**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-Q**





**(** Mark
      One)


x
      Quarterly report
      pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for
      the
      quarterly period ended March 31, 2007 or


o
      Transition report
      pursuant to section 13 or 15(d) of the Securities Exchange act of 1934 for
      the
      transition period from _______ to _______





Commission
      file number 1-10776





CALGON
      CARBON CORPORATION





(Exact
      name of registrant as specified in its charter)




Delaware
            
            25-0530110(State
                or other jurisdiction ofincorporation or organization)
            
            (I.R.S.
                EmployerIdentification No.)





P.O.
      Box
      717, Pittsburgh, PA 15230-0717





(Address
      of principal executive offices)


(Zip
      Code)






**(412)
      787-6700**





**(Registrant’s
      telephone number, including area code)**








**(Former
      name, former address and former fiscal year**


**if
      changed since last report)**





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.





Yes x   No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.




Large accelerated filero
            Accelerated
                filer x
            Non-accelerated
                filero





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Securities Exchange Act of 1934).





Yes
o   No x




**Applicable
        only to corporate issuers:**
 **Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        stock, as of the latest practicable date.**


Class
            Outstanding
                at June 1, 2007Common
                Stock, $.01 par value
            40,361,590
                shares










CALGON
      CARBON CORPORATION


FORM
      10-Q


QUARTER
      ENDED March 31, 2007





The
      Quarterly Report on Form 10-Q contains historical information and
      forward-looking statements. Statements looking forward in time are included
      in
      this Form 10-Q pursuant to the “safe harbor” provisions of the Private
      Securities Litigation Reform Act of 1995. They involve known and unknown risks
      and uncertainties that may cause the Company’s actual results in the future to
      differ from performance suggested herein. In the context of forward-looking
      information provided in this Form 10-Q and in other reports, please refer to
      the
      discussion of risk factors detailed in, as well as the other information
      contained in the Company’s filings with the Securities and Exchange Commission.





INDEX


PagePART
                  1-CONDENSED
                  CONSOLIDATED FINANCIAL INFORMATIONItem
                  1.
              Condensed
                  Consolidated Financial StatementsIntroduction
                  to the Condensed Consolidated Financial Statements
              2Condensed
                  Consolidated Statements of Operations (unaudited)
              3Condensed
                  Consolidated Balance Sheets (unaudited)
              4Condensed
                  Consolidated Statements of Cash Flows (unaudited)
              5Notes
                  to Condensed Consolidated Financial Statements (unaudited)
              6Item
                  2.
              Management's
                  Discussion and Analysis of Results of
                  Operations and Financial Condition
              24Item
                  4.
              Controls
                  and Procedures
              30PART
                  II-OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              31Item
                  1a.
              Risk
                  Factors
              31Item
                  2c.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              31Item
                  3.
              Defaults
                  Upon Senior Securities
              31Item
                  6.
              Exhibits
              32SIGNATURES
              
              33CERTIFICATIONS




1




PART
      I
      - CONDENSED CONSOLIDATED FINANCIAL INFORMATION








Item
      1.  Condensed
      Consolidated Financial Statements




INTRODUCTION
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








The
      unaudited interim condensed consolidated financial statements included herein
      have been prepared by Calgon Carbon Corporation and subsidiaries (the Company),
      without audit, pursuant to the rules and regulations of the Securities and
      Exchange Commission. Certain information and footnote disclosures normally
      included in annual financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted pursuant to such rules and regulations. Management of
      the
      Company believes that the disclosures are adequate to make the information
      presented not misleading when read in conjunction with the Company's audited
      consolidated financial statements and the notes included therein for the year
      ended December 31, 2006, as 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 three months of 2007 are not necessarily indicative of the results that
      may be expected for the year ending December 31, 2007.




2






CALGON
      CARBON CORPORATION


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(Dollars
      in Thousands Except Share and Per Share Data)


(Unaudited)


Three
                  Months Ended
                March
                  31,2007
              
              2006Net
                  sales
              
              $
              83,030
              
              $
              76,579Cost
                    of products sold (excluding depreciation)
              
              
              58,424
              
              
              57,411Depreciation
                  and amortization
              
              
              4,261
              
              
              4,798Selling,
                    general and administrative expenses
              
              
              14,606
              
              
              14,372Research
                  and development expenses
              
              
              828
              
              
              1,197Restructuring
                  charge
              
              
              -
              
              
              678,119
              
              
              77,784Income
                  (loss) from operations
              
              
              4,911
              
              
              (1,205
              )Interest
                  income
              
              
              302
              
              
              86Interest
                  expense
              
              
              (1,450
              )
              
              (1,574
              )Other
                  expense—net
              
              
              (403
              )
              
              (844
              )Income
                    (loss) from continuing operations before income taxes and equity
                    in income
                    from equity investments
              
              
              3,360
              
              
              (3,537
              )Income
                  tax provision (benefit)
              
              
              2,380
              
              
              (345
              )Income
                    (loss) from continuing operations before equity in income from
                    equity investments
              
              
              980
              
              
              (3,192
              )Equity
                  in income from equity investments
              
              
              1,054
              
              
              203Income
                  (loss) from continuing operations
              
              
              2,034
              
              
              (2,989
              )Income
                  from discontinued operations - net of tax
              
              
              -
              
              
              1,575Net
                  income (loss)
              
              $
              2,034
              
              $
              (1,414
              )Basic
                    and diluted income (loss) from continuing operations per common
                    share
              
              $
              .05
              
              $
              (.08
              )Income
                  from discontinued operations per common share
              
              $
              .00
              
              $
              .04Basic
                  and diluted income (loss) per common share
              
              $
              .05
              
              $
              (.04
              )Weighted
                  average shares outstandingBasic
              
              
              40,224,585
              
              
              39,854,726Diluted
              
              
              42,660,625
              
              
              39,854,726




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




3





CALGON CARBON CORPORATION


CONDENSED
      CONSOLIDATED BALANCE SHEETS


(Dollars
      in Thousands except share data)


(Unaudited)


March
                  31,
              
              December
                  31,2007
              
              2006ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              8,898
              
              $
              5,631Receivables
                  (net of allowance of $2,198 and $1,981)
              
              
              59,792
              
              
              55,036Revenue
                  recognized in excess of billings on uncompleted contracts
              
              
              7,103
              
              
              7,576Inventories
              
              
              73,368
              
              
              70,339Deferred
                  income taxes - current
              
              
              7,173
              
              
              5,761Other
                  current assets
              
              
              4,323
              
              
              4,369Total
                  current assets
              
              
              160,657
              
              
              148,712Property,
                  plant and equipment, net
              
              
              103,479
              
              
              106,101Equity
                  investments
              
              
              8,332
              
              
              6,971Intangibles
              
              
              9,087
              
              
              8,521Goodwill
              
              
              27,540
              
              
              27,497Deferred
                  income taxes - long-term
              
              
              11,094
              
              
              20,225Other
                  assets
              
              
              3,332
              
              
              4,337Total
                  assets
              
              $
              323,521
              
              $
              322,364LIABILITIES
                  AND SHAREHOLDERS' EQUITYCurrent
                  liabilities:Short-term
                  debt
              
              $
              62,960
              
              $
              -Accounts
                  payable and accrued liabilities
              
              
              38,656
              
              
              36,614Billings
                  in excess of revenue recognized on uncompleted contracts
              
              
              2,716
              
              
              2,516Accrued
                  interest
              
              
              653
              
              
              1,440Payroll
                  and benefits payable
              
              
              7,189
              
              
              6,533Accrued
                  income taxes
              
              
              4,883
              
              
              8,423Total
                  current liabilities
              
              
              117,057
              
              
              55,526Long-term
                  debt
              
              
              12,925
              
              
              74,836Deferred
                  income taxes - long-term
              
              
              1,694
              
              
              1,679Accrued
                  pension and other liabilities
              
              
              43,659
              
              
              42,450Total
                  liabilities
              
              
              175,335
              
              
              174,491Commitments
                  and contingenciesShareholders'
                  equity:Common
                    shares, $.01 par value, 100,000,000 shares authorized,
                    42,550,290 and 42,550,290 shares issued
              
              
              425
              
              
              425Additional
                  paid-in capital
              
              
              71,274
              
              
              70,345Retained
                  earnings
              
              
              91,731
              
              
              94,035Accumulated
                  other comprehensive income
              
              
              12,067
              
              
              10,305175,497
              
              
              175,110Treasury
                  stock, at cost, 2,842,390 and 2,819,690 shares
              
              
              (27,311
              )
              
              (27,237
              )Total
                  shareholders' equity
              
              
              148,186
              
              
              147,873Total
                  liabilities and shareholders’ equity
              
              $
              323,521
              
              $
              322,364




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


4





CALGON
      CARBON CORPORATION


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Dollars
      in Thousands)


(Unaudited)


Three
                  Months EndedMarch
                  31,2007
              
              2006Cash
                  flows from operating activitiesNet
                  income (loss)
              
              $
              2,034
              
              $
              (1,414
              )Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities:Gain
                  from sale of assets, pre-tax
              
              
              -
              
              
              (6,078
              )Depreciation
                  and amortization
              
              
              4,261
              
              
              4,800Equity
                  in income from equity investments
              
              
              (1,054
              )
              
              (203
              )Employee
                  benefit plan provisions
              
              
              520
              
              
              1,154Changes
                  in assets and liabilities:Increase
                  in receivables
              
              
              (4,528
              )
              
              (1,803
              )Increase
                  in inventories
              
              
              (2,818
              )
              
              (2,683
              )Decrease in
                  revenue in excess of billings on uncompleted contracts and other
                  current
                  assets
              
              
              548
              
              
              (1,036
              )Increase
                  (decrease) in accounts payable, accrued liabilities, and billings
                  in
                  excess of revenue
              
