonged phase-in periods, our sales growth
targets could be adversely affected and our return on investor capital could be
reduced.

For example, stricter regulations
surrounding the treatment of Cryptosporidium and other disease causing
microorganisms in drinking water, as addressed by the EPAs promulgation of
the Long Term 2 Enhanced Surface Water Treatment Rule (LT2), were
expected to be effective as of the fourth quarter of 2004. LT2 was not
ultimately published in the Federal Register until January 2006, thus delaying
municipalities requirements for testing and any subsequent need to fund a
plan for remediation by over a year. The effect has been a delay in the timing
of the expected growth for our UV business.

Our industry is highly competitive. If
we are unable to compete effectively with competitors having greater resources
than we do, our financial results could be adversely affected.

Our activated carbon business faces
significant competition from Norit N.V., Westvaco Corporation and Siemens Water,
together with Chinese producers. Our UV technology products face significant
competition from Trojan Technologies, Inc., which is owned by Danaher
Corporation, and Wedeco Ideal Horizons, which is owned by ITT Industries. In
each case, our competitors include major manufacturers and diversified
companies, a number of which have revenues and capital resources exceeding ours,
which they may use to develop more advanced or more cost-effective technologies,
increase market share or leverage their distribution networks. We may experience
reduced net sales as a result of having fewer resources than these
competitors.

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Encroachment into our markets by
competitive technologies could adversely affect our financial
results.

Activated carbon is utilized in various
applications as a cost effective solution for solving customer problems. If
other competitive technologies, such as membranes, ozone and UV, are advanced to
the stage in which such technologies could effectively compete with activated
carbon technologies, we could experience a decline in net sales, which could
adversely affect our financial results.

Failure to innovate new products or
applications could adversely affect our ability to meet our strategic growth
targets.

Part of our strategic growth and
profitability plans involve the development of new products or new applications
for our current products in order to replace more mature products or markets
that have seen increased competition. If we are unable to develop new products
or applications, our financial results could be adversely affected.

A planned or unplanned shutdown at one
of our production facilities could have an adverse effect on our financial
results.

We operate multiple facilities, and source
product from strategic partners who operate facilities, which are close to water
or in areas susceptible to earthquakes. An unplanned shutdown at any of our or
our strategic partners facilities for more than a temporary period as a
result of a hurricane, typhoon, earthquake or other natural disaster, or a
result of fire, explosions, war, terrorist activities, political conflict or
other hostilities, could significantly affect our ability to meet our demand
requirements, thereby resulting in lost sales and profitability in the
short-term or eventual loss of customers in the long-term. In addition, a
prolonged planned shutdown of any of our production facilities due to a change
in business conditions could result in impairment charges that could have an
adverse impact on our financial results.

A recent example of an unplanned shutdown
of one of our production facilities is the shutdown of our Pearl River facility
in Pearlington, Mississippi due to damage caused by Hurricane Katrina in August
2005. The plant did not become operational again until November 2005 and was not
operating again at full capacity until January 2006. Certain customer shipments
were either delayed or cancelled during the plant outage, the consequences of
which have adversely affected us throughout 2006. We had estimated our pre-tax
business interruption losses during 2005 and the first nine months of 2006 to be
approximately $4.4 million in the aggregate due to the effect of the unplanned
shutdown of the Pearl River facility.

We hold a variety of patents that
give us a competitive advantage in certain markets. An inability to defend those
patents from competitive attack could have an adverse effect on both current
results and future growth targets.

From time to time in the course of our
business, we have to address competitive challenges to our patented technology.
We are currently in litigation in multiple jurisdictions to defend our process
patent for the use of ultraviolet light in the prevention of infection from
Cryptosporidium and Giardia in drinking water. First, in July 2006, the U.S.
District Court for the District of New Jersey granted the plaintiffs
motion for summary judgment in the matter, holding that our patent was invalid.
We have appealed this ruling. Second, we filed suit in the U.S. District Court
for the Western District of New York, alleging that the defendants are
practicing the method claimed in our patent without a license, and we have been
granted a stay pending the outcome of our appeal to the U.S. Court of Appeals
for the Federal Circuit in the first case. Third, on November 14, 2006 a
Canadian Federal Court entered a judgement after trial finding that our process
patent for the use of ultraviolet light to prevent infection from
Cryptosporidium and Giardia in drinking water is invalid.  The Company
intends to appeal this decision. An unfavorable outcome in any of these cases
could impair our ability to capitalize on substantial future revenues from the
licensing of that technology. Finally, certain competitors have opposed our
process patent for the use of ultraviolet light in the prevention of infection
from Cryptosporidium and Giardia in drinking water in Germany.

