**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 June 30, 2007
                or




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





Commission
      file number 1-10776





CALGON
      CARBON CORPORATION


(Exact
      name of registrant as specified in its charter)





Delaware
            25-0530110(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)





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


(Address
      of principal executive offices)


(Zip
      Code)





**(412)
      787-6700**


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







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


**if
      changed since last report)**





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





Yes
x   No
o





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





Large
      accelerated filer o     Accelerated
      filer x   Non-accelerated
      filer o





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





Yes
o   No
x




**Applicable
      only to corporate issuers:**




**Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.**





Class
            
            Outstanding
                at August 2, 2007Common
                Stock, $.01 par value
            
            40,403,439
                shares










CALGON
      CARBON CORPORATION


FORM
      10-Q


QUARTER
      ENDED June 30, 2007





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




INDEX





PagePART
                1-CONDENSED
                CONSOLIDATED FINANCIAL INFORMATION
            2Item
                I.
            Condensed
                Consolidated Financial Statements
            2Introduction
                to the Condensed Consolidated Financial Statements
            2Condensed
                Consolidated Statements of Operations (unaudited)
            3Condensed
                Consolidated Balance Sheets (unaudited)
            4Condensed
                Consolidated Statements of Cash Flows (unaudited)
            5Notes
                to Condensed Consolidated Financial Statements (unaudited)
            6Item
                2.
            Management's
                Discussion and Analysis of Results of Operations and Financial
                Condition
            25Item
                4.
            Controls
                and Procedures
            32PART
                II - OTHER INFORMATION
            33Item
                1.
            Legal
                Proceedings
            33Item
                1a.
            Risk
                Factors
            33Item
                2c.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            33Item
                3.
            Default
                upon Senior Security
            33Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            33Item
                6.
            Exhibits
            34SIGNATURES
            35CERTIFICATIONS




1




PART
      I
      - CONDENSED CONSOLIDATED FINANCIAL INFORMATION




Item
      1.  Condensed
      Consolidated Financial Statements




INTRODUCTION
      TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




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


10-K.





In
      management’s opinion, the unaudited interim condensed consolidated financial
      statements reflect all adjustments, which are of a normal and recurring nature,
      and are necessary for a fair presentation, in all material respects, of
      financial results for the interim periods presented. Operating results for
      the
      first six 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
            
            Six
                Months EndedJune
                30,
            
            June
                30,2007
            
            2006
            
            2007
            
            2006Net
                sales
            
            $
            86,621
            
            $
            77,870
            
            $
            167,667
            
            $
            151,270Net
                sales to related parties
            
            
            1,807
            
            
            2,640
            
            
            3,791
            
            
            5,819Total
            
            
            88,428
            
            
            80,510
            
            
            171,458
            
            
            157,089Cost
                of products sold(excluding
                depreciation and amortization)
            
            
            59,556
            
            
            59,962
            
            
            117,980
            
            
            117,373Depreciation
                and amortization
            
            
            4,331
            
            
            4,794
            
            
            8,592
            
            
            9,592Selling,
                general and administrative expenses
            
            
            15,009
            
            
            16,570
            
            
            29,615
            
            
            30,942Research
                and development expenses
            
            
            907
            
            
            1,041
            
            
            1,735
            
            
            2,238Gain
                on insurance settlement
            
            
            -
            
            
            (4,899
            )
            
            -
            
            
            (4,899
            )Restructuring
                charge
            
            
            -
            
            
            1
            
            
            -
            
            
            779,803
            
            
            77,469
            
            
            157,922
            
            
            155,253Income
                from operations
            
            
            8,625
            
            
            3,041
            
            
            13,536
            
            
            1,836Interest
                income
            
            
            400
            
            
            234
            
            
            702
            
            
            320Interest
                expense
            
            
            (1,410
            )
            
            (1,524
            )
            
            (2,860
            )
            
            (3,098
            )Other
                expense—net
            
            
            (408
            )
            
            (514
            )
            
            (811
            )
            
            (1,358
            )Income
                (loss) from continuing operations before income taxes, and equity
                income
            
            
            7,207
            
            
            1,237
            
            
            10,567
            
            
            (2,300
            )Provision
                (benefit) for income taxes
            
            
            3,147
            
            
            (925
            )
            
            5,527
            
            
            (1,270
            )Income
                (loss) from continuing operations before equity income
            
            
            4,060
            
            
            2,162
            
            
            5,040
            
            
            (1,030
            )Equity
                in income (loss) from equity investments
            
            
            402
            
            
            (23
            )
            
            1,456
            
            
            180Income
                (loss) from continuing operations
            
            
            4,462
            
            
            2,139
            
            
            6,496
            
            
            (850
            )Income
                from discontinued operations
            
            
            -
            
            
            297
            
            
            -
            
            
            1,872Net
                income
            
            $
            4,462
            
            $
            2,436
            
            $
            6,496
            
            $
            1,022Net
                income per common shareBasic:Income
                (loss) from continuing operations
            
            $
            .11
            
            $
            .05
            
            $
            .16
            
            $
            (.02
            )Income
                from discontinued operations
            
            
            -
            
            
            .01
            
            
            -
            
            
            .05Net
                income
            
            $
            .11
            
            $
            .06
            
            $
            .16
            
            $
            .03Diluted:Income
                (loss) from continuing operations
            
            $
            .09
            
            $
            .05
            
            $
            .14
            
            $
            (.02
            )Income
                from discontinued operations
            
            
            -
            
            
            .01
            
            
            -
            
            
            .05Net
                income
            
            $
            .09
            
            $
            .06
            
            $
            .14
            
            $
            .03Weighted
                average shares outstandingBasic
            
            
            40,291,372
            
            
            39,875,505
            
            
            40,258,163
            
            
            39,865,173Diluted
            
            
            47,745,066
            
            
            40,076,904
            
            
            45,807,253
            
            
            39,865,173




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)





June
                30,
            
            December
                31,2007
            
            2006ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            16,628
            
            $
            5,631Receivables
                (net of allowance of $2,699 and $1,981)
            
            
            59,875
            
            
            53,239Receivables
                from related parties (Note 13)
            
            
            1,667
            
            
            1,797Revenue
                recognized in excess of billings on uncompleted contracts
            
            
            7,045
            
            
            7,576Inventories
            
            
            71,466
            
            
            70,339Deferred
                income taxes - current
            
            
            6,973
            
            
            5,761Other
                current assets
            
            
            3,834
            
            
            4,369Total
                current assets
            
            
            167,488
            
            
            148,712Property,
                plant and equipment, net
            
            
            102,690
            
            
            106,101Equity
                investments
            
            
            8,937
            
            
            6,971Intangibles
            
            
            8,652
            
            
            8,521Goodwill
            
            
            27,768
            
            
            27,497Deferred
                income taxes - long-term
            
            
            8,314
            
            
            20,225Other
                assets
            
            
            3,172
            
            
            4,337Total
                assets
            
            $
            327,021
            
            $
            322,364LIABILITIES
                AND SHAREHOLDERS' EQUITYCurrent
                liabilities:Short-term
                debt
            