              
              1,901
              
              
              (1,228
              )Increase
                  (decrease) in accrued income taxes
              
              
              743
              
              
              725Increase
                  in deferred income taxes
              
              
              301
              
              
              1,270Other
                  items - net
              
              
              1,515
              
              
              2,367Net
                  cash provided by (used in) operating activities
              
              
              3,423
              
              
              (4,129
              )Cash
                  flows from investing activitiesProceeds
                  from the sale of assets
              
              
              -
              
              
              19,120Property,
                  plant and equipment expenditures
              
              
              (1,965
              )
              
              (3,093
              )Proceeds
                  from disposals of property, plant and equipment
              
              
              147
              
              
              52Net
                  cash (used in) provided by investing activities
              
              
              (1,818
              )
              
              16,079Cash
                  flows from financing activitiesProceeds
                  from borrowings
              
              
              5,144
              
              
              32,300Repayments
                  of borrowings
              
              
              (4,095
              )
              
              (44,726
              )Treasury
                  stock purchased
              
              
              (74
              )
              
              -Common
                  stock issued through exercise of stock options
              
              
              -
              
              
              27Net
                  cash provided by (used in) financing activities
              
              
              975
              
              
              (12,399
              )Effect
                  of exchange rate changes on cash
              
              
              687
              
              
              (614
              )Increase
                  (decrease) in cash and cash equivalents
              
              
              3,267
              
              
              (1,063
              )Cash
                  and cash equivalents, beginning of period
              
              
              5,631
              
              
              5,446Cash
                  and cash equivalents, end of period
              
              $
              8,898
              
              $
              4,383






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






5




CALGON
      CARBON CORPORATION


NOTES
      TOCONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
      in Thousands)


(Unaudited)




1.
              Inventories:




March
                  31,2007
              
              December
                  31, 2006Raw
                  materials
              
              $
              19,054
              
              $
              16,587Finished
                  goods
              
              
              54,314
              
              
              53,752$
              73,368
              
              $
              70,339


2.
                Supplemental Cash Flow
                    Information:





Cash
      paid
      for interest during the three months ended March 31, 2007 and 2006 was $2.2
      million and $1.6 million, respectively. Income taxes paid, net of refunds,
      were
      $200 thousand and $2 thousand, for the three months ended March 31, 2007
      and 2006, respectively.





The
      non-cash vesting of restricted stock-based compensation was $0.2 million and
      $0.3 million for the three months ended March 31, 2007 and 2006, respectively.
      The non-cash impact of the January 1, 2007 adoption FIN 48 was $4.3 million
      for
      the three months ended March 31, 2007.





3.
            
            Dividends:





The
      Company’s Board of Directors did not declare or pay a dividend for the quarters
      ended March 31, 2007 and 2006.


4.
              
              Comprehensive
                    income (loss):


Three
                  Months Ended March 31,2007
              
              2006Net
                  income (loss)
              
              $
              2,034
              
              $
              (1,414
              )Other
                  comprehensive income, net of taxes
              
              
              1,762
              
              
              858Comprehensive
                  income (loss)
              
              $
              3,796
              
              $
              (556
              )




The
      only
      matters contributing to the other comprehensive income during the three months
      ended March 31, 2007 was the foreign currency translation adjustment of $1.2
      million and the change in the fair value of the derivative instruments of $0.6
      million as described in Note 6. The only matters contributing to the other
      comprehensive income during the three months ended March 31, 2006 was the
      foreign currency translation adjustment of $1.0 million and the change in the
      fair value of the derivative instruments of ($0.1) million as described in
      Note
      6.





5. Segment
      Information:





The
      Company’s management has identified three segments based on product line and
      associated services. Those segments included 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 household odors. The
      following segment information represents the results of the Company’s continuing
      operations.




6




Three
                Months EndedMarch
                31,2007
            
            2006Net
                SalesCarbon
                and Service
            
            $
            68,683
            
            $
            65,185Equipment
            
            
            10,966
            
            
            8,441Consumer
            
            
            3,381
            
            
            2,953$
            83,030
            
            $
            76,579Income
                (loss) from continuing operationsbefore
                depreciation, amortization,restructuring,
                and income taxesCarbon
                and Service
            
            $
            8,473
            
            $
            5,048Equipment
            
            
            (129
            )
            
            (1,659
            )Consumer
            
            
            828
            
            
            2109,172
            
            
            3,599Depreciation
                and amortizationCarbon
                and Service
            
            
            3,888
            
            
            4,449Equipment
            
            
            240
            
            
            210Consumer
            
            
            133
            
            
            1394,261
            
            
            4,798Income
                (loss) from continuing operations beforerestructuring
                and income taxes
            
            $
            4,911
            
            $
            (1,199
            )Reconciling
                items:Restructuring
                charges
            
            
            -
            
            
            (6
            )Interest
                income
            
            
            302
            
            
            86Interest
                expense
            
            
            (1,450
            )
            
            (1,574
            )Other
                expense - net
            
            
            (403
            )
            
            (844
            )Consolidated
                income (loss) from continuing operationsbefore
                income taxes and equity in income from equityinvestments
            
            $
            3,360
            
            $
            (3,537
            )


March
                  31, 2007
              
              December
                  31, 2006Total
                  AssetsCarbon
                  and Service
              
              $
              277,046
              
              $
              277,134Equipment
              
              
              33,520
              
              
              34,031Consumer
              
              
              12,955
              
              
              11,199Consolidated
                  total assets
              
              $
              323,521
              
              $
              322,364





7




Net
      Sales by Product:


Three
                  months ended March 31(Thousands)
              
              2007
              
              2006Carbon
                  products
              
              $
              62,728
              
              $
              59,589Capital
                  equipment
              
              
              8,091
              
              
              6,224Equipment
                  leasing
              
              
              3,252
              
              
              3,515Spare
                  parts
              
              
              2,875
              
              
              2,217Carbon
                  cloth products
              
              
              2,863
              
              
              1,995Home
                  consumer products
              
              
              518
              
              
              958Other
                  services
              
              
              2,703
              
              
              2,081Total
                  sales
              
              $
              83,030
              
              $
              76,579




8


6.
                Derivative
                    Instruments





The
      Company accounts for its foreign exchange derivative instruments under Statement
      of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative
      Instruments and Hedging Activities,” as amended. This standard requires
      recognition of all derivatives as either assets or liabilities at fair value
      and
      may result in additional volatility in both current period earnings and other
      comprehensive income as a result of recording recognized and unrecognized gains
      and losses from changes in the fair value of derivative instruments.





The
      Company had thirty derivative instruments outstanding at March 31, 2007 of
      which
      one was a foreign currency swap, twenty-six 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 held sixteen foreign currency forward exchange contracts at March 31,
      2006 and none qualified for hedge accounting treatment. During the periods
      ended
      March 31, 2007 and 2006, the Company recorded an immaterial gain in other income
      for the twenty-six  and
      sixteen foreign currency forward exchange contracts.





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 of $0.1 million and ($0.1) million, respectively,
      for the periods ended March 31, 2007 and 2006 was recorded in other
      comprehensive income (loss). The balance of the effective hedge portion of
      the
      foreign currency swap recorded in other long-term liabilities was $0.9 million
      and $0.3 million, respectively, as of March 31, 2007 and 2006.





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 and $0.2 million, net of tax,
      respectively, for the period ended March 31, 2007.





No
      component of the derivatives gains or losses has been excluded from the
      assessment of hedge effectiveness. For the periods ended March


31,
      2007
      and 2006, the net gain or loss recognized due to the amount of hedge
      ineffectiveness was insignificant.


7.
                  Contingencies





The
      Company purchased the common stock of Advanced Separation Technologies
      Incorporated (AST) from Progress Capital Holdings, Inc. and Potomac Capital
      Investment Corporation on December 31, 1996. On January 12, 1998, the Company
      filed a claim for unspecified damages in the United States District Court in
      the
      Western District of Pennsylvania alleging among other things that Progress
      Capital Holdings and Potomac Capital Investment Corporation materially breached
      various AST financial and operational representations and warranties included
      in
      the Stock Purchase Agreement and had defrauded the Company. On January 26,
      2007,
      a jury returned a verdict in favor of the Company and against the defendants
      in
      the amount of $10.0 million, which has not been recorded in operations as of
      March 31, 2007. The defendants have filed post trial motions seeking to overturn
      the verdict. The Company has filed a motion for an award of prejudgment
      interest, which may be awarded at the discretion of the trial judge at the
      rate
      of 6% per annum (simple) from the date the complaint was filed. If the post
      trial motions of the defendants are denied, the defendants will be entitled
      to
      appeal to the United States Circuit Court of Appeals for the Third
      Circuit.





The
      Company is a party in three cases involving alleged infringement of its U.S.
      Patent No. 6,129,893 and U.S. Patent No. 6,565,803 B1 (“U.S. Patents”) and its
      Canadian Patent No. 2,331,525 (“525 Patent”) for the method of preventing
      infection from cryptosporidium found in drinking water. In the first case,
      Wedeco Ideal Horizons, Inc. filed suit against the Company in the United States
      District Court for the District of New Jersey seeking a declaratory judgment
      that it does not infringe the Company’s U.S. Patents on the grounds that the
      U.S. Patents are invalid and alleging unfair competition by the Company. On
      June
      30, 2006, the District Court granted Wedeco’s motion for summary judgment on the
      issue of validity of the U.S. Patents, denied the Company’s motion for summary
      judgment on the infringement claim on the ground that there can be no
      infringement where there is no valid patent and granted the Company’s motion for
      summary judgment on Wedeco’s claim of unfair competition. The Company appealed
      the Court’s decision against it to the United States Circuit Court of Appeals
      for the Federal Circuit. On April 24, 2007, the Court affirmed the lower Court’s
      judgment. The Company does not intend to appeal this decision. In the second
      case, the Company filed suit against the Town of Ontario, New York, Trojan
      Technologies, Inc. (“Trojan”) and Robert Wykle, et al. in the United States
      District Court for the Western District of New York alleging that the defendants
      are practicing the method claimed within the U.S. Patents without a license.
      In
      the third case, the Company filed suit against the City of North Bay, Ontario,
      Canada (“North Bay”) and Trojan in the Federal Court of Canada alleging
      infringement of the Canadian Patent by North Bay and inducement of infringement
      by Trojan. On November 14, 2006, after a bench trial, the Court dismissed the
      Company’s claim for a declaration that the defendants infringed the Canadian
      Patent and the Company’s claims for an injunction, compensation, damages,
      interest, and costs and declared that the Canadian Patent is invalid. In March
      2007, the Company and Trojan entered into a settlement whereby in exchange
      for a
      nominal cash payment and relief from legal fees, the Company granted Trojan
      worldwide immunity from all current and future legal action related to Calgon
      Carbon’s UV patents.