In addition, we have incurred significant
legal fees and expenses in litigating these matters. For example, legal expenses
related to these patent litigation matters totaled approximately $2.4 million in
2005 and approximately $3.4 million during the nine months ended September 30,
2006. We may be required to incur additional significant legal expenses to
defend our intellectual property in the future.

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Furthermore, these legal disputes over our
UV patents may adversely affect our business and growth prospects because they
may suppress overall demand for UV equipment as municipalities may decide to
wait for the completion of the litigation to resolve the resulting uncertainties
before making investment decisions.

Our products may infringe the
intellectual property rights of others, which may cause us to pay unexpected
litigation costs or damages or prevent us from selling our
products.

Although it is our intention to avoid
infringing or otherwise violating the intellectual property rights of others,
our products may infringe or otherwise violate the intellectual property rights
of others.  We may be subject to legal proceedings and claims, including
claims of alleged infringement by us of the patents and other intellectual
property rights of third parties.  Intellectual property litigation is
expensive and time-consuming, regardless of the merits of any claim.

If we were to discover or be notified that
our products potentially infringe or otherwise violate the intellectual property
rights of others, we may need to obtain licenses from these parties or
substantially re-engineer our products in order to avoid infringement.  We
might not be able to obtain the necessary licenses on acceptable terms, or at
all, or be able to re-engineer our products successfully.  Moreover, if we
are sued for infringement and lose the suit, we could be required to pay
substantial damages and/or be enjoined from using or selling the infringing
products.  Any of the foregoing could cause us to incur significant costs
and prevent us from selling our products.

Environmental compliance and
remediation could result in substantially increased capital requirements and
operating costs.

Our production facilities are subject to
environmental laws and regulations in the jurisdictions in which they operate or
maintain properties.  Costs may be incurred in complying with such laws and
regulations.  Each of our domestic production facilities require permits
and licenses issued by local, state and federal regulators which regulate air
emissions and water discharges.  These permits are subject to renewal and,
in some circumstances, revocation.  International environmental
requirements vary and could have substantially lesser requirements that may give
competitors a competitive advantage.  Additional costs may be incurred if
environmental remediation measures are required.  In addition, the
discovery of contamination at any of our current or former sites or at locations
at which we disposed of waste may expose us to cleanup obligations and other
damages.  For example, we and the Pennsylvania Department of Environmental
Protection (PADEP) recently agreed to settlement terms with respect to a demand
by the PADEP for response costs relating to a site in Allegheny County,
Pennsylvania, requiring us to pay an aggregate of $515,000.  If we receive
similar demands in the future, we may incur significant costs in connection with
the resolution of those matters.

Our international operations expose
us to political and economic uncertainties and risks from abroad, which could
negatively affect our results of operations.

We have manufacturing facilities and sales
offices in Europe, China, Japan and the United Kingdom which are subject to
economic conditions and political factors within the respective countries which,
if changed in a manner adverse to us, could negatively affect our results of
operations and cash flow.  Political factors include, but are not limited
to, taxation, nationalization, inflation, currency fluctuations, increased
regulation and quotas, tariffs and other protectionist measures.

We face risks in connection with the
material weaknesses described in our Sarbanes-Oxley Section 404 Management
Report and any other related remedial measures that we may
undertake.

In connection with the preparation of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2005, we
concluded that our internal controls were ineffective as of December 31, 2005 as
a result of the failure to record invoices for professional services in a timely
manner.  We remediated the identified material weakness by centralizing the
collection and record keeping of invoices for professional services and
establishing balance sheet reconciliation review meetings with the business
process owners.  We also have identified a significant deficiency related
to a lack of segregation of duties with respect to our information systems and
are in the process of implementing changes to remediate this significant
deficiency.  Subsequent to our Annual Report, we concluded that our
internal controls were ineffective as a result of an error made in the
calculation of the Companys tax provision for the quarters ended March 31
and June 30, 2006, respectively.  We continue to evaluate the effectiveness
of our disclosure controls and procedures and internal control over financial
reporting on an ongoing basis, taking additional remedial action as
appropriate.