            $
            63,649
            
            $
            -Accounts
                payable and accrued liabilities
            
            
            33,822
            
            
            36,446Accounts
                payable to related parties (Note 13)
            
            
            -
            
            
            168Billings
                in excess of revenue recognized on uncompleted contracts
            
            
            3,646
            
            
            2,516Accrued
                interest
            
            
            1,639
            
            
            1,440Payroll
                and benefits payable
            
            
            7,424
            
            
            6,533Accrued
                income taxes
            
            
            2,378
            
            
            8,423Total
                current liabilities
            
            
            112,558
            
            
            55,526Long-term
                debt
            
            
            12,925
            
            
            74,836Deferred
                income taxes - long-term
            
            
            1,927
            
            
            1,679Accrued
                pension and other liabilities
            
            
            44,302
            
            
            42,450Total
                liabilities
            
            
            171,712
            
            
            174,491Commitments
                and contingencies (Note 7)Shareholders'
                equity:Common
                shares, $.01 par value, 100,000,000 shares authorized, 42,671,227
                and
                42,550,290 shares issued
            
            
            427
            
            
            425Additional
                paid-in capital
            
            
            72,699
            
            
            70,345Retained
                earnings
            
            
            96,594
            
            
            94,035Accumulated
                other comprehensive income
            
            
            12,983
            
            
            10,305182,703
            
            
            175,110Treasury
                stock, at cost, 2,843,853 and 2,819,690 shares
            
            
            (27,394
            )
            
            (27,237
            )Total
                shareholders' equity
            
            
            155,309
            
            
            147,873Total
                liabilities and shareholders’ equity
            
            $
            327,021
            
            $
            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)





Six
                Months EndedJune
                30,2007
            
            2006Cash
                flows from operating activitiesNet
                income
            
            $
            6,496
            
            $
            1,022Adjustments
                to reconcile net income to net cash provided by (used in) operating
                activities:Gain
                on insurance settlement
            
            
            -
            
            
            (4,899
            )Gain
                from divestitures
            
            
            -
            
            
            (6,719
            )Depreciation
                and amortization
            
            
            8,592
            
            
            9,594Equity
                income from equity investments
            
            
            (1,456
            )
            
            (180
            )Employee
                benefit plan provisions
            
            
            745
            
            
            2,220Distributions
                received from equity investments
            
            
            403
            
            
            -Non-cash
                pension curtailment gain
            
            
            (265
            )
            
            -Changes
                in assets and liabilities:Increase
                in receivables
            
            
            (6,010
            )
            
            (1,993
            )Increase
                in inventories
            
            
            (651
            )
            
            (1,232
            )Decrease
                (increase) in revenue in excess of billings on uncompleted contracts
                and
                other current assets
            
            
            1,131
            
            
            (1,780
            )Decrease
                  (increase) in accounts payable, accrued liabilities, and billings
                  in
                  excess of revenue
            
            
            366
            
            
            (4,368
            )Decrease
                in accrued pension
            
            
            (1,890
            )
            
            (1,609
            )Increase
                deferred income taxes
            
            
            4,429
            
            
            1,496Other
                items - net
            
            
            584
            
            
            1,725Net
                cash provided by (used in) operating activities
            
            
            12,474
            
            
            (5,114
            )Cash
                flows from investing activitiesProceeds
                from divestitures
            
            
            -
            
            
            21,213Property,
                plant and equipment expenditures
            
            
            (4,451
            )
            
            (7,302
            )Proceeds
                from insurance settlement for plant and equipment
            
            
            -
            
            
            4,595Proceeds
                from disposals of property, plant and equipment
            
            
            162
            
            
            416Net
                cash (used in) provided by investing activities
            
            
            (4,289
            )
            
            18,922Cash
                flows from financing activitiesProceeds
                from borrowings
            
            
            5,933
            
            
            61,039Repayments
                of borrowings
            
            
            (4,195
            )
            
            (74,927
            )Treasury
                stock purchases
            
            
            (157
            )
            
            (108
            )Common
                stock issued through exercise of stock options
            
            
            708
            
            
            466Net
                cash provided by (used in) financing activities
            
            
            2,289
            
            
            (13,530
            )Effect
                of exchange rate changes on cash
            
            
            523
            
            
            (1,240
            )Increase
                (decrease) in cash and cash equivalents
            
            
            10,997
            
            
            (962
            )Cash
                and cash equivalents, beginning of period
            
            
            5,631
            
            
            5,446Cash
                and cash equivalents, end of period
            
            $
            16,628
            
            $
            4,484




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




5




CALGON
      CARBON CORPORATION


NOTES
      TO CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
      in Thousands)


(Unaudited)




1.
            Inventories:





June
                30,
              2007
            
            December
                31,
              2006Raw
                materials
            
            $
            18,922
            
            $
            16,587Finished
                goods
            
            
            52,544
            
            
            53,752$
            71,466
            
            $
            70,339




2.
            Supplemental
                Cash Flow Information:





Cash
      paid
      for interest during the six months ended June 30, 2007 and 2006 was $2.7 million
      and $3.1 million, respectively. Income taxes paid, net of refunds, was $0.7
      million and $0.5 million, for the six months ended June 30, 2007 and 2006,
      respectively.





The
      non-cash vesting of restricted stock-based compensation was $0.5 million and
      $0.4 million for the six months ended June 30, 2007 and 2006, respectively.
      The
      non-cash impact of FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an Interpretation of FASB Statement No. 109,” (“FIN 48”) was $6.5
      million for the six months ended June 30, 2007.





3.
            Dividends:





The
      Company’s Board of Directors did not declare or pay a dividend for the three or
      six month periods ended June 30, 2007 and 2006.




4.
            Comprehensive
                income:





Three
                Months Ended June 30,
            
            Six
                Months Ended June 30,2007
            
            2006
            
            2007
            
            2006Net
                income
            
            $
            4,462
            
            $
            2,436
            
            $
            6,496
            
            $
            1,022Other
                comprehensive income,net
                of taxes
            
            
            916
            
            
            2,885
            
            
            2,678
            
            
            3,743Comprehensive
                income
            
            $
            5,378
            
            $
            5,321
            
            $
            9,174
            
            $
            4,765




The
      only
      matters contributing to the other comprehensive income during the three and
      six
      months ended June 30, 2007 was the foreign currency translation adjustment
      of
      $0.9 million and $2.1 million, respectively, and the change in the fair value
      of
      the derivative instruments of $(14) thousand and $0.5 million as described
      in
      Note 6.  The
      only
      matters contributing to the other comprehensive income during the three and
      six
      months ended June 30, 2006 were the foreign currency translation adjustment
      of
      $2.8 million and $3.6 million, respectively, and the change in the fair value
      of
      the derivative instruments of $(15) thousand and $(0.1) million,
      respectively.