9




The
      Pennsylvania Department of Environmental Protection (“PADEP”) demanded that the
      Company reimburse the PADEP for response costs of that agency in respect of
      a
      site owned by a third party and located in Allegheny County, Pennsylvania
      (“Site”). On August 31, 2006, the Company and the PADEP entered into a Consent
      Order and Settlement in which the Company agreed to pay $515,000 in three
      installments to resolve the matter. This amount was charged to earnings for
      the
      second quarter ended June 30, 2006. On January 11, 2007, the PADEP notified
      the
      Company that the Consent Order and Agreement is final.





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 for the three months
      ended March 31, 2006. The Company has not incurred any environmental remediation
      expense for the three months ended March 31, 2007 and has incurred a total
      of
      $0.2 million of environmental remediation expense to date. It is reasonably
      possible that a change in the estimate of this obligation will occur as
      remediation preparation and remediation activity commences 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 2007.





In
      January, 2007, the Company received a Notice of Violation (“NOV”) from the
      Environmental Protection Agency, Region 4 (“EPA”), alleging multiple violations
      of the Federal Resource Conservation and Recovery Act and corresponding EPA
      and
      Kentucky Department of hazardous waste management (“KYDEP”) rules and
      regulations. The alleged violations are based on information provided by the
      Company during and after a Multi Media Compliance Evaluation inspection of
      the
      Company’s Catlettsburg, Kentucky plant (the “Plant”), conducted by the EPA
      and KYDEP in September 2005, and concern the hazardous waste spent activated
      carbon regeneration facility located at the Plant. The Company is preparing
      a
      response to the NOV. The EPA has not indicated whether or not it will take
      formal enforcement action, or whether such action would involve the assessment
      of civil penalties, and has not yet specified a monetary amount of any such
      civil penalties it might pursue in connection with this matter. At this time
      the
      Company cannot predict with any certainty the outcome of this
      matter.




10




The
      Company owns a 49% interest in a joint venture, Calgon Mitsubishi Chemical
      Corporation, which was formed on October 1, 2002. At March 31, 2007, Calgon
      Mitsubishi Chemical Corporation had $9.0 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 March 31, 2007, the
      lender had not requested, and the Company has not provided, such guarantee.





In
      addition to the matters described above, the Company is involved in various
      legal proceedings, lawsuits and claims, including employment, product warranty
      and environmental matters of a nature considered normal to its business. It
      is
      the Company’s policy to accrue for amounts related to these legal matters when
      it is probable that a liability has been incurred and the loss amount is
      reasonably estimable. Management believes, after consulting with counsel, that
      the ultimate liabilities, if any, resulting from such lawsuits and claims will
      not materially affect the consolidated liquidity or financial position of the
      Company, but an adverse outcome could be material to the results of operations
      in a particular period in which a liability is recognized


8.
                    Goodwill & Intangible
                        Assets


The
      Company has elected to do the annual impairment test of its goodwill, as
      required by SFAS No. 142, on December 31 of each year. For purposes of the
      test,
      the Company has identified reporting units, as defined within SFAS No. 142,
      at a
      regional level for the Activated Carbon and Service segment and at the
      technology level for the Equipment segment and has allocated goodwill to these
      reporting units accordingly.





The
      following is a table showing the results of the annual impairment test at
      December 31, 2006:


*(Thousands)*At
                  December 31, 2006Carrying
              
              CarryingFair
                  Value of
              
              Value
                  of
              
              Value
                  ofReporting
                  Unit
              
              Unit
              
              Unit
              
              GoodwillActivated
                  Carbon and Service Segment:Americas/Asia
              
              $
              187,000
              
              $
              141,740
              
              $
              16,768Europe
              
              
              56,800
              
              
              43,306
              
              
              4,288Equipment
                  Segment:ISEP
                  equipment(ISEP)
              
              
              22,900
              
              
              4,668
              
              
              4,419Ultraviolet
                  lightequipment
                  (UV)
              
              
              14,445
              
              
              9,222
              
              
              1,962Consumer
                  Segment
              
              
              N/A
              
              
              N/A
              
              
              60Total
              
              
              
              
              
              
              
              $
              27,497




11


The
      changes in the carrying amounts of goodwill by segment for the three months
      ended March 31, 2007 are as follows:


Carbon
                  &Service
              
              Equipment
              
              ConsumerSegment
              
              Segment
              
              Segment
              
              TotalBalance
                  as of January 1, 2007
              
              $
              21,056
              
              $
              6,381
              
              $
              60
              
              $
              27,497Foreign
                  exchange
              
              
              25
              
              
              18
              
              
              -
              
              
              43Balance
                  as of March 31, 2007
              
              $
              21,081
              
              $
              6,399
              
              $
              60
              
              $
              27,540





The
      following is a summary of the Company’s identifiable intangible assets as of
      March 31, 2007 and December 31, 2006 respectively:





March
                31, 2007Weighted
                Average Amortization Period
            
            Gross
                Carrying Amount
            
            Foreign
                Exchange
            
            Accumulated
                Amortization
            
            Net
                Carrying AmountAmortized
                Intangible Assets:Patents
            
            
            15.4
                Years
            
            $
            1,369
            
            $
            -
            
            $
            (814
            )
            $
            555Customer
                Relationships
            
            
            17.0
                Years
            
            
            9,323
            
            
            17
            
            
            (3,893
            )
            
            5,447Customer
                Contracts
            
            
            2.8
                Years
            
            
            664
            
            
            (20
            )
            
            (644
            )
            
            -License
                Agreement
            
            
            5.0
                Years
            
            
            500
            
            
            -
            
            
            (342
            )
            
            158Product
                Certification
            
            
            7.9
                Years
            
            
            1,682
            
            
            -
            
            
            (394
            )
            
            1,288Unpatented
                Technology
            
            
            20.0
                Years
            
            
            2,875
            
            
            -
            
            
            (1.236
            )
            
            1,639Total
            
            
            16.0
                Years
            
            $
            16,413
            
            $
            (3
            )
            $
            (7,323
            )
            $
            9,087


December
                    31, 2006Weighted
                    Average Amortization Period
                
                Gross
                    Carrying Amount
                
                Foreign
                    Exchange
                
                Accumulated
                    Amortization
                
                Net
                    Carrying AmountAmortized
                    Intangible Assets:Patents
                
                
                15.4
                    Years
                
                $
                1,369
                
                $
                -
                
                $
                (793
                )
                $
                576Customer
                    Relationships
                
                
                17.0
                    Years
                
                
                9,323
                
                
                11
                
                
                (3,596
                )
                
                5,738Customer
                    Contracts
                
                
                2.8
                    Years
                
                
                664
                
                
                (20
                )
                
                (644
                )
                
                -License
                    Agreement
                
                
                5.0
                    Years
                
                
                500
                
                
                -
                
                
                (317
                )
                
                183Product
                    Certification
                
                
                7.9
                    Years
                
                
                665
                
                
                -
                
                
                (321
                )
                
                344Unpatented
                    Technology
                
                
                20.0
                    Years
                
                
                2,875
                
                
                -
                
                
                (1.195
                )
                
                1,680Total
                
                
                16.0
                    Years
                
                $
                15,396
                
                $
                (9
                )
                $
                (6,866
                )
                $
                8,521


For
        the
        three months ended March 31, 2007 and 2006, the Company recognized $0.5 million
        and $0.5 million, respectively, of amortization expense related to intangible
        assets. The Company estimates amortization expense to be recognized during
        the
        next five years as follows:


*(Thousands)*For
                  the year ending December 31:2007
              
              $
              1,7852008
              
              $
              1,5852009
              
              $
              1,3122010
              
              $
              1,1682011
              
              $
              824
  12


9.
                      Borrowing Arrangements





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





**5.00%
      Convertible Senior Notes due 2036**





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





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





For
      the
      quarter ended March 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended March
      31, 2007. As a result, as of March 31, 2007, the holders of the Notes have
      the
      right to convert the Notes into cash and shares of common stock. Although the
      Company does not anticipate that a significant amount of these Notes will be
      converted, if any, as of March 31, 2007 the Company was required to reclassify
      as a current liability that portion of the Notes that cannot be refinanced
      on a
      long-term basis as provided by SFAS No. 6, “Classification of Short-Term
      Obligations Expected to be Refinanced.”





The
      initial conversion rate is 196.0784 shares of the Company’s common stock per
      $1,000 principal amount of Notes, equivalent to an initial conversion price
      of
      approximately $5.10 per share of common stock. The conversion rate is subject
      to
      adjustment in some events, including the payment of a dividend on the Company’s
      common stock, but will not be adjusted for accrued interest, including any
      additional interest. In addition, following certain fundamental changes that
      occur prior to August 15, 2011, the Company will increase the conversion rate
      for holders who elect to convert Notes in connection with such fundamental
      changes in certain circumstances. The Company considered EITF 00-27,
“Application of Issue No. 98-5 to Certain Convertible Instruments,” Issue 7,
      which indicates that if a reset of the conversion rate due to a contingent
      event
      occurs the Company would need to calculate if there is a beneficial conversion
      and record if applicable. Through March 31, 2007, no contingent events have
      occurred.