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If we are unable to effectively remediate
this material weakness and any other material weaknesses or significant
deficiencies in internal control over financial reporting that are identified in
the future and to assert that disclosure controls and procedures including
internal control over financial reporting are effective in any future period, we
could lose investor confidence in the accuracy and completeness of our financial
reports, which could have an adverse effect on our stock price and potentially
subject us to litigation.  In addition, we may be required to incur
additional costs including but not limited to the potential for hiring
additional personnel to improve our existing internal control system and/or the
hiring of additional personnel.

The Company has received a letter of
written comments from the staff of the Division of Corporate Finance of the SEC,
which could result in changes to our previously filed reports.

The Company has received a letter of
written comments from the staff of the Division of Corporate Finance of the SEC
dated November 29, 2006 pertaining to Form 10-K for the year ended December 31,
2005, Form 10-Q as originally filed for the period ended June 30, 2006, and Form
8-K dated November 16, 2006 previously filed under the Exchange Act.  The
Company is in the process of responding to and resolving these SEC comments. The
Company cannot ultimately predict the date of resolution of the unresolved
comments, the results of the SEC staff review, or the resulting impact of
additional review, if any, to its SEC filings.

We have significant domestic and
foreign net operating tax loss carryforwards which, if they are not
utilized, would have an adverse effect on our financial results.

As of September 30, 2006, we had $25.1
million of deferred tax assets associated with net operating loss carryforwards
(NOLs) that were generated from both our domestic and foreign
operations.  We have established a valuation reserve of $6.2 million for
these deferred tax assets when it is deemed more likely than not that a portion
of these deferred tax assets will not be realized.  If we do not meet our
projections of profitability in the future, we may not be able to realize these
NOLs, and we may be required to record an additional valuation allowance, which
would adversely affect our financial results.  In addition, if some or all
of these NOLs expire, they will not be available to offset our tax
liability.

Our ability to utilize our NOLs and
certain other tax attributes may be limited.

As of September 30, 2006, we had NOLs of
approximately $22.0 million for federal income tax purposes and approximately
$73.7 million for state income tax purposes.  Under Section 382 of the
Internal Revenue Code, if a corporation undergoes an ownership
change, the corporations ability to use its pre-change NOLs and
other pre-change tax attributes to offset its post-change income may be
limited.  An ownership change is generally defined as a greater than 50%
change in its equity ownership by value over a three-year period.  We may
experience an ownership change in the future as a result of subsequent shifts in
our stock ownership.  If we were to trigger an ownership change in the
future, our ability to use any NOLs existing at that time could be
limited.

Risks related to the convertible
senior notes and our common stock:

Although the notes are referred to as
senior notes, the notes will be effectively junior to the rights of
our and our subsidiary guarantors existing and future secured creditors
and effectively subordinated to the existing and future indebtedness and other
liabilities of our non-guarantor subsidiaries.

The notes will be our general,
unsecured senior obligations and will rank equally in right of payment with all
of our existing and future unsecured senior indebtedness and senior in right of
payment to all of our existing and future indebtedness.  The notes will be
effectively junior to any of our existing and future secured indebtedness to the
extent of the value of the assets securing such indebtedness.  In addition,
the notes will be effectively subordinated to all existing and future
liabilities of our non-guarantor subsidiaries.  These liabilities may
include indebtedness, trade payables, guarantees, lease obligations and letter
of credit obligations.

The notes will be guaranteed on a senior
unsecured basis by certain of our domestic subsidiaries, which we refer to as
the subsidiary guarantors.  The subsidiary guarantees will be general
unsecured senior obligations of the subsidiary guarantors and will rank equally
in right of payment with any existing and future senior indebtedness of the
subsidiary guarantors.  Our non-guarantor subsidiaries have no obligation
to pay any amounts due on the notes and have no obligation to provide us with
funds for our payment obligations, whether by dividends, distributions, loans or
other payments.  Our right to receive any assets of any of our
non-guarantor subsidiaries upon their liquidation or reorganization, and
therefore the right of the holders of the notes to participate in those assets,
will be subordinated to claims of that subsidiarys creditors, including
trade creditors.  In addition, even if we were a creditor of any of our
subsidiaries, our rights as a creditor would be subordinate to any security
interest in the assets of our subsidiaries and any indebtedness of our
subsidiaries senior to that held by us.