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, 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 .





Three
                Months Ended June 30,
            
            Six
                Months Ended June 30,2007
            
            2006
            
            2007
            
            2006Net
                SalesActivated
                Carbon and Service
            
            $
            74,723
            
            $
            67,435
            
            $
            143,406
            
            $
            132,620Equipment
            
            
            10,658
            
            
            9,446
            
            
            21,624
            
            
            17,887Consumer
            
            
            3,047
            
            
            3,629
            
            
            6,428
            
            
            6,582$
            88,428
            
            $
            80,510
            
            $
            171,458
            
            $
            157,089Income
                (loss) from continuing operations before depreciation, amortization,
                restructuring, and income taxesActivated
                Carbon and Service
            
            $
            13,015
            
            $
            9,061
            
            $
            21,488
            
            $
            14,109Equipment
            
            
            (607
            )
            
            (2,013
            )
            
            (736
            )
            
            (3,672
            )Consumer
            
            
            548
            
            
            788
            
            
            1,376
            
            
            99812,956
            
            
            7,836
            
            
            22,128
            
            
            11,435Depreciation
                and amortizationActivated
                Carbon and Service
            
            
            3,959
            
            
            4,451
            
            
            7,847
            
            
            8,900Equipment
            
            
            243
            
            
            208
            
            
            483
            
            
            418Consumer
            
            
            129
            
            
            135
            
            
            262
            
            
            2744,331
            
            
            4,794
            
            
            8,592
            
            
            9,592Income
                from continuing operations before restructuring, equity in income
                from
                equity investments, and income taxes
            
            
            8,625
            
            
            3,042
            
            
            13,536
            
            
            1,843Reconciling
                items:Restructuring
                charge
            
            
            -
            
            
            (1
            )
            
            -
            
            
            (7
            )Interest
                income
            
            
            400
            
            
            234
            
            
            702
            
            
            320Interest
                expense
            
            
            (1,410
            )
            
            (1,524
            )
            
            (2,860
            )
            
            (3,098
            )Other
                expense - net
            
            
            (408
            )
            
            (514
            )
            
            (811
            )
            
            (1,358
            )Consolidated
                income (loss) from continuing operations before income taxes and
                equity in
                income from equity investments
            
            $
            7,207
            
            $
            1,237
            
            $
            10,567
            
            $
            (2,300
            )




7




June
                30,
              2007
            
            December
                31,
              2006Total
                AssetsActivated
                Carbon and Service
            
            $
            280,721
            
            $
            277,134Equipment
            
            
            33,584
            
            
            34,031Consumer
            
            
            12,716
            
            
            11,199Consolidated
                total assets
            
            $
            327,021
            
            $
            322,364




6.
            Derivative
                Instruments





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





The
      Company had sixteen derivative instruments outstanding at June 30, 2007 of
      which
      one was a foreign currency swap, eight were foreign currency forward exchange
      contracts, and seven were cash flow hedges for forecasted purchases of natural
      gas. The Company applied hedge accounting treatment to the foreign currency
      swap
      and the seven cash flow hedges for forecasted natural gas. During the period
      ended June 30, 2007, the Company recorded an immaterial loss in other expense
      related to the foreign currency forward exchange contracts that did not qualify
      for hedge accounting treatment. The Company had twenty derivative instruments
      outstanding at June 30, 2006 of which one was a foreign currency swap and
      nineteen were foreign currency forward exchange contracts. The Company applied
      hedge accounting treatment to the foreign currency swap. During the period
      ended
      June 30, 2006, the Company recorded an immaterial gain in other income for
      the
      nineteen foreign currency forward exchange contracts that did not qualify for
      hedge accounting treatment .





On
      April
      26, 2004, the Company entered into a ten-year foreign currency swap agreement
      to
      fix the foreign exchange rate on a $6.5 million intercompany loan between the
      Company and its foreign subsidiary, Chemviron Carbon Ltd. Since its inception,
      the foreign currency swap has been treated as a foreign exchange cash flow
      hedge. Accordingly, the change in the fair value of the effective hedge portion
      of the foreign currency swap of $0.1 million and $0.2 million, respectively,
      for
      the three and six month periods ended June 30, 2007 and ($15) thousand and
      ($0.1) million, respectively, for the three and six month periods ended June
      30,
      2006 was recorded in other comprehensive income (loss). The balance of the
      effective hedge portion of the foreign currency swap recorded in other long-term
      liabilities was $0.9 million and $0.7 million, respectively, as of June 30,
      2007
      and 2006.





The
      change in fair value of the cash flow hedges for the forecasted purchase of
      natural gas recorded in other long-term liabilities was $0.2 million and $(0.6)
      million, net of tax, respectively, for the three and six month periods ended
      June 30, 2007. The balance of the cash flow hedges for the forecasted purchase
      of natural gas recorded in other long-term liabilities was $0.3 million as
      of
      June 30, 2007.




No
      component of the derivatives gains or losses has been excluded from the
      assessment of hedge effectiveness. For the three and six month periods ended
      June 30, 2007 and 2006, the net gain or loss recognized due to the amount of
      hedge ineffectiveness was insignificant.




8




7.
            Contingencies





The
      Company purchased the common stock of Advanced Separation Technologies
      Incorporated (AST) from Progress Capital Holdings, Inc. and Potomac Capital
      Investment Corporation on December 31, 1996. On January 12, 1998, the Company
      filed a claim for unspecified damages in the United States District Court in
      the
      Western District of Pennsylvania alleging among other things that Progress
      Capital Holdings and Potomac Capital Investment Corporation materially breached
      various AST financial and operational representations and warranties included
      in
      the Stock Purchase Agreement and had defrauded the Company. On January 26,
      2007,
      a jury returned a verdict in favor of the Company and against the defendants
      in
      the amount of $10.0 million, which has not been recorded in operations as of
      June 30, 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. On April 24, 2007, the
      United States Circuit Court of Appeals for the Federal Circuit Court affirmed
      the District Court’s judgment. The Company did not appeal this decision. In the
      second case, the Company filed suit against the Town of Ontario, New York,
      Trojan Technologies, Inc. (“Trojan”) and Robert Wykle, et al. in the United
      States District Court for the Western District of New York alleging that the
      defendants are practicing the method claimed within the U.S. Patents without
      a
      license. In the third case, the Company filed suit against the City of North
      Bay, Ontario, Canada (“North Bay”) and Trojan in the Federal Court of Canada
      alleging infringement of the Canadian Patent by North Bay and inducement of
      infringement by Trojan. On November 14, 2006, after a bench trial, the Court
      dismissed the Company’s claim for a declaration that the defendants infringed
      the Canadian Patent and the Company’s claims for an injunction, compensation,
      damages, interest, and costs and declared that the Canadian Patent is invalid.
      In March 2007, the Company and Trojan entered into a settlement whereby in
      exchange for a nominal cash payment and relief from legal fees, the Company
      granted Trojan worldwide immunity from all current and future legal action
      related to Calgon Carbon’s UV patents.