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




13




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





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





The
      Company sold the Notes to the original purchaser at a discount of
      $3.3 million that will be amortized over a period of five years. The
      discount is reflected as a deduction from the face amount of the debt. As of
      March 31, 2007, the Company recorded interest expense of $1.8 million, of
      which $0.2 million related to the amortization of the discount and
      $1.6 million related to the Notes. The Company incurred issuance costs of
      $1.5 million which were deferred and are being amortized over a five year
      period.





The
      Notes
      and the Subsidiary 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, the Subsidiary Guarantees, and the common stock
      issuable upon conversion of the Notes have not been registered. The offering
      was
      conducted in reliance upon an exemption from registration under the Securities
      Act and applicable state securities laws. The Company 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. The Company
      implemented Financial Statement of Position (FSP) EITF 00-19-2, “Accounting for
      Registration Payment Arrangements” and accrued the probable liability of $0.2
      million for penalty interest under SFAS No. 5, “Accounting for Contingencies,”
with an adoption date of January 1, 2007.





**Credit
      Facility**





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





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




14




As
      of
      March 31, 2007, the carrying amount of assets pledged as collateral was
      $55.9 million. The carrying amount as of March 31, 2007 for domestic,
      U.K., and Belgian borrowers were $42.5 million, $7.9 million, and
      $5.5 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 March 31, 2007, total availability
      was $38.2 million. Availability as of March 31, 2007 for domestic,
      U.K., and Belgian borrowers were $31.6 million, $6.6 million, and
      zero, respectively. The Company can issue letters of credit up to
      $20 million of the available commitment amount under the Credit Facility.
      Sub-limits for letters of credit under the U.K. sub-facility and the Belgian
      sub-facility are $2.0 million and $6.0 million, respectively. Letters
      of credit outstanding at March 31, 2007 totaled
      $17.8 million.





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





The
      Company incurred debt issuance costs of $0.5 million which were deferred
      and are being amortized over a five year period. The Company had no borrowings
      under the Credit Facility as of March 31, 2007.





The
      Credit Facility contains a number of affirmative and negative covenants. Because
      of delays in filing its Quarterly Report on Form 10-Q for the quarter ended
      March 31, 2007, the Company was in violation of the affirmative covenant
      requiring unaudited financial statements to be provided to the lender within
      45
      days after the end of the Company’s fiscal quarter. On May 29, 2007, the Company
      amended its credit agreement prior to the filing of this Form 10- Q which
      included a waiver to extend the due date for delivery of unaudited financial
      statements until June 8, 2007. For the quarter ended March 31, 2007, the last
      reported sale price of the Company's common stock was greater than 120% of
      the
      conversion price of the Notes for at least 20 trading days in the period of
      30
      consecutive trading days ended March 31, 2007. As a result, as of March 31,
      2007, the holders of the Notes have the right to convert the Notes into cash
      and
      shares of common stock. Although currently not anticipated by the Company,
      the
      ability of holders of the Notes to convert is an event of default. Included
      in
      the aforementioned amendment, is a provision for up to $10.0 million where
      Notes
      converted up to that amount will not be considered an event of default and
      the
      Company was able to classify up to that amount of the Notes as long-term debt
      as
      it has the ability and intent to refinance it under the amended agreement.
      The
      amendment also includes a provision for up to $3.0 million of letters of credit
      under the Company’s U.S., Belgium, and UK sub-limits that can be issued having
      expiration dates that are more than one year but not more than three years
      after
      the date of issuance.





The
      negative covenants provide for certain restrictions on possible acts by the
      Company related to matters such as additional indebtedness, certain liens,
      fundamental changes in the business, certain investments or loans, asset sales
      and other customary requirements. The Company was in compliance with all such
      negative covenants as of March 31, 2007 and is currently in compliance with
      such covenants.





Management
      cannot be assured that, after the March 31, 2007 financial statements have
      been
      provided to the lenders, there will not be any violation in future periods
      of
      the covenants contained in the Credit Facility. Although not currently
      anticipated by the Company, the conversion by holders of Notes above the $10.0
      million provision, as described above, would be an event of default.





**Belgian
      Credit Facility**


The
      Company maintains a Belgian credit facility totaling 4.0 million Euros
      which is secured by a U.S. letter of credit provided under the Credit Facility.
      There are no financial covenants, and the Company had no outstanding borrowings
      under the Belgian credit facility as of March 31, 2007. Bank guarantees of
      2.8 million Euros were issued as of March 31, 2007. The maturity date
      of this facility is December 15, 2007. Availability under this facility was
      1.2 million Euros at March 31, 2007.





**United
      Kingdom Credit Facilities**


The
      Company maintains a United Kingdom unsecured overdraft facility totaling 200,000
      British Pounds Sterling. There are no financial covenants and the Company had
      no  outstanding
      borrowings under this overdraft facility as of March 31, 2007. This
      facility is reviewed annually. The bank, in its sole discretion, may cancel
      at
      any time its commitment to provide this facility.




The
      Company also maintains a United Kingdom unsecured bonds, guarantees and
      indemnities facility totaling 662,000 British Pounds Sterling. The bank, in
      its
      sole discretion, may cancel at any time its commitment to provide this facility.
      This facility was fully utilized at March 31, 2007.





15


**Fair
      Value of  Debt**


At
      March
      31, 2007, the Company had $12.9 million of long-term debt which primarily
      consisted of $10.0 million of fixed rate senior convertible notes that were
      entered into in August 2006. The fair value of these notes at March 31, 2007
      was
      $16.9 million. The increase in value is mainly due to the increase in the
      Company’s common stock price and its impact on the conversion features of the
      Notes. The remaining $2.9 million of long-term debt is based on prime rates,
      and
      accordingly, the carrying value of this obligation approximates its fair
      value.





At
      March 31, 2007, the Company had $63.0 million of outstanding short-term
      debt. Substantially all of the Company’s outstanding long-term debt
      at March 31, 2007 consisted of $65.0 million, excluding debt discount of
      $2.9 million, of fixed rate senior convertible notes that were entered into
      in
      August 2006. The fair value of these notes at March 31, 2007 was $109.9 million.
      The increase in value is primarily due to the increase in the Company’s common
      stock price and its impact on the conversion features of the notes. The Company
      also maintains a Chinese credit facility totaling 11.0 million RMB which is
      secured by a U.S. letter of credit provided under the Credit Facility. There
      are
      no financial covenants, and the Company had 7.0 million RMB or $0.9 million
      of
      outstanding borrowings under this credit facility as of March 31, 2007.
      Availability under this facility was 4.0 million RMB at March 31,
      2007. The maturity date of this facility is December 31, 2007.





**Maturities
      of Debt**


The
      Company is obligated to make principal payments on debt outstanding at
      March 31, 2007 of $2.9 million in 2009 and $75.0 million in 2011.
      See also the 5.00% Convertible Senior Notes due 2036 section related to the
      holders’ optional conversion as of March 31, 2007.





10.
                        Pensions




U.S.
      Plans :





For
      U.S.
      plans, the following table provides the components of net periodic pension
      costs
      of the plans for the periods ended March 31, 2007 and 2006:


Three
                  Months Ended March 31Pension
                  Benefits (in thousands)
              
              2007
              
              2006Service
                  cost
              
              $
              322
              
              $
              647Interest
                  cost
              
              
              1,174
              
              
              1,252Expected
                  return on plan assets
              
              
              (1,229
              )
              
              (1,063
              )Amortization
                  of prior service cost
              
              
              61
              
              
              81Net
                  actuarial loss amortization
              
              
              69
              
              
              253Net
                  periodic pension cost
              
              $
              397
              
              $
              1,170





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





Employer
      Contributions





In
      its
      2006 financial statements, the Company disclosed that it expected to contribute
      $3.2 million to its U.S. pension plans in 2007. As of March 31, 2007, no
      contributions have been made. The Company expects to contribute the $3.2 million
      over the remainder of the year.





16





European
      Plans :





For
      European plans, the following table provides the components of net periodic
      pension costs of the plans for the periods ended March 31, 2007 and
      2006:


Three
                  Months Ended March 31Pension
                  Benefits (in thousands)
              
              2007
              
              2006Service
                  cost
              
              $
              181
              
              $
              253Interest
                  cost
              
              
              426
              
              
              422Expected
                  return on plan assets
              
              
              (320
              )
              
              (272
              )Amortization
                  of net transition amount
              
              
              11
              
              
              13Net
                  actuarial loss amortization
              
              
              25
              
              
              48Net
                  periodic pension cost
              
              $
              323
              
              $
              464





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





Employer
      Contributions





In
      its
      2006 financial statements, the Company disclosed that it expected to contribute
      $2.3 million to its European pension plans in 2007. As of March 31, 2007, the
      Company contributed $0.5  million.
      The Company expects to contribute the remaining $1.8 million over the remainder
      of the year.





Defined
      Contribution Plans





The
      Company also sponsors a defined contribution pension plan for certain U.S.
      employees that permits employee contributions of up to 50% of eligible
      compensation in accordance with Internal Revenue Service guidance. In September
      2006, the Company announced the freezing of its defined benefit pension plans
      for all U.S. salaried employees replacing it with a defined contribution plan.
      Under this defined contribution plan, the Company makes a fixed contribution
      of
      2% of eligible employee compensation 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. For all other U.S. 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 eligible employee
      compensation. Employer matching contributions vest immediately. Total expenses
      related to this defined contribution plan were $0.5 million and $0.1 million,
      respectively, for the periods ended March 31, 2007 and 2006,
      respectively.