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Holders of our existing and future secured
indebtedness will have claims that are senior to your claims as holders of the
notes, to the extent of the value of the assets securing such
indebtedness.  The notes will be effectively junior to existing secured
financings and any future secured indebtedness incurred by us.  As a
result, in the event of any distribution or payment of our assets in any
bankruptcy, liquidation or dissolution, holders of secured indebtedness will
have prior claim to those assets that constitute their collateral.  Holders
of the notes will participate ratably with all holders of our unsecured
indebtedness that is deemed to be of the same class as the notes, and
potentially with all of our general creditors, based on the respective amounts
owed to each holder or creditor, in our remaining assets.  In any of the
foregoing events, we cannot assure you that there will be sufficient assets to
pay amounts due on the notes.

As of September 30, 2006, on an actual
historical basis, we and the subsidiary guarantors had $81.7 million in senior
indebtedness, and our non-guarantor subsidiaries had approximately $27.1 million
in liabilities.

Federal or state laws allow courts,
under specific circumstances, to void debts, including subsidiary guarantees,
and could require holders of notes to return payments received from us and the
subsidiary guarantors.

Under federal bankruptcy law and
comparable provisions of state fraudulent transfer laws, if a subsidiary
guarantor becomes a debtor in a case under the U.S. Bankruptcy Code or suffers
other financial difficulty, a court might avoid (that is, cancel) its
guarantee.  A court might do so if it found that

| |  | the subsidiary received less than
reasonably equivalent value or fair consideration for the incurrence of such
debt or subsidiary guarantee; and     
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | when the subsidiary entered into its
guarantee (or, in some jurisdictions, when it became obligated to make payments
under its guarantee), it either:
| |   | -                                                                                                                                                    
| |   | -                                                                                                                                                    
| |   | -                                                                                                                                                    

A court might also avoid a
subsidiarys guarantee, without regard to these factors, if it found that
the subsidiary entered into its guarantee with actual intent to hinder, delay or
defraud its creditors.

The measure of insolvency for purposes of
these fraudulent transfer laws will vary depending upon the law applied in any
proceeding to determine whether a fraudulent transfer has occurred. 
Generally, however, a court would consider an entity insolvent if:

| |  | the sum of its debts, including contingent
liabilities, was greater than the fair salable value of all of its
assets;                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the present fair salable value of its
assets was less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become absolute and mature; or
| |  | it could not pay its debts as they become
due.                                                                                                                                                                            

We cannot be sure as to the standards that
a court would use to determine whether or not the subsidiary guarantors were
solvent at the relevant time, or, regardless of the standard that the court
uses, that the issuance of the subsidiary guarantees would not be voided or
subordinated to the subsidiary guarantors other debt.

If the subsidiary guarantees were legally
challenged, they could also be subject to the claim that, since they were
incurred for our benefit, and only indirectly for the benefit of the subsidiary
guarantors, the obligations of the subsidiary guarantors were incurred for less
than fair consideration.

A court could thus void the obligations
under the subsidiary guarantees or subordinate the subsidiary guarantees to the
subsidiary guarantors other debt or take other action detrimental to
holders of the notes.

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We may not have sufficient funds
necessary to settle conversion of the notes or to purchase the notes upon a
fundamental change or other purchase date, and our future debt may contain
limitations on our ability to pay cash upon conversion or repurchase of the
notes.

Upon conversion of the notes, we will be
required to pay a settlement amount in cash and shares of our common stock, if
any, based upon a 25 trading-day observation period.  In addition, on
August 15, 2011, August 15, 2016 and August 15, 2026, holders of the notes may
require us to purchase their notes for cash.  Holders may also require us
to purchase their notes upon a fundamental change, as described under
Description of notes  Fundamental change permits holders to require
us to purchase notes.  A fundamental change may also constitute an
event of default, and result in the effective acceleration of the maturity of
our then-existing indebtedness under our existing revolving credit facility or
other indebtedness we have may in the future, including under our new revolving
credit facility.