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. As of July 2007, the
      Company paid the final installment of $0.3 million related to the settlement.





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 June 30, 2006. The reduction of the liability
      was
      recorded as a reduction of selling, general and administrative expenses on
      the
      Company’s condensed consolidated statement of operations for the six months
      ended June 30, 2006. The Company has not incurred any environmental remediation
      expense for the three and six months ended June 30, 2007 and has incurred a
      total of $0.2 million of environmental remediation expense to date. It is
      reasonably possible that a change in the estimate of this obligation will occur
      as remediation preparation and remediation activity commences. The ultimate
      remediation costs are dependent upon among other things, the requirements of
      any
      state or federal environmental agencies, the remediation methods employed,
      the
      final scope of work being determined, and the extent and types of contamination
      which will not be fully determined until experience is gained through
      remediation and related activities. The accrued amounts are expected to be
      paid
      out over the course of several years once work has commenced. The Company has
      not yet determined when it will proceed with remediation efforts.




9





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





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





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





The
      Company owns a 49% interest in a joint venture, Calgon Mitsubishi Chemical
      Corporation, which was formed on October 1, 2002. At June 30, 2007, Calgon
      Mitsubishi Chemical Corporation had $6.4 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 June 30, 2007, the
      lender had not requested, and the Company has not provided, such guarantee.




10





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




8.
            Goodwill
                & Intangible Assets





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





The
      changes in the carrying amounts of goodwill by segment for the six month period
      ended June 30, 2007 are as follows:





ActivatedCarbon
                & Service Segment
            
            Equipment
                Segment
            
            Consumer
                Segment
            
            TotalBalance
                as of January 1, 2007
            
            $
            21,056
            
            $
            6,381
            
            $
            60
            
            $
            27,497Foreign
                exchange
            
            
            108
            
            
            163
            
            
            -
            
            
            271Balance
                as of June 30, 2007
            
            $
            21,164
            
            $
            6,544
            
            $
            60
            
            $
            27,768





The
      following is a summary of the Company’s identifiable intangible assets as of
      June 30, 2007 and December 31, 2006 respectively:





June
                30, 2007Weighted
                Average Amortization Period
            
            Gross
                Carrying Amount
            
            Foreign
                Exchange
            
            Accumulated
                Amortization
            
            Net
                Carrying AmountAmortized
                Intangible Assets:Patents
            
            
            15.4
                Years
            
            $
            1,369
            
            $
            -
            
            $
            (835
            )
            $
            534Customer
                Relationships
            
            
            17.0
                Years
            
            
            9,323
            
            
            45
            
            
            (4,192
            )
            
            5,176License
                Agreement
            
            
            5.0
                Years
            
            
            500
            
            
            -
            
            
            (367
            )
            
            133Product
                Certification
            
            
            7.9
                Years
            
            
            1,682
            
            
            -
            
            
            (472
            )
            
            1,210Unpatented
                Technology
            
            
            20.0
                Years
            
            
            2,875
            
            
            -
            
            
            (1,276
            )
            
            1,599Total
            
            
            16.6
                Years
            
            $
            15,749
            
            $
            45
            
            $
            (7,142
            )
            $
            8,652




11




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
            )
            
            5,738License
                Agreement
            
            
            5.0
                Years
            
            
            500
            
            
            -
            
            
            (317
            )
            
            183Product
                Certification
            
            
            7.9
                Years
            
            
            665
            
            
            -
            
            
            (321
            )
            
            344Unpatented
                Technology
            
            
            20.0
                Years
            
            
            2,875
            
            
            -
            
            
            (1,195
            )
            
            1,680Total
            
            
            16.6
                Years
            
            $
            14,732
            
            $
            11
            
            $
            (6,222
            )
            $
            8,521




For
      the
      three and six months ended June 30, 2007, the Company recognized $0.5 million
      and $0.9 million, respectively, of amortization expense related to intangible
      assets. For the three and six months ended June 30, 2006, the Company recognized
      $0.4 million and $0.9 million, respectively, of amortization expense related
      to
      intangible assets. The Company estimates amortization expense to be recognized
      during the next five years as follows:





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




9.
            Borrowing
                Arrangements





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




12





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





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 June 30, 2007, no contingent events have
      occurred.





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





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





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





The
      Company sold the Notes to the original purchaser at a discount of
      $3.3 million that will be amortized over a period of five years. The
      discount is reflected as a deduction from the face amount of the debt. As of
      the
      period ended June 30, 2007, the Company recorded interest expense of
      $2.2 million, of which $0.3 million related to the amortization of the
      discount and $1.9 million related to the Notes. The Company incurred
      issuance costs of $1.5 million which were deferred and are being amortized
      over a five year period.





The
      Company and the Subsidiary Guarantors sold the Notes and the Subsidiary
      Guarantees in August 2006 to initial purchasers for resale only to qualified
      institutional buyers in reliance on Rule 144A under the Securities Act of
      1933, as amended (the “Securities Act”), in an offering exempt from the
      registration requirements of the Securities Act and applicable state securities
      laws. In a related registration rights agreement, the Company and the Subsidiary
      Guarantors 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
      cause such registration statement to become effective within 240 days from
      the
      issue date, in order to register under the Securities Act resales of the Notes,
      the Subsidiary Guarantees and common stock issuable upon conversion of the
      Notes. The 90-day period expired on November 16, 2006, and the 240-day
      period expired on April 15, 2007. The Company did not file a shelf registration
      statement within the 90-day or cause such shelf registration to become effective
      within the 240-day period and, as a result, is obligated to pay predetermined
      additional interest to holders of the Notes pursuant to the terms of the
      registration rights agreement through the time when the registration statement
      was filed and declared effective. 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. The Company has filed a resale shelf registration statement on July 10,
      2007, and the registration statement was declared effective on July 18, 2007,
      ending the Company’s obligation to pay penalty interest. The Company will pay
      the penalty interest due in the third quarter of 2007.




13





**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
      June 30, 2007, the carrying amount of assets pledged as collateral was
      $56.0 million. The carrying amount as of June 30, 2007 for domestic,
      U.K., and Belgian borrowers were $44.3 million, $7.0 million, and
      $4.7 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 June 30, 2007, total availability was
      $37.4 million. Availability as of June 30, 2007 for domestic, U.K.,
      and Belgian borrowers was $32.7 million, $5.6 million, and zero,
      respectively. The Company can issue letters of credit up to $20.0 million
      of the available commitment amount under the Credit Facility. Sub-limits for
      letters of credit under the U.K. sub-facility and the Belgian sub-facility
      are
      $2.0 million and $6.0 million, respectively. Letters of credit
      outstanding at June 30, 2007 totaled $17.6 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 June 30, 2007.