11.
                          Earnings Per
                              Share





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


Three
                  Months Ended March 31,*(Dollars
                  in thousands, except per share amounts)*
              
              2007
              
              2006Income
                  (loss) from continuing operations available tocommon
                  shareholders
              
              $
              2,034
              
              $
              (2,989
              )Weighted
                  Average Shares OutstandingBasic
              
              
              40,224,585
              
              
              39,854,726Effect
                  of Dilutive Securities
              
              
              2,436,040
              
              
              -Diluted
              
              
              42,660,625
              
              
              39,854,726Basic
                  and diluted net income (loss) from continuingoperations
                  per common share
              
              $
              .05
              
              $
              (.08
              )




17




For
      the
      three months ended March 31, 2007 and 2006, there were 1,457,468 and 254,369
      of
      stock options that were excluded from the dilutive calculations as the effect
      would have been antidilutive.





The
      Company’s obligation under its Senior Convertible Notes is to settle the par
      value of the Notes in cash and to settle the amount in excess of par value
      in
      its common shares. Therefore, the Company is not required to include any shares
      underlying the Notes in its diluted weighted average shares outstanding until
      the average stock price per share for the quarter exceeds the $5.10 conversion
      price. At such time, only the number of shares that would be issuable (under
      the
“treasury stock” method of accounting for share dilution) will be included,
      which is based upon the amount by which the average stock price exceeds the
      conversion price. For the first $0.50 per share that the Company’s average stock
      price exceeds the $5.10 conversion price of the Notes, it will include
      approximately 1,300,000 additional shares in its diluted share count. For the
      second $0.50 per share that the Company’s average stock price exceeds the $5.10
      conversion price, it will include approximately 1,100,000 additional shares,
      for
      a total of approximately 2,400,000 shares, in its diluted share count, and
      so
      on, with the additional shares’ dilution decreasing for each $1 per share that
      the Company’s average stock price exceeds $5.10 if the stock price rises further
      above $5.10 (see table below). As of March 31, 2007, the average stock price
      for
      the 90-day trading period was $6.64, which was higher than the conversion price
      of $5.10 therefore 2,213,155 shares were included in the dilutive share
      calculation for the period of time the Notes were outstanding for the quarter
      ended March 31, 2007.





**"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
            
            
            2,626,046$
                6.10
            
            
            $5.10
            
            
            $1.00
            
            
            2,410,798
            
            
            2,410,798$
                7.10
            
            
            $5.10
            
            
            $2.00
            
            
            4,142,500
            
            
            2,071,250$
                8.10
            
            
            $5.10
            
            
            $3.00
            
            
            5,446,621
            
            
            1,815,540$
                9.10
            
            
            $5.10
            
            
            $4.00
            
            
            6,464,122
            
            
            1,616,031$
                10.10
            
            
            $5.10
            
            
            $5.00
            
            
            7,280,137
            
            
            1,456,027$
                11.10
            
            
            $5.10
            
            
            $6.00
            
            
            7,949,123
            
            
            1,324,854$
                12.10
            
            
            $5.10
            
            
            $7.00
            
            
            8,507,533
            
            
            1,215,362


18


12.
                            Other Financial
                                Information





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





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




Condensed
                Consolidating Statements of Operations
              Three
                months ended March 31, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                sales
            
            $
            71,860
            
            $
            11,887
            
            $
            12,313
            
            $
            (13,030
            )
            $
            83,030Cost
                of products sold
            
            
            52,715
            
            
            9,695
            
            
            9,044
            
            
            (13,030
            )
            
            58,424Depreciation
                and amortization
            
            
            3,427
            
            
            277
            
            
            557
            
            
            -
            
            
            4,261Selling,
                general and administrative expenses
            
            
            12,592
            
            
            1,305
            
            
            709
            
            
            -
            
            
            14,606Research
                and development expense
            
            
            736
            
            
            92
            
            
            -
            
            
            -
            
            
            828Interest
                (income) expense - net
            
            
            5,276
            
            
            (3,896
            )
            
            (232
            )
            
            -
            
            
            1,148Other
                expense - net
            
            
            330
            
            
            235
            
            
            (162
            )
            
            -
            
            
            403Provision
                for income taxes
            
            
            1,609
            
            
            69
            
            
            702
            
            
            -
            
            
            2,380Results
                of affiliates’ operations
            
            
            6,859
            
            
            903
            
            
            -
            
            
            (7,762
            )
            
            -Equity
                in income from equity investments
            
            
            -
            
            
            -
            
            
            1,049
            
            
            5
            
            
            1,054Net
                income (loss)
            
            $
            2,034
            
            $
            5,013
            
            $
            2,744
            
            $
            (7,757
            )
            $
            2,034




Condensed
                Consolidating Statements of Operations
              Three
                months ended March 31, 2006Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                sales
            
            $
            68,431
            
            $
            9,959
            
            $
            10,568
            
            $
            (12,379
            )
            $
            76,579Cost
                of products sold
            
            
            52,257
            
            
            8,720
            
            
            8,813
            
            
            (12,379
            )
            
            57,411Depreciation
                and amortization
            
            
            4,309
            
            
            398
            
            
            91
            
            
            -
            
            
            4,798Selling,
                general and administrative expenses
            
            
            13,623
            
            
            (70
            )
            
            819
            
            
            -
            
            
            14,372Research
                and development expense
            
            
            1,111
            
            
            86
            
            
            -
            
            
            -
            
            
            1,197Restructuring
            
            
            6
            
            
            -
            
            
            -
            
            
            -
            
            
            6Interest
                (income) expense - net
            
            
            4,999
            
            
            (3,444
            )
            
            (67
            )
            
            -
            
            
            1,488Other
                expense - net
            
            
            463
            
            
            125
            
            
            256
            
            
            -
            
            
            844Provision
                (benefit) for income taxes
            
            
            2,272
            
            
            96
            
            
            (2,713
            )
            
            -
            
            
            (345
            )Results
                of affiliates’ operations
            
            
            9,004
            
            
            5,382
            
            
            -
            
            
            (14,386
            )
            
            -Equity
                in income from equity investments
            
            
            -
            
            
            -
            
            
            203
            
            
            -
            
            
            203Income
                (loss) from continuing operations
            
            
            (1,605
            )
            
            9,430
            
            
            3,572
            
            
            (14,386
            )
            
            (2,989
            )Income
                (loss) from discontinued operations
            
            
            191
            
            
            (178
            )
            
            1,562
            
            
            -
            
            
            1,575Net
                income (loss)
            
            $
            (1,414
            )
            $
            9,252
            
            $
            5,134
            
            $
            (14,386
            )
            $
            (1,414
            )





19





Condensed
                Consolidating Balance SheetsMarch
                31, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedCash
                & Cash Equivalents
            
            $
            5,396
            
            $
            2,114
            
            $
            21,679
            
            $
            (20,291
            )
            $
            8,898Receivables
            
            
            46,425
            
            
            16,240
            
            
            5,446
            
            
            (8,319
            )
            
            59,792Inventories
            
            
            60,529
            
            
            7,347
            
            
            5,459
            
            
            33
            
            
            73,368Other
                current assets
            
            
            15,372
            
            
            1,596
            
            
            1,631
            
            
            -
            
            
            18,599Total
                current assets
            
            
            127,722
            
            
            27,297
            
            
            34,215
            
            
            (28,577
            )
            
            160,657Intercompany
                accounts receivable
            
            
            56,271
            
            
            164,358
            
            
            1,602
            
            
            (222,231
            )
            
            -Property,
                plant, and equipment, net
            
            
            89,033
            
            
            6,933
            
            
            7,513
            
            
            -
            
            
            103,479Intangibles
            
            
            5,528
            
            
            3,559
            
            
            -
            
            
            -
            
            
            9,087Goodwill
            
            
            16,674
            
            
            8,306
            
            
            2,560
            
            
            -
            
            
            27,540Equity
                investments
            
            
            226,123
            
            
            102,975
            
            
            8,142
            
            
            (328,908
            )
            
            8,332Other
                assets
            
            
            7,113
            
            
            3,580
            
            
            3,733
            
            
            -
            
            
            14,426Total
                assets
            
            $
            528,464
            
            $
            317,008
            
            $
            57,765
            
            $
            (579,716
            )
            $
            323,521Short-term
                debt
            
            $
            62,056
            
            $
            -
            
            $
            904
            
            $
            -
            
            $
            62,960Accounts
                payable
            
            
            31,012
            
            
            18,824
            
            
            5,221
            
            
            (13,685
            )
            
            41,372Other
                current liabilities
            
            
            30,043
            
            
            805
            
            
            3,874
            
            
            (21,997
            )
            
            12,725Total
                current liabilities
            
            
            123,111
            
            
            19,629
            
            
            9,999
            
            
            (35,682
            )
            
            117,057Intercompany
                accounts payable
            
            
            153,114
            
            
            51,791
            
            
            10,253
            
            
            (215,158
            )
            
            -Long-term
                debt
            
            
            12,925
            
            
            -
            
            
            -
            
            
            -
            
            
            12,925Other
                non-current liabilities
            
            
            91,128
            
            
            12,196
            
            
            10,457
            
            
            (68,428
            )
            
            45,353Shareholders'
                equity
            
            
            148,186
            
            
            233,392
            
            
            27,056
            
            
            (260,448
            )
            
            148,186Total
                liabilities and shareholders' equity
            
            $
            528,464
            
            $
            317,008
            
            $
            57,765
            
            $
            (579,716
            )
            $
            323,521


20





Condensed
                Consolidating Balance SheetsDecember
                31, 2006Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedCash
                & Cash Equivalents
            