Further, we cannot assure you that we
would have sufficient financial resources, or would be able to arrange
financing, to pay the settlement amount in cash, or the purchase price or
fundamental change purchase price for the notes tendered by the holders in
cash.  Our ability to pay the settlement amount in cash, or the purchase
price or fundamental change purchase price for the notes in cash, will be
subject to limitations we may have in our credit facilities, or any other
indebtedness we may have in the future.  If you convert your notes or
require us to purchase them, we may seek the consent of our lenders or attempt
to refinance our debt, but there can be no assurance that we will be able to do
so.

Failure by us to pay the settlement amount
upon conversion or purchase the notes when required will result in an event of
default with respect to the notes, which may also result in a default under
existing and future agreements governing our indebtedness.  If the
repayment of such indebtedness were to be accelerated after any applicable
notice or grace periods, we may not have sufficient funds to repay such
indebtedness and the notes.

The conditional conversion feature of
the notes until June 15, 2011 could result in your receiving less than the value
of our common stock into which a note would otherwise be convertible and may
impact the trading price of the notes and make them more difficult to
resell.

Prior to June 15, 2011, the notes are
convertible into cash and shares of our common stock, if applicable, and only if
specified conditions are met.  If the specific conditions for conversion
are not met, you will not be able to convert your notes, and you may not be able
to receive the value of the cash and common stock into which the notes would
otherwise be convertible.  In addition, an inability to convert may
adversely affect the trading price of the notes and/or the resaleability of the
notes.

The value of the consideration received
by holders upon conversion of the notes may be less than the conversion value of
the notes on the conversion date.

Upon conversion, we will pay cash and
deliver shares of our common stock, if any, based on a daily conversion value
calculated on a proportionate basis for each day of the 25 trading day
observation period.  Accordingly, upon conversion of a note, you may
receive less proceeds than you expected because the value of our common stock
may decline between the conversion date and the day the settlement amount of
your notes is determined.  In addition, because of the 25 trading day
observation period, settlement will generally be delayed until at least the 30th
trading day following the related conversion date.  See Description
of notes-Conversion rights-Settlement upon conversion.

Under certain circumstances, upon
conversion you will not receive the settlement amount until after
maturity.

If you convert after the 30th trading day
immediately preceding the maturity date, you will not receive the settlement
amount until after the maturity date.  In addition, if you convert on or
prior to the 30th trading day immediately preceding the maturity date, you may
not receive the settlement amount until after the maturity date, depending on
whether a market disruption event occurs on one or more trading days during the
25 trading day observation period.

The notes do not restrict our ability
to take certain actions that could adversely affect the trading price of the
notes.

Neither we nor our subsidiaries are
restricted under the notes from incurring additional debt (including secured
debt), incurring liens, paying dividends, issuing or repurchasing securities or
entering into transactions with our affiliates.  In addition, the indenture
governing the notes does not require us to achieve or maintain any minimum
financial results relating to our financial position or results of
operations.  Our ability to recapitalize, incur additional debt and take
other actions that are not limited by the notes could have the effect of
diminishing our ability to make payments on the notes when due.

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We may issue additional shares of our
common stock or other equity and thereby adversely affect the market price of
our common stock and the trading price of the notes.

Except as described under Plan of
Distribution, we are not restricted from issuing additional shares of our
common stock, or securities convertible into or exchangeable for our common
stock, during the life of the notes and have no obligation to consider your
interests for any reason.  If we issue additional shares of our common
stock or such convertible or exchangeable securities, it may adversely affect
the market price of our common stock and, in turn, the trading price of the
notes.  In addition, it may impair our ability to raise capital through the
sale of additional equity securities.

The trading price of the notes could
be adversely affected by the market price of our common stock, which has
historically experienced significant volatility.

Because the notes are convertible based on
our common stock, we expect that in general the trading price of the notes will
be significantly affected by the market price of our common stock.  The
market price of our common stock has historically experienced significant
fluctuations.  The market price of our common stock is likely to continue
to be volatile and subject to significant price and volume fluctuations in
response to market and other factors, including the other risk factors discussed
elsewhere in Risk factors and Forward-looking
statements.  Volatility or depressed market prices of our common
stock could result in volatility or depressed trading prices of the notes, could
limit the amount of cash and shares of our common stock, if any, deliverable
upon conversion of the notes, and could make it difficult for you to resell the
notes (or shares of common stock, if any, issued upon conversion) when you want
or at attractive prices.