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




14





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 June 30, 2007 and is currently in compliance with
      such
      covenants.





Management
      cannot be assured that, after the June 30, 2007 financial statements have been
      provided to the lenders, there will not be any violation in future periods
      of
      the covenants contained in the Credit Facility. 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 June 30, 2007. Bank guarantees of
      1.8 million Euros were issued as of June 30, 2007. The maturity date
      of this facility is December 15, 2007. Availability under this facility was
      2.2 million Euros at June 30, 2007.





**United
      Kingdom Credit Facility**




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





**Chinese
      Credit Facility**




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




**Fair
      Value of Debt**




At
      June
      30, 2007, the Company had $12.9 million of long-term debt which primarily
      consisted of $10.0 million of fixed rate Senior Convertible Notes that were
      entered into in August 2006. The fair value of these Notes at June 30, 2007
      was
      $23.1 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
      June 30, 2007, the Company had $63.6 million of outstanding short-term
      debt. Substantially all of the Company’s outstanding short-term debt at June 30,
      2007 consists of $65.0 million, excluding debt discount of $2.8 million, of
      fixed rate Senior Convertible Notes that were entered into in August 2006.
      The
      fair value of these Notes at June 30, 2007 was $150.1 million. The increase
      in
      value is primarily due to the increase in the Company’s common stock price and
      its impact on the conversion features of the Notes.





**Maturities
      of Debt**




The
      Company is obligated to make principal payments on debt outstanding at
      June 30, 2007 of $1.4 million in 2007, $2.9 million in 2009 and
      $75.0 million in 2011. See also the 5.00% Convertible Senior Notes due 2036
      section related to the holders’ optional conversion as of June 30,
      2007.




15




10.
            Pensions





U.S.
      Plans :





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




Three
                Months Ended June 30
            
            Six
                Months Ended June 30Pension
                Benefits (in thousands)
            
            2007
            
            2006
            
            2007
            
            2006Service
                cost
            
            $
            234
            
            $
            609
            
            $
            556
            
            $
            1,256Interest
                cost
            
            
            1,178
            
            
            1,201
            
            
            2,352
            
            
            2,453Expected
                return on plan assets
            
            
            (1,229
            )
            
            (1,066
            )
            
            (2,458
            )
            
            (2,129
            )Amortization
                of prior service cost
            
            
            62
            
            
            56
            
            
            123
            
            
            137Net
                amortization
            
            
            119
            
            
            203
            
            
            188
            
            
            456Curtailment
                credit
            
            
            (265
            )
            
            -
            
            
            (265
            )
            
            -Net
                periodic pension cost
            
            $
            99
            
            $
            1,003
            
            $
            496
            
            $
            2,173





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 June 30, 2007, the Company
      has contributed $0.8 million and expects to contribute $4.9 million over the
      remainder of the year which is $2.5 million more than originally
      estimated.





European
      Plans :





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





Three
                Months Ended June 30
            
            Six
                Months Ended June 30Pension
                Benefits (in thousands)
            
            2007
            
            2006
            
            2007
            
            2006Service
                cost
            
            $
            189
            
            $
            249
            
            $
            370
            
            $
            498Interest
                cost
            
            
            442
            
            
            389
            
            
            868
            
            
            778Expected
                return on plan assets
            
            
            (328
            )
            
            (272
            )
            
            (648
            )
            
            (544
            )Amortization
                of prior service cost
            
            
            11
            
            
            12
            
            
            22
            
            
            24Net
                amortization
            
            
            26
            
            
            44
            
            
            51
            
            
            88Net
                periodic pension cost
            
            $
            340
            
            $
            422
            
            $
            663
            
            $
            844




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 June 30, 2007, the
      Company contributed $1.0 million. The Company expects to contribute the
      remaining $1.3 million over the remainder of the year.





Defined
      Contribution Plans





The
      Company also sponsors a defined contribution pension plan for certain U.S.
      employees that permits employee contributions of up to 50% of eligible
      compensation in accordance with Internal Revenue Service guidance. In September
      2006, the Company announced the freezing of its defined benefit pension plan
      for
      all U.S. salaried employees replacing it with a defined contribution plan.
      Under
      this defined contribution plan, the Company makes a fixed contribution of 2%
      of
      eligible employee compensation on a quarterly basis and matches contributions
      made by each participant in an amount equal to 100% of the employee contribution
      up to a maximum of 2% of employee compensation. In addition, each of these
      employees is eligible for an additional Company contribution of up to 4% of
      employee compensation based upon annual Company performance at the discretion
      of
      the Company’s Board of Directors. Employer matching contributions for
      non-representative employees vest after two years of service. For bargaining
      unit employees at the Catlettsburg, Kentucky facility, the Company contributes
      a
      maximum of $25.00 per month to the plan. For bargaining unit employees at the
      Columbus, Ohio facility, the Company began making contributions to the USW
      401(k) Plan of $1.15 per actual hour worked for eligible employees when their
      former Barnebey Sutcliffe Employee USWA Local 23.08 401(k) Plan was discontinued
      and their defined benefit pension plan was frozen effective April 30, 2007.
      The
      Company realized a $0.3 million curtailment gain as a result of freezing the
      aforementioned plan. Employer matching contributions for bargaining unit
      employees vest immediately. Total expenses related to the defined contribution
      plans for the three months ended June 30, 2007 and 2006 were $0.3 million and
      $0.1 million, respectively, and for the six months ended June 30, 2007 and
      2006
      were $0.8 million and $0.2 million, respectively.




16




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




11.
            Earnings
                Per Share





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





Three
                Months Ended June 30,
            
            Six
                Months Ended June 30,*(Dollars
                in thousands, except per share amounts)*
            
            2007
            
            2006
            
            2007
            
            2006Income
                (loss) from continuing operations available to common
                shareholders
            
            $
            4,462
            
            $
            2,139
            
            $
            6,496
            
            $
            (850
            )Income
                from discontinued operations available to common
                shareholders
            
            
            -
            
            
            297
            
            
            -
            
            
            1,872Net
                income available to common shareholders
            
            $
            4,462
            
            $
            2,436
            
            $
            6,496
            
            $
            1,022Weighted
                Average Shares OutstandingBasic
            
            
            40,291,372
            
            
            39,875,505
            
            
            40,258,163
            
            
            39,865,173Effect
                of Dilutive Securities
            
            
            7,453,694
            
            
            201,399
            
            
            5,549,090
            
            
            -Diluted
            
            
            47,745,066
            
            
            40,076,904
            
            
            45,807,253
            
            
            39,865,173Net
                income per common shareBasic:Income
                (loss) from continuing operations
            
            $
            .11
            
            $
            .05
            
            $
            .16
            
            $
            (.02
            )Income
                from discontinued operations
            
            
            -
            
            
            .01
            
            
            -
            
            
            .05Net
                Income
            
            $
            .11
            
            $
            .06
            
            $
            .16
            
            $
            .03Diluted:Income
                (loss) from continuing operations
            
            $
            .09
            
            $
            .05
            
            $
            .14
            
            $
            (.02
            )Income
                from discontinued operations
            
            
            -
            
            
            .01
            
            
            -
            
            
            .05Net
                Income
            
            $
            .09
            
            $
            .06
            
            $
            .14
            
            $
            .03




17





The
      stock
      options that were excluded from the dilutive calculations as the effect would
      have been antidilutive were 6,100 and 1,644,668 for the three months ended
      June
      30, 2007 and 2006, respectively, and 166,684 and 227,737 for the six months
      ended June 30, 2007 and 2006, respectively.