            $
            -
            
            $
            2,507
            
            $
            19,556
            
            $
            (16,432
            )
            $
            5,631Receivables
            
            
            44,741
            
            
            15,014
            
            
            5,187
            
            
            (9,906
            )
            
            55,036Inventories
            
            
            57,143
            
            
            7,323
            
            
            5,840
            
            
            33
            
            
            70,339Other
                current assets
            
            
            14,927
            
            
            1,549
            
            
            1,230
            
            
            -
            
            
            17,706Total
                current assets
            
            
            116,811
            
            
            26,393
            
            
            31,813
            
            
            (26,305
            )
            
            148,712Intercompany
                accounts receivable
            
            
            54,887
            
            
            157,438
            
            
            384
            
            
            (212,709
            )
            
            -Property,
                plant, and equipment, net
            
            
            91,670
            
            
            6,986
            
            
            7,445
            
            
            -
            
            
            106,101Intangibles
            
            
            4,835
            
            
            3,686
            
            
            -
            
            
            -
            
            
            8,521Goodwill
            
            
            16,674
            
            
            8,281
            
            
            2,542
            
            
            -
            
            
            27,497Equity
                investments
            
            
            218,957
            
            
            101,376
            
            
            6,786
            
            
            (320,148
            )
            
            6,971Other
                assets
            
            
            17,156
            
            
            3,870
            
            
            3,536
            
            
            -
            
            
            24,562Total
                assets
            
            $
            520,990
            
            $
            308,030
            
            $
            52,506
            
            $
            (559,162
            )
            $
            322,364Accounts
                payable
            
            $
            30,807
            
            $
            18,626
            
            $
            4,164
            
            $
            (14,467
            )
            $
            39,130Other
                current liabilities
            
            
            31,256
            
            
            666
            
            
            3,424
            
            
            (18,950
            )
            
            16,396Total
                current liabilities
            
            
            62,063
            
            
            19,292
            
            
            7,588
            
            
            (33,417
            )
            
            55,526Intercompany
                accounts payable
            
            
            146,151
            
            
            48,611
            
            
            10,867
            
            
            (205,629
            )
            
            -Long-term
                debt
            
            
            74,836
            
            
            -
            
            
            -
            
            
            -
            
            
            74,836Other
                non-current liabilities
            
            
            90,067
            
            
            12,292
            
            
            9,539
            
            
            (67,769
            )
            
            44,129Shareholders'
                equity
            
            
            147,873
            
            
            227,835
            
            
            24,512
            
            
            (252,347
            )
            
            147,873Total
                liabilities and shareholders' equity
            
            $
            520,990
            
            $
            308,030
            
            $
            52,506
            
            $
            (559,162
            )
            $
            322,364


21






Condensed
                Consolidating Statements of Cash FlowsThree
                months ended March 31, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                cash (used in) provided by operating activities
            
            $
            (4,087
            )
            $
            3,491
            
            $
            2,967
            
            $
            1,052
            
            $
            3,423Investing
                activities:Property,
                plant and equipment expenditures
            
            
            (1,656
            )
            
            (128
            )
            
            (181
            )
            
            -
            
            
            (1,965
            )Investment
                from (in) affiliates
            
            
            -
            
            
            (60
            )
            
            61
            
            
            (1
            )
            
            -Other
            
            
            147
            
            
            -
            
            
            -
            
            
            -
            
            
            147Net
                cash (used in) provided by investing activities
            
            
            (1,509
            )
            
            (188
            )
            
            (120
            )
            
            (1
            )
            
            (1,818
            )Financing
                activities:Net
                borrowings (repayments)
            
            
            4,871
            
            
            -
            
            
            931
            
            
            (4,753
            )
            
            1,049Intercompany
                and equity transactions
            
            
            4,687
            
            
            (3,739
            )
            
            (1,837
            )
            
            889
            
            
            -Other
            
            
            (74
            )
            
            (1
            )
            
            -
            
            
            1
            
            
            (74
            )Net
                cash provided by (used in) financing activities
            
            
            9,484
            
            
            (3,740
            )
            
            (906
            )
            
            (3,863
            )
            
            975Effect
                of exchange rate changes on cash and cash equivalents
            
            
            1,508
            
            
            44
            
            
            182
            
            
            (1,047
            )
            
            687Increase
                (decrease) in cash and cash equivalents
            
            
            5,396
            
            
            (393
            )
            
            2,123
            
            
            (3,859
            )
            
            3,267Cash
                and cash equivalents, beginning of period
            
            
            -
            
            
            2,507
            
            
            19,556
            
            
            (16,432
            )
            
            5,631Cash
                and cash equivalents, end of period
            
            $
            5,396
            
            $
            2,114
            
            $
            21,679
            
            $
            (20,291
            )
            $
            8,898








Condensed
                Consolidating Statements of Cash FlowsThree
                months ended March 31, 2006Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                cash (used in) provided by operating activities
            
            $
            (6,056
            )
            $
            4,033
            
            $
            (1,559
            )
            $
            (547
            )
            $
            (4,129
            )Investing
                activities:Proceeds
                from divestitures
            
            
            -
            
            
            -
            
            
            19,120
            
            
            -
            
            
            19,120Property,
                plant and equipment expenditures
            
            
            (2,801
            )
            
            (48
            )
            
            (244
            )
            
            -
            
            
            (3,093
            )Investment
                from (in) affiliates
            
            
            -
            
            
            (98
            )
            
            98
            
            
            -
            
            
            -Other
            
            
            52
            
            
            -
            
            
            -
            
            
            -
            
            
            52Net
                cash (used in) provided by investing activities
            
            
            (2,749
            )
            
            (146
            )
            
            18,974
            
            
            -
            
            
            16,079Financing
                activities:Net
                repayments
            
            
            (10,654
            )
            
            (607
            )
            
            (80
            )
            
            (1,085
            )
            
            (12,426
            )Intercompany
                and equity transactions
            
            
            5,168
            
            
            (5,048
            )
            
            (120
            )
            
            -
            
            
            -Other
            
            
            27
            
            
            30
            
            
            -
            
            
            (30
            )
            
            27Net
                cash used in financing activities
            
            
            (5,459
            )
            
            (5,625
            )
            
            (200
            )
            
            (1,115
            )
            
            (12,399
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            934
            
            
            90
            
            
            (2,215
            )
            
            577
            
            
            (614
            )(Decrease)
                increase in cash and cash equivalents
            
            
            (13,330
            )
            
            (1,648
            )
            
            15,000
            
            
            (1,085
            )
            
            (1,063
            )Cash
                and cash equivalents, beginning of period
            
            
            3,049
            
            
            3,681
            
            
            9,836
            
            
            (11,120
            )
            
            5,446Cash
                and cash equivalents, end of period
            
            $
            (10,281
            )
            $
            2,033
            
            $
            24,836
            
            $
            (12,205
            )
            $
            4,383








22


13.
                              Related Party
                                  Transactions





Net
      sales
      to related parties and receivables from related parties primarily reflect sales
      of activated carbon products to equity investees. Generally, transactions are
      conducted under long-term contractual arrangements. Related party sales
      transactions were $2.3 million and $3.2 million for the three months ended
      March
      31, 2007 and 2006, respectively. Receivables from equity investees amounted
      to
      $2.3 million and $1.8 million at March 31, 2007 and December 31, 2006,
      respectively. Accounts payable to related parties primarily relates to sales
      and
      management support and amounted to zero and $0.2 million at March 31, 2007
      and
      December 31, 2006, respectively.


14.
                              Income
                                  Taxes
 On
        January 1, 2007, the Company adopted the provisions of Financial Accounting
        Standards Board ("FASB") Interpretation No. 48 ("FIN 48"), "Accounting for
        Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
        Accounting for Income Taxes". FIN 48 clarifies the accounting for uncertainty
        in
        income taxes recognized in an enterprise’s financial statements and prescribes a
        recognition threshold and measurement attribute for the financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        tax return. As a result of the adoption of FIN 48 and recognition of the
        cumulative effect of adoption of a new accounting principle, the Company
        recorded a $5.7 million increase in the gross unrecognized income tax benefits
        and a decrease in retained earnings of $4.3 million. In conjunction with
        the
        adoption of FIN 48, the Company has classified uncertain tax positions as
        non-current income tax liabilities unless the amount is expected to be paid
        within one year. The Company had previously recorded its tax contingencies
        as
        current liabilities. As of January 1, 2007, the gross unrecognized income
        tax
        benefits were $10.5 million. As of March 31, 2007, the gross unrecognized
        income tax benefits were $10.9 million and the change from January 1, 2007
        was as a result of increases to tax positions in the prior period. If
        recognized, $9.5 million of the gross unrecognized income tax benefits would
        affect the effective tax rate.





The
      Company does not believe the amount of unrecognized benefit will materially
      change in the next twelve months. All liabilities are classified as non-current
      as no amounts are expected to be paid within the next year.





The
      Company recognizes interest and penalties related to uncertain tax positions
      in
      the income tax provision (benefit) on the condensed consolidated statement
      of
      operations. As of January 1, 2007, the Company had approximately $0.5
      million of accrued interest and penalties related to uncertain tax positions
      included in the liability on its condensed consolidated balance
      sheet.





The
      tax
      years 2003 to 2006 remain open to examination by the United States Internal
      Revenue Service, tax years 2001 to 2006 remain open to examination by state
      taxing jurisdictions, and the tax years 2002 to 2006 remain open to examination
      by foreign taxing jurisdictions.


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


16.
                              Reclassifications


Certain
      amounts from prior years have been reclassified to conform to the 2007
      presentation.