The adjustments to the conversion rate
do not cover all dilutive events that may adversely affect the trading price of
the notes.

The conversion rate is subject to
adjustment for certain events, including, but not limited to, the issuance of
stock dividends on our common stock, the issuance of certain rights or warrants,
subdivisions, combinations, distributions of capital stock, indebtedness, or
assets, cash dividends and certain issuer tender or exchange offers as described
under Description of notes-Conversion rights-Conversion rate
adjustments. However, the conversion rate will not be adjusted for certain
other events, such as an issuance of common stock for cash or in connection with
acquisition, that may adversely affect the market price of our common stock. If
any of these other events adversely affects the market price of our common
stock, it may also adversely affect the trading price of the notes.

Because your right to require purchase
of the notes upon a fundamental change is limited, the trading price of the
notes may decline if we enter into a transaction that does not constitute a
fundamental change under the indenture.

Upon the occurrence of a fundamental
change (as defined under Description of notes-Fundamental change permits
holders to require us to purchase notes), you have the right to require us
to purchase your notes. However, the fundamental change provisions will not
afford protection to holders of notes in the event of certain transactions. For
example, transactions such as leveraged recapitalizations, refinancing,
restructuring, or acquisitions initiated by us may not constitute a fundamental
change requiring us to purchase the notes. In the event of any such transaction,
the holders would not have the right to require us to purchase the notes, even
though each of these transactions could increase the amount of our indebtedness,
or otherwise adversely affect our capital structure of any credit ratings,
thereby adversely affecting the trading price of the notes.

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The adjustment to the conversion rate
for notes converted in connection with a specified corporate transaction may not
adequately compensate you.

If a specified corporate transaction that
constitutes certain fundamental changes occurs prior to August 15, 2011 with
respect to notes converted in connection with such transaction, we will increase
the conversion rate by a number of additional shares of our common stock unless
the price paid per share of our common stock in such transaction is less than
the last reported sale price per share of our common stock on the date of this
offering memorandum (subject to adjustment) or above a specified price (subject
to adjustment). A description of how the increase in the conversion rate will be
determined is set forth under Description of notes-Conversion
Rights-Adjustments to shares delivered upon conversion upon certain fundamental
changes.

Although the increase in the conversion
rate is designed to compensate you for the lost value of your notes as a result
of such transaction, it may not adequately compensate you for such loss.
Furthermore, our obligation to increase the conversion rate in connection with
any such specified corporate transaction could be considered a penalty, in which
case the enforceability thereof would be subject to general principles of
reasonableness of economic remedies.

We have not registered the notes,
the subsidiary guarantees or the common stock issuable upon conversion of the
notes, which will limit your ability to resell them.

The notes offered hereby, the subsidiary
guarantees and the common stock issuable upon conversion of the notes have not
been registered. This offering is being conducted in reliance upon an exemption
from registration under the Securities Act and applicable state securities laws.
We and the subsidiary guarantors have agreed, however, to use reasonable best
efforts to file a shelf registration statement with the SEC within 90 days of
the issue date, and to use reasonable efforts to cause such registration
statement to become effective within 240 days from the issue date, in order to
register resales of the notes, the subsidiary guarantees and common stock
issuable upon conversion of the notes under the Securities Act. The 90-day
period expired on November 16, 2006.  The Company did not file a
registration statement within the time period and, as a result, is obligated to
pay predetermined additional interest to holders of the notes as described in
the registration rights agreement.  Until the notes, the subsidiary
guarantees and the common stock issued upon conversion of the notes are sold
pursuant to the shelf registration statement, you may transfer or resell the
notes only in a transaction exempt from the registration under the Securities
Act and applicable state securities laws. Although we are obligated to attempt
to register resales of the notes, the subsidiary guarantees and the common stock
issuable upon the conversion of the notes under the Securities Act, no
assurances can be given as to the ability of holders to sell their notes, the
subsidiary guarantees of the common stock issuable upon conversion of the
notes.

An active trading market for the notes
may not develop.

The notes are a new issue of securities
with no established trading market. A trading market for the notes may not
develop, or if it does, it may not be liquid at the time you may want to sell
the notes. The initial purchaser has advised us that it intends to make a market
in the notes after the offering is completed. However, the initial purchaser is
not obligated to do so and it may discontinue any market-making at any time
without notice. Further, such market making activities will be subject to limits
imposed by the U.S. federal securities laws, and may be limited during the
pendency of any shelf registration statement. As a result, an active trading
market for the notes may not develop.