The
      Company’s obligation under its Senior Convertible Notes is to settle the par
      value of the Notes in cash and to settle the amount in excess of par value
      in
      its common shares. Therefore, the Company is not required to include any shares
      underlying the Notes in its diluted weighted average shares outstanding until
      the average stock price per share for the quarter exceeds the $5.10 conversion
      price. At such time, only the number of shares that would be issuable (under
      the
“treasury stock” method of accounting for share dilution) will be included,
      which is based upon the amount by which the average stock price exceeds the
      conversion price. For the first $0.50 per share that the Company’s average stock
      price exceeds the $5.10 conversion price of the Notes, it will include
      approximately 1,300,000 additional shares in its diluted share count. For the
      second $0.50 per share that the Company’s average stock price exceeds the $5.10
      conversion price, it will include approximately 1,100,000 additional shares,
      for
      a total of approximately 2,400,000 shares, in its diluted share count, and
      so
      on, with the additional shares’ dilution decreasing for each $1 per share that
      the Company’s average stock price exceeds $5.10 if the stock price rises further
      above $5.10 (see table below). As of June 30, 2007, the average stock price
      for
      the 90-day trading period was $9.39 which was higher than the conversion price
      of $5.10 therefore 6,720,684 shares were included in the dilutive share
      calculation for the period of time the Notes were outstanding for the three
      month period ended June 30, 2007. The year-to-date dilutive effect of the Notes
      was calculated based on the weighted average number of incremental shares
      included in each quarterly diluted earnings per share computation.




**"Treasury
                Stock" Method of Accounting for Share
                Dilution**





**Conversion
                Price:**
            
            $
            5.10**Number
                of underlying shares:**
            
            
            14,705,880**Principal
                Amount:**
            
            $
            75,000,000





**Formula:**
            Number
                of extra dilutive shares created=
                ((Stock Price * Underlying Shares) - Principal)/Stock
                Price**Condition:**
            Only
                applies when share price exceeds
                $5.10





Stock
                Price
            
            Coversion
                Price
            
            Price
                Difference
            
            Included
                in Share Count
            
            Share
                Dilution Per $1.00 Share Price Difference$5.10
            
            $
            5.10
            
            $
            0.00
            
            
            -
            
            
            -$5.60
            
            $
            5.10
            
            $
            0.50
            
            
            1,313,023
            
            
            2,626,046$6.10
            
            $
            5.10
            
            $
            1.00
            
            
            2,410,798
            
            
            2,410,798$7.10
            
            $
            5.10
            
            $
            2.00
            
            
            4,142,500
            
            
            2,071,250$8.10
            
            $
            5.10
            
            $
            3.00
            
            
            5,446,621
            
            
            1,815,540$9.10
            
            $
            5.10
            
            $
            4.00
            
            
            6,464,122
            
            
            1,616,031$10.10
            
            $
            5.10
            
            $
            5.00
            
            
            7,280,137
            
            
            1,456,027$11.10
            
            $
            5.10
            
            $
            6.00
            
            
            7,949,123
            
            
            1,324,854$12.10
            
            $
            5.10
            
            $
            7.00
            
            
            8,507,533
            
            
            1,215,362$13.10
            
            $
            5.10
            
            $
            8.00
            
            
            8,980,689
            
            
            1,122,586$14.10
            
            $
            5.10
            
            $
            9.00
            
            
            9,386,731
            
            
            1,042,970




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 June 30, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                sales
            
            $
            78,340
            
            $
            11,205
            
            $
            7,239
            
            $
            (8,356
            )
            $
            88,428Cost
                of products sold
            
            
            55,818
            
            
            8,148
            
            
            3,946
            
            
            (8,356
            )
            
            59,556Depreciation
                and amortization
            
            
            3,487
            
            
            269
            
            
            575
            
            
            -
            
            
            4,331Selling,
                general and administrative expenses
            
            
            12,616
            
            
            1,318
            
            
            1,075
            
            
            -
            
            
            15,009Research
                and development expense
            
            
            815
            
            
            93
            
            
            (1
            )
            
            -
            
            
            907Interest
                (income) expense - net
            
            
            5,231
            
            
            (3,984
            )
            
            (237
            )
            
            -
            
            
            1,010Other
                (income) expense - net
            
            
            368
            
            
            257
            
            
            (217
            )
            
            -
            
            
            408Provision
                (benefit) for income taxes
            
            
            2,766
            
            
            609
            
            
            (228
            )
            
            -
            
            
            3,147Results
                of affiliates’ operations
            
            
            7,223
            
            
            1,278
            
            
            -
            
            
            (8,501
            )
            
            -Equity
                in income (loss) from equity investments
            
            
            -
            
            
            -
            
            
            406
            
            
            (4
            )
            
            402Net
                income (loss)
            
            $
            4,462
            
            $
            5,773
            
            $
            2,732
            
            $
            (8,505
            )
            $
            4,462








Condensed
                Consolidating Statements of Operations
              Six
                months ended June 30, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                sales
            
            $
            151,053
            
            $
            23,091
            
            $
            16,971
            
            $
            (19,657
            )
            $
            171,458Cost
                of products sold
            
            
            109,384
            
            
            17,843
            
            
            10,410
            
            
            (19,657
            )
            
            117,980Depreciation
                and amortization
            
            
            6,914
            
            
            546
            
            
            1,132
            
            
            -
            
            
            8,592Selling,
                general and administrative expenses
            
            
            25,207
            
            
            2,623
            
            
            1,785
            
            
            -
            
            
            29,615Research
                and development expense
            
            
            1,551
            
            
            184
            
            
            -
            
            
            -
            
            
            1,735Interest
                (income) expense - net
            
            
            10,507
            
            
            (7,879
            )
            
            (470
            )
            
            -
            
            
            2,158Other
                (income) expense - net
            
            
            698
            
            
            492
            
            
            (379
            )
            