23





Item
      2 .  Management’s
      Discussion and Analysis of Results of


Operations
      and Financial Condition





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





Results
      of Operations





**Continuing
      Operations:**





Consolidated
      net sales increased by $6.5 million or 8.4% for the quarter ended March 31,
      2007
      versus the quarter ended March 31, 2006.  Net
      sales
      for the quarter ended March 31, 2007 for the Activated Carbon and Service
      segment increased $3.5 million or 5.4% versus the similar 2006
      period.  The
      increase was primarily due to higher demand and price in the worldwide
      environmental water treatment and potable water markets of $2.6 million and
      $2.1
      million, respectively, as well as price increases for certain carbon and service
      products. Foreign currency translation also had a positive impact of $2.0
      million. Partially offsetting this increase was lower demand in the worldwide
      specialty carbon and food markets of $1.9 million and $0.7 million,
      respectively.  Net
      sales
      for the Equipment segment increased $2.5 million or 29.9% in the first quarter
      2007 versus the comparable 2006 period.  The
      increase was primarily due to higher demand for traditional carbon adsorption
      equipment and ion exchange systems. Net sales for the quarter ended March 31,
      2007 for the Consumer segment increased by $0.4 million or 14.5% versus the
      quarter ended March 31, 2006.  The
      increase was attributable to higher demand for activated carbon cloth as well
      as
      the positive impact of foreign currency translation of $0.3 million. The total
      positive impact of foreign currency translation on consolidated net sales for
      the quarter ended March 31, 2007 was $2.3 million.





Net
      sales
      less cost of products sold, as a percentage of net sales, was 29.6% for the
      quarter ended March 31, 2007 compared to 25.0% for the similar 2006 period,
      a
      4.6% increase. The increase was primarily in the Activated Carbon and Service
      segment in the amount of $5.3 million, which was principally driven by volume
      as
      well as higher prices for certain carbon and service products. The Equipment
      segment reported a decline of approximately $0.3 million primarily as a result
      of $0.2 million of higher raw material and freight costs. The Consumer segment
      increased by $0.4 million primarily due to volume sold. The Company’s cost of
      products sold excludes depreciation; therefore it may not be comparable to
      that
      of other companies.





The
      depreciation and amortization decrease of $0.5 million during the quarter ended
      March 31, 2007 versus the quarter ended March 31, 2006  was
      primarily due to decreased depreciation due to an increase in fully depreciated
      fixed assets.




Selling,
      general and administrative expenses for the quarter ended March 31, 2007
      increased by $0.2 million versus the comparable 2006 quarter. The increase
      was
      primarily due to higher employee related costs and professional service fees
      which were partially offset by decreased legal expenses including the positive
      effect of the settlement with Trojan Technologies regarding the Company’s
      Canadian UV patent.





Research
      and development expenses for the quarter ended March 31, 2007 decreased $0.4
      million or 30.8% versus the similar 2006 period primarily due to decreased
      employee related expenses and a decline in rent expense.





Restructuring
      charges for the quarter ended March 31, 2006 primarily related to charges
      associated with the closure of two small manufacturing facilities as a result
      of
      the Company’s 2005 re-engineering plan.





Other
      expense for the quarter ended March 31, 2007 decreased $0.4 million as compared
      to March 31, 2006. The decrease is primarily due to the write-off of deferred
      financing fees associated with the Company’s previous credit facility that
      occurred during the quarter ended March 31, 2006.




Interest
      expense, net of interest income, for the quarter ended March 31, 2007 decreased
      $0.3 million versus the quarter ended March 31, 2006. The decrease is as a
      result of lower average borrowing levels and lower average interest rates paid
      on the Company’s borrowings in the quarter ended March 31, 2007 versus the
      similar 2006 period.




24





The
      effective tax rate for the quarter ended March 31, 2007 was 70.8% compared
      to
      9.8% for the quarter ended March 31, 2006. The quarter ended March 31, 2007
      tax
      rate was higher than the statutory Federal Income Tax Rate due to several
      factors. In foreign jurisdictions, the statutory rates are greater than the
      United State’s statutory rate, without a corresponding benefit of a foreign tax
      credit in the United States. This accounted for 31.9% or $3.4 million of the
      increase. In addition, the expiration of the Extraterritorial Income Exclusion
      created an increase in the rate which totaled approximately 4.0% or  $0.4
      million, the recording of tax contingencies for uncertain tax positions amounted
      to an increase of  10.0% or $0.3 million, and higher income generated by
      the Company’s Japanese joint venture increased the effective tax rate above the
      statutory rate by 10.0%. The quarter ended March 31, 2006 tax rate was lower
      than the statutory Federal Income Tax Rate due to an 18.6% or  $0.3 million
      benefit related to the Extraterritorial Income Exclusion, recognition of foreign
      tax credit benefits of 18.6% or $0.3 million, and recognition of state income
      tax benefits of  26.6% or $0.4 million.





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. Under FIN 48, the Company must recognize the
      tax
      benefit from an uncertain tax position only if it is more likely than not that
      the tax position will be sustained on examination by the taxing authorities,
      based on the technical merits of the position. The tax benefits recognized
      in
      the financial statements from such a position are measured based on the largest
      benefit that has a greater than fifty percent likelihood of being realized
      upon
      ultimate resolution.





Equity
      in
      income from equity investments for the quarter ended March 31, 2007 increased
      $0.9 million versus the similar 2006 period. The increase was primarily due
      to
      lower cost of products sold and a favorable mix for products manufactured by
      the
      company’s joint venture with Mitsubishi Chemical Company in Japan.





**Discontinued
      Operations:**





Income
      from discontinued operations was $1.6 million for the quarter ended March 31,
      2006 was primarily due to the $1.7 million, net of tax, gain recognized on
      the
      sale of the Company’s Charcoal/Liquid business.





Financial
      Condition





Working
      Capital and Liquidity





Cash
      flows provided by operating activities were $3.4 million for the period ended
      March 31, 2007 compared to cash flows used in operating activities of $4.1
      million for the comparable 2006 period. The $7.5 million increase is primarily
      due to improved earnings of $3.4 million and a $1.9 million increase in
      operating working capital (exclusive of debt) in 2007 versus the comparable
      2006
      period. The 2006 period also included the gain from the sale of assets,
      pre-tax. The cash flows discussed for the quarter ended March 31, 2006
      include discontinued operations.





Common
      stock dividends were not paid during the quarters ended March 31, 2007 and
      2006,
      respectively.




Total
      debt at March 31, 2007 was $75.9 million, an increase of $1.0 million from
      December 31, 2006. The increase was primarily the result of the addition of
      short-term debt of $0.9 million related to the Company’s operations in China and
      is more fully described in Note 10. The additional borrowings were used in
      financing normal working capital and capital expenditure
      activities.





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




25




**5.00%
      Convertible Senior Notes due 2036**





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





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





For
      the
      quarter ended March 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended March
      31, 2007. As a result, as of March 31, 2007, the holders of the Notes have
      the
      right to convert the Notes into cash and shares of common stock. Although the
      Company does not anticipate that a significant amount of these Notes will be
      converted, if any, as of March 31, 2007 the Company was required to reclassify
      as a current liability that portion of the Notes that cannot be refinanced
      on a
      long-term basis as provided by SFAS No. 6, “Classification of Short-Term
      Obligations Expected to be Refinanced.”





The
      initial conversion rate is 196.0784 shares of the Company’s common stock per
      $1,000 principal amount of Notes, equivalent to an initial conversion price
      of
      approximately $5.10 per share of common stock. The conversion rate is subject
      to
      adjustment in some events, including the payment of a dividend on the Company’s
      common stock, but will not be adjusted for accrued interest, including any
      additional interest. In addition, following certain fundamental changes that
      occur prior to August 15, 2011, the Company will increase the conversion rate
      for holders who elect to convert Notes in connection with such fundamental
      changes in certain circumstances. The Company considered EITF 00-27,
“Application of Issue No. 98.5 to Certain Convertible Instruments,” Issue 7,
      which indicates that if a reset of the conversion rate due to a contingent
      event
      occurs the Company would need to calculate if there is a beneficial conversion
      and record if applicable. Through December 31, 2006, no contingent events
      have occurred.





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





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





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




26




The
      Company sold the Notes to the original purchaser at a discount of
      $3.3 million that will be amortized over a period of five years. The
      discount is reflected as a deduction from the face amount of the debt. As of
      the
      three months ended March 31, 2007, the Company recorded interest expense of
      $1.8 million, of which $0.2 million related to the amortization of the
      discount and $1.6 million related to the Notes. The Company incurred
      issuance costs of $1.5 million which were deferred and are being amortized
      over a five year period.





The
      Notes
      and the Subsidiary 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, the Subsidiary Guarantees, and the common stock
      issuable upon conversion of the Notes have not been registered. The offering
      was
      conducted in reliance upon an exemption from registration under the Securities
      Act and applicable state securities laws. The Company 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. The Company
      implemented Financial Statement of Position (FSP) EITF 00-19-2, “Accounting for
      Registration Payment Arrangements” and accrued the probable liability of $0.2
      million for penalty interest under SFAS No. 5, “Accounting for Contingencies,”
with an adoption date of January 1, 2007.




**Credit
      Facility**





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





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





As
      of
      March 31, 2007, the carrying amount of assets pledged as collateral was
      $55.9 million. The carrying amount as of March 31, 2007 for domestic,
      U.K., and Belgian borrowers were $42.5 million, $7.9 million, and
      $5.5 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 March 31, 2007, total availability
      was $38.2 million. Availability as of March 31, 2007 for domestic,
      U.K., and Belgian borrowers were $31.6 million, $6.6 million, and
      zero, respectively. The Company can issue letters of credit up to
      $20 million of the available commitment amount under the Credit Facility.
      Sub-limits for letters of credit under the U.K. sub-facility and the Belgian
      sub-facility are $2.0 million and $6.0 million, respectively. Letters
      of credit outstanding at March 31, 2007 totaled
      $17.8 million.