If we increase the cash dividend on
our common stock, you may be deemed to have received a taxable dividend without
the receipt of any cash.

If we increase the cash dividend on our
common stock, an adjustment to the conversion rate may result, and you may be
deemed to have received a taxable dividend subject to United States federal
income tax without receipt of any cash. If you are a non-U.S. holder (as defined
in Certain U.S. federal income and estate tax consequences), such
deemed dividend may be subject to U.S. federal withholding tax at a 30% rate or
such lower rate as may be specified by an applicable treaty. See Certain
U.S. federal income and estate tax consequences.

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If you hold notes, you will not be
entitled to any rights with respect to our common stock, but you will be subject
to all changes made with respect to our common stock.

If you hold notes, you will not be
entitled to any rights with respect to our common stock (including, without
limitation, voting rights and rights to receive any dividends or other
distributions on our common stock), but you will be subject to all changes
affecting our common stock. You will only have rights with respect to our common
stock if and when we deliver shares of our common stock to you upon conversion
of your notes, and, to a limited extent, under the conversion rate adjustment
applicable to the notes. For example, in the event that an amendment is proposed
to our certificate of incorporation or bylaws requiring stockholder approval and
the record date for determining the stockholders of record entitled to vote on
the amendment occurs prior to delivery of common stock to you, you will not be
entitled to vote on an amendment, although you will nevertheless be subject to
any changes in the powers or rights of our common stock.

The fundamental changes provisions may
delay or prevent an otherwise beneficial takeover attempt of our
company.

The fundamental change provisions,
including the fundamental change purchase right and the provisions requiring an
increase in the conversion rate for conversions in connection with certain
fundamental changes, may in certain circumstances delay or prevent a takeover of
our company and the removal of incumbent management that might otherwise be
beneficial to investors.

Our stockholder rights plan and our
certificate of incorporation and bylaws and Delaware law contain provisions that
may delay or prevent an otherwise beneficial takeover attempt of our company.

Our stockholder rights plan and certain
provisions of our certificate of incorporation and bylaws and Delaware law could
make it more difficult for a third party to acquire us, even if doing so would
be beneficial to our stockholders. These include provisions:

| |  | providing for a board of   directors with staggered, three-year terms;                                                                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                   
| |  | requiring super-majority   voting to affect certain amendments to our certificate of incorporation and   bylaws;                                                                  
| |   |                                                                                                                                                                                   
| |  | limiting the persons who   may call special stockholders meetings;                                                                                                               
| |   |                                                                                                                                                                                   
| |  | limiting stockholder action   by written consent;                                                                                                                                 
| |   |                                                                                                                                                                                   
| |  | establishing advance notice   requirements for nominations for election to the board of directors or for   proposing matters that can be acted upon at stockholders meetings; and
| |   |                                                                                                                                                                                   
| |  | allowing our board of   directors to issue shares of preferred stock without stockholder approval.                                                                                

These provisions, along or in combination
with each other, may discourage transactions involving actual or potential
changes of control, including transactions that otherwise could involve payment
of a premium over prevailing market prices to holders of our common stock, or
could limit the ability of our stockholders to approve transactions that they
may deem to be in their best interests.

An adverse rating of the notes may
adversely affect the trading price of the notes.

We do not intend to seek a rating on the
notes. However, if the notes are rated in the future and one or more rating
agencies assigns the notes a rating lower than the rating expected by investors,
or reduces their rating in the future, the trading price of the notes and our
common stock could be adversely affected.

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|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.

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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:  December 13, 2006 |  | /s/ Leroy M. Ball        
|                         |  |                          
|                         |  | Leroy M. Ball            
|                         |  | Senior Vice President,   
|                         |  | Chief Financial Officer  

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EXHIBIT INDEX

|Exhibit   No. |  | Description                                                                                                                |  | Method of   Filing
|------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ------------------
|              |  |                                                                                                                            |  |                   
|31.1          |  | Certification   Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the   Sarbanes-Oxley Act of 2002 |  | Filed herewith    
|31.2          |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002     |  | Filed herewith    
|32.1          |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002     |  | Filed herewith    
|32.2          |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002     |  | Filed herewith    

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