            -
            
            
            811Provision
                for income taxes
            
            
            4,375
            
            
            678
            
            
            474
            
            
            -
            
            
            5,527Results
                of affiliates’ operations
            
            
            14,079
            
            
            2,181
            
            
            -
            
            
            (16,260
            )
            
            -Equity
                in income from equity investments
            
            
            -
            
            
            -
            
            
            1,455
            
            
            1
            
            
            1,456Net
                income (loss)
            
            $
            6,496
            
            $
            10,785
            
            $
            5,474
            
            $
            (16,259
            )
            $
            6,496




19




Condensed
                  Consolidating Statements of OperationsThree
                months ended June 30, 2006Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                sales
            
            $
            72,473
            
            $
            10,806
            
            $
            9,241
            
            $
            (12,010
            )
            $
            80,510Cost
                of products sold
            
            
            56,496
            
            
            8,658
            
            
            6,819
            
            
            (12,010
            )
            
            59,963Depreciation
                and amortization
            
            
            3,924
            
            
            947
            
            
            731
            
            
            -
            
            
            5,602Selling,
                general and administrative expenses
            
            
            9,335
            
            
            1,377
            
            
            959
            
            
            -
            
            
            11,671Research
                and development expense
            
            
            953
            
            
            89
            
            
            (1
            )
            
            -
            
            
            1,041Restructuring
            
            
            1
            
            
            -
            
            
            -
            
            
            -
            
            
            1Interest
                (income) expense - net
            
            
            5,186
            
            
            (3,627
            )
            
            (269
            )
            
            -
            
            
            1,290Other
                (income) expense - net
            
            
            683
            
            
            (805
            )
            
            (172
            )
            
            -
            
            
            (294
            )Provision
                (benefit) for income taxes
            
            
            (1,749
            )
            
            (13
            )
            
            837
            
            
            -
            
            
            (925
            )Results
                of affiliates’ operations
            
            
            4,870
            
            
            229
            
            
            -
            
            
            (5,099
            )
            
            -Equity
                loss from equity investments
            
            
            -
            
            
            -
            
            
            (23
            )
            
            -
            
            
            (23
            )Income
                (loss) from continuing operations
            
            
            2,514
            
            
            4,409
            
            
            314
            
            
            (5,099
            )
            
            2,138Income
                (loss) from discontinued operations
            
            
            (78
            )
            
            253
            
            
            123
            
            
            -
            
            
            298Net
                income (loss)
            
            $
            2,436
            
            $
            4,662
            
            $
            437
            
            $
            (5,099
            )
            $
            2,436




Condensed
                  Consolidating Statements of OperationsSix
                months ended June 30, 2006Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                sales
            
            $
            141,976
            
            $
            20,765
            
            $
            17,173
            
            $
            (22,825
            )
            $
            157,089Cost
                of products sold
            
            
            109,824
            
            
            17,379
            
            
            12,996
            
            
            (22,825
            )
            
            117,374Depreciation
                and amortization
            
            
            8,754
            
            
            1,469
            
            
            177
            
            
            -
            
            
            10,400Selling,
                general and administrative expenses
            
            
            22,957
            
            
            1,306
            
            
            1,780
            
            
            -
            
            
            26,043Research
                and development expense
            
            
            2,064
            
            
            174
            
            
            -
            
            
            -
            
            
            2,238Restructuring
            
            
            7
            
            
            -
            
            
            -
            
            
            -
            
            
            7Interest
                (income) expense - net
            
            
            10,185
            
            
            (7,071
            )
            
            (336
            )
            
            -
            
            
            2,778Other
                (income) expense - net
            
            
            624
            
            
            (804
            )
            
            729
            
            
            -
            
            
            549Provision
                (benefit) for income taxes
            
            
            522
            
            
            83
            
            
            (1,875
            )
            
            -
            
            
            (1,270
            )Results
                of affiliates’ operations
            
            
            13,870
            
            
            5,611
            
            
            -
            
            
            (19,481
            )
            
            -Equity
                in income from equity investments
            
            
            -
            
            
            -
            
            
            180
            
            
            -
            
            
            180Income
                (loss) from continuing operations
            
            
            909
            
            
            13,840
            
            
            3,882
            
            
            (19,481
            )
            
            (850
            )Income
                from discontinued operations
            
            
            113
            
            
            75
            
            
            1,684
            
            
            -
            
            
            1,872Net
                income (loss)
            
            $
            1,022
            
            $
            13,915
            
            $
            5,566
            
            $
            (19,481
            )
            $
            1,022




20




Condensed
                Consolidating Balance SheetsJune
                30, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedCash
                & Cash Equivalents
            
            $
            12,466
            
            $
            2,194
            
            $
            21,175
            
            $
            (19,207
            )
            $
            16,628Receivables
            
            
            50,291
            
            
            16,310
            
            
            4,917
            
            
            (9,976
            )
            
            61,542Inventories
            
            
            58,700
            
            
            7,398
            
            
            5,335
            
            
            33
            
            
            71,466Other
                current assets
            
            
            14,830
            
            
            1,451
            
            
            1,571
            
            
            -
            
            
            17,852Total
                current assets
            
            
            136,287
            
            
            27,353
            
            
            32,998
            
            
            (29,150
            )
            
            167,488Intercompany
                accounts receivable
            
            
            54,306
            
            
            167,657
            
            
            4,348
            
            
            (226,311
            )
            
            -Property,
                plant, and equipment, net
            
            
            88,102
            
            
            6,973
            
            
            7,615
            
            
            -
            
            
            102,690Intangibles
            
            
            5,201
            
            
            3,451
            
            
            -
            
            
            -
            
            
            8,652Goodwill
            
            
            16,674
            
            
            8,388
            
            
            2,706
            
            
            -
            
            
            27,768Equity
                investments
            
            
            233,953
            
            
            104,454
            
            
            8,752
            
            
            (338,222
            )
            
            8,937Other
                assets
            
            
            6,441
            
            
            2,759
            
            
            2,286
            
            
            -
            
            
            11,486Total
                assets
            
            $
            540,964
            
            $
            321,035
            
            $
            58,705
            
            $
            (593,683
            )
            $
            327,021Short-term
                debt
            
            $
            62,205
            
            $
            -
            
            $
            1,444
            
            $
            -
            
            $
            63,649Accounts
                payable
            
            
            29,640
            
            
            17,433
            
            
            4,087
            
            
            (13,692
            )
            
            37,468Other
                current liabilities
            
            
            31,243
            
            
            439
            
            
            2,378
            
            
            (22,619
            )
            
            11,441Total
                current liabilities
            
            
            123,088
            
            
            17,872
            
            
            7,909
            
            
            (36,311
            )
            
            112,558Intercompany
                accounts payable
            
            
            157,367
            
            
            51,436
            
            
            10,379
            
            
            (219,182
            )
            