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




27




The
      Company incurred debt issuance costs of $0.5 million which were deferred
      and are being amortized over a five year period. The Company had no borrowings
      under the Credit Facility as of March 31, 2007.





The
      Credit Facility contains a number of affirmative and negative covenants. Because
      of delays in filing its Quarterly Report on Form 10-Q for the quarter ended
      March 31, 2007, the Company was in violation of the affirmative covenant
      requiring unaudited financial statements to be provided to the lender within
      45
      days after the end of the Company’s fiscal quarter. On May 29, 2007, the Company
      amended its credit agreement prior to the filing of this Form 10- Q which
      included a waiver to extend the due date for delivery of unaudited financial
      statements until June 8, 2007. For the quarter ended March 31, 2007, the last
      reported sale price of the Companys common stock was greater than 120% of the
      conversion price of the Notes for at least 20 trading days in the period of
      30
      consecutive trading days ended March 31, 2007. As a result, as of March 31,
      2007, the holders of the Notes have the right to convert the Notes into cash
      and
      shares of common stock. Although currently not anticipated by the Company,
      the ability of holders of the Notes to convert is an event of default. Included
      in the aforementioned amendment, is a provision for up to $10.0 million where
      Notes converted up to that amount will not be considered an event of default
      and
      the Company was able to classify up to that amount of the Notes as
      long-term debt as it has the ability and intent to refinance it under the
      amended agreement. The amendment also includes a provision for up to $3.0
      million of letters of credit under the Company’s U.S., Belgium, and UK
      sub-limits that can be issued having expiration dates that are more than one
      year but not more than three years after the date of issuance.




The
      negative covenants provide for certain restrictions on possible acts by the
      Company related to matters such as additional indebtedness, certain liens,
      fundamental changes in the business, certain investments or loans, asset sales
      and other customary requirements. The Company was in compliance with all such
      negative covenants as of March 31, 2007 and is currently in compliance with
      such covenants.





Management
      cannot be assured that, after the March 31, 2007 financial statements have
      been
      provided to the lenders, there will not be any violation in future periods
      of
      the covenants contained in the Credit Facility. Although not currently
      anticipated by the Company, the conversion by holders of Notes above the $10.0
      million provision, as described above, would be an event of default.





**Contractual
      Obligations**





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


Due
                  in(Thousands)
              
              2007
              
              2008
              
              2009
              
              2010
              
              2011
              
              Thereafter
              
              TotalShort-term
                  debt *
              
              $
              904
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              65,000
              
              $
              -
              
              $
              65,904Long-term
                  debt
              
              
              -
              
              
              -
              
              
              2,925
              
              
              -
              
              
              10,000
              
              
              -
              
              
              12,925Operating
                  leases
              
              
              4,127
              
              
              3,056
              
              
              2,673
              
              
              2,357
              
              
              2,000
              
              
              10,604
              
              
              24,817Unconditional
                  purchaseobligations**
              
              
              26,981
              
              
              19,853
              
              
              10,019
              
              
              7,753
              
              
              5,711
              
              
              -
              
              
              70,317Total
                  contractual cashObligations
              
              $
              32,012
              
              $
              22,909
              
              $
              15,617
              
              $
              10,110
              
              $
              82,711
              
              $
              10,604
              
              $
              173,963




**The
      2011 maturity excludes debt discount of $2,943*




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




The
      long-term tax payable of $10.3 million pertaining to the FIN 48 tax liability
      has been excluded from the above table.




28


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





Capital
      Expenditures and Investments





Capital
      expenditures for property, plant and equipment totaled $2.0 million for the
      three months ended March 31, 2007 compared to expenditures of $3.1 million
      for
      the same period in 2006. The expenditures for the period ended March 31, 2007
      consisted primarily of improvements to the Company’s manufacturing facilities of
      $1.8 million and customer capital of $0.1 million. The comparable 2006
      expenditures consisted primarily of $1.8 million for improvements to
      manufacturing facilities, $1.1 million related to the repair of the Company’s
      Pearl River plant as a result of Hurricane Katrina, and $0.3 million for
      customer capital. Capital expenditures for 2007 are projected to be
      approximately $17.0 million .





In
      January 2006, the Company announced the temporary idling of its reactivation
      facility in Blue Lake, California in an effort to reduce operating costs and
      to
      more efficiently utilize the capacity at its other existing locations. The
      Company conducted an impairment review, in accordance with SFAS No. 144 of
      the
      plant’s assets having a net book value of $1.3 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 late
      2007 if market conditions warrant it. If management should conclude that the
      idling of the plant beyond 2007 is necessary, operating results may be adversely
      affected by impairment charges.





The
      March
      31, 2006 proceeds from sale of assets of $19.1 million, as shown on the
      statement of cash flows, represents the Company’s sale of its Charcoal/Liquid
      business in Germany which is more fully described in


Note
      1.





Regulatory
      Matters





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





In
      January 2007, the Company received a Notice of Violation (“NOV”) from the United
      States Environmental Protection Agency, Region 4 (“EPA”) alleging multiple
      violations of the federal Resource Conservation and Recovery Act and
      corresponding EPA and Kentucky Department of Environmental Protection (“KYDEP”)
      hazardous waste management rules and regulations. The alleged violations are
      based on information provided by the Company during and after a Multi Media
      Compliance Evaluation inspection of the Company’s Big Sandy Plant, located in
      Catlettsburg, Kentucky, conducted by the EPA and KYDEP in September 2005, and
      concern the hazardous waste spent activated carbon regeneration facility located
      at the Big Sandy Plant. The Company is evaluating the NOV. The EPA has not
      yet
      indicated whether or not it will take formal enforcement action, or whether
      such
      action would involve the assessment of civil penalties, and has not specified
      a
      monetary amount of any such civil penalties it might pursue in connection with
      this matter. At this time the Company can not predict with any certainty the
      outcome of this matter.




29




New
      Accounting Pronouncements





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





Item
      3 .  Quantitative
      and Qualitative Disclosures about Market Risk





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





Item
      4.  Controls
      and Procedures





Disclosure
      Controls and Procedures:





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





Changes
      in Internal Control:





There
      have not been any changes in the Company’s internal controls over financial
      reporting that occurred during the period ended March 31, 2007, that have
      significantly affected, or are reasonably likely to significantly affect, the
      Company’s internal controls over financial reporting.





30





PART
      II - OTHER INFORMATION


Item
                  1.
              Legal
                  ProceedingsSee
                  Note 7to
                  the unaudited interim Condensed Consolidated Financial Statements
                  contained herein.Item
                  1a.
              Risk
                  FactorsThere
                  were no material changes in the Company’s risk factors from the risks
                  disclosed in the Company’s Form 10-K for the year ended December 31,
                  2006.Item
                2c.
              Unregistered
                Sales
                of Equity Securities and Use of
                Proceeds





**Period**
            
            **Total**
              **Number**
              **of
                Shares**
              **Purchased
                (a)**
            
            **Average**
              **Price
                Paid**
              **Per
                Share (b)**
            
            **Total
                Number of**
              **Shares
                Purchased**
              **as
                Part of Publicly**
              **Announced**
              **Repurchase
                Plans**
              **or
                Programs (c)**
            
            **Maximum
                Number**
              **(or
                Approximate**
              **Dollar
                Value)**
              **of
                Shares that May**
              **Yet
                be Purchased**
              **Under
                the Plans or**
              **Programs
                (d)**January
                1 - January 31, 2007
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---February
                1 - February 28, 2007
            
            
            11,921
            
            $
            6.22
            
            
            ---
            
            
            ---March
                1 - March 31, 2007
            
            
            10,779
            
            $
            8.10
            
            
            ---
            
            
            ---








(a)
      This
      column includes purchases under Calgon Carbon’s Stock Option Plan which
      represented withholding taxes due from employees relating to the restricted
      share awards issued on February 9, 2007 and March 27, 2007. Future purchases
      under this plan will be dependent upon employee elections and
      forfeitures.





Item
                3.
            Defaults
                Upon Senior Securities





The
      Credit Facility contains a number of affirmative and negative covenants. Because
      of delays in filing its Quarterly Report on Form 10-Q for the quarter ended
      March 31, 2007, the Company was in violation of the affirmative covenant
      requiring unaudited financial statements to be provided to the lender within
      45
      days after the end of the Company’s fiscal quarter. On May 29, 2007, the Company
      amended its credit agreement prior to the filing of this Form 10- Q which
      included a waiver to extend the due date for delivery of unaudited financial
      statements until June 8, 2007.





For
      the
      quarter ended March 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended March
      31, 2007. As a result, as of March 31, 2007, the holders of the Notes have
      the
      right to convert the Notes into cash and shares of common stock. Although
      currently not anticipated by the Company, the ability of holders of the Notes
      to
      convert is an event of default. Included in the aforementioned amendment, is
      a
      provision for up to $10.0 million where Notes converted up to that amount will
      not be considered an event of default and the Company was able to classify
      up to
      that amount as long-term debt. The amendment also includes a provision for
      up to
      $3.0 million of letters of credit under the Company’s U.S., Belgium, and UK
      sub-limits that can be issued having expiration dates that are more than one
      year but not more than three years after the date of issuance.





31


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.




Exhibit
        99.1 Amendment No. 2 to Credit Agreement, as amended on May 29, 2007.




32




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:
              June 5, 2007
            
            /s/ Leroy
              M.
              BallLeroy
                M.
                Ball
              Senior
                Vice
                President,Chief
              Financial Officer




33




EXHIBIT
      INDEX





Exhibit
              No.
            Description
            Method
                of Filing31.1
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002
            Filed
                herewith31.2
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002
            Filed
                herewith32.1
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
            Filed
                herewith32.2
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
            Filed
                herewith99.1
            Amendment
                No. 2 to Credit Agreement, as amended on May 29,
                2007.
            Filed
                herewith




35