            -Long-term
                debt
            
            
            12,925
            
            
            -
            
            
            -
            
            
            -
            
            
            12,925Other
                non-current liabilities
            
            
            92,275
            
            
            12,101
            
            
            10,101
            
            
            (68,248
            )
            
            46,229Shareholders'
                equity
            
            
            155,309
            
            
            239,626
            
            
            30,316
            
            
            (269,942
            )
            
            155,309Total
                liabilities and shareholders' equity
            
            $
            540,964
            
            $
            321,035
            
            $
            58,705
            
            $
            (593,683
            )
            $
            327,021





21





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




22





Condensed
                Consolidating Statements of Cash FlowsSix
                months ended June 30, 2007Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                cash provided by (used in) operating activities
            
            $
            1,183
            
            $
            7,391
            
            $
            4,378
            
            $
            (478
            )
            $
            12,474Investing
                activities:Property,
                plant and equipment expenditures
            
            
            (3,967
            )
            
            (272
            )
            
            (212
            )
            
            -
            
            
            (4,451
            )Investment
                (in) from affiliates
            
            
            -
            
            
            (263
            )
            
            263
            
            
            (1
            )
            
            -Other
            
            
            162
            
            
            1
            
            
            -
            
            
            -
            
            
            162Net
                cash (used in) provided by investing activities
            
            
            (3,805
            )
            
            (534
            )
            
            51
            
            
            (1
            )
            
            (4,289
            )Financing
                activities:Net
                borrowings (repayments)
            
            
            3,969
            
            
            -
            
            
            1,438
            
            
            (3,669
            )
            
            1,738Intercompany
                and equity transactions
            
            
            10,903
            
            
            (7,395
            )
            
            (4,402
            )
            
            894
            
            
            -Other
            
            
            551
            
            
            (1
            )
            
            -
            
            
            1
            
            
            551Net
                cash provided by (used in) financing activities
            
            
            15,423
            
            
            (7,396
            )
            
            (2,964
            )
            
            (2,774
            )
            
            2,289Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (334
            )
            
            226
            
            
            152
            
            
            479
            
            
            523Increase
                (decrease) in cash and cash equivalents
            
            
            12,467
            
            
            (313
            )
            
            1,617
            
            
            (2,774
            )
            
            10,997Cash
                and cash equivalents, beginning of period
            
            
            -
            
            
            2,507
            
            
            19,556
            
            
            (16,432
            )
            
            5,631Cash
                and cash equivalents, end of period
            
            $
            12,467
            
            $
            2,194
            
            $
            21,173
            
            $
            (19,206
            )
            $
            16,628




Condensed
                Consolidating Statements of Cash FlowsSix
                months ended June 30, 2006Issuer
            
            Guarantor
                Subsidiaries
            
            Non-Guarantor
                Subsidiaries
            
            Consolidating
                and Eliminating Entries
            
            ConsolidatedNet
                cash (used in) provided by operating activities
            
            $
            (8,303
            )
            $
            8,310
            
            $
            (553
            )
            $
            (4,568
            )
            $
            (5,114
            )Investing
                activities:Proceeds
                from divestitures
            
            
            778
            
            
            -
            
            
            20,435
            
            
            -
            
            
            21,213Property,
                plant and equipment expenditures
            
            
            (6,961
            )
            
            (111
            )
            
            (230
            )
            
            -
            
            
            (7,302
            )Proceeds
                from insurance settlement for property and equipment
            
            
            4,595
            
            
            -
            
            
            -
            
            
            -
            
            
            4,595Investment
                from (in) affiliates
            
            
            11,433
            
            
            (689
            )
            
            (10,744
            )
            
            -
            
            
            -Other
            
            
            416
            
            
            -
            
            
            -
            
            
            -
            
            
            416Net
                cash provided by (used in) investing activities
            
            
            10,261
            
            
            (800
            )
            
            9,461
            
            
            -
            
            
            18,922Financing
                activities:Net
                borrowings (repayments)
            
            
            (9,780
            )
            
            (609
            )
            
            108
            
            
            (3,607
            )
            
            (13,888
            )Intercompany
                and equity transactions
            
            
            8,023
            
            
            (8,243
            )
            
            220
            
            
            -
            
            
            -Other
            
            
            357
            
            
            30
            
            
            1
            
            
            (30
            )
            
            358Net
                cash (used in) provided by financing activities
            
            
            (1,400
            )
            
            (8,822
            )
            
            329
            
            
            (3,637
            )
            
            (13,530
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (4,434
            )
            
            744
            
            
            (2,148
            )
            
            4,598
            
            
            (1,240
            )(Decrease)
                increase in cash and cash equivalents
            
            
            (3,876
            )
            
            (568
            )
            
            7,089
            
            
            (3,607
            )
            
            (962
            )Cash
                and cash equivalents, beginning of period
            
            
            3,049
            
            
            3,681
            
            
            9,836
            
            
            (11,120
            )
            
            5,446Cash
                and cash equivalents, end of period
            
            $
            (827
            )
            $
            3,113
            
            $
            16,925
            
            $
            (14,727
            )
            $
            4,484




23




13.
      Related Party Transactions





Net
      sales
      to related parties and receivables from related parties primarily reflect sales
      of activated carbon products to equity investees. Generally, transactions are
      conducted under long-term contractual arrangements. Related party sales
      transactions were $1.8 million and $2.6 million for the three months ended
      June
      30, 2007 and 2006, respectively, and $3.8 million and $5.8 million for the
      six
      months ended June 30, 2007 and 2006, respectively. Receivables from equity
      investees amounted to $1.7 million and $1.8 million at June 30, 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
      June 30, 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 June 30, 2007, the gross unrecognized income tax
      benefits were $11.6 million and the change from January 1, 2007 was due to
      the
      addition of similar tax positions related to 2007 activity. If recognized,
      $10.0
      million of the gross unrecognized income tax benefits would affect the effective
      tax rate.





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





The
      Company recognizes interest and penalties related to uncertain tax positions
      in
      the income tax provision (benefit) on its Condensed Consolidated Statement
      of
      Operations. As of June 30, 2007, the Company had approximately $0.6 million
      of
      accrued interest and penalties related to uncertain tax positions included
      in
      the liability on the condensed consolidated balance sheet.





The
      tax
      years 2003 to 2006 remain open to examination by United States taxing
      jurisdictions, tax years 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





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





24




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 $7.9 million or 9.8% and $14.4 million or 9.1% for the
      quarter and year-to-date periods ended June 30, 2007, respectively, versus
      the
      quarter and year-to-date periods ended June 30, 2006.  Net
      sales
      for the Activated Carbon and Service segment for the quarter and year-to-date
      periods ended June 30, 2007 increased $7.3 million or 10.8% and $10.8 million
      or
      8.1%, respectively, versus the comparable 2006 periods. The increase for the
      quarter ended June 30, 2007 was primarily due to higher prices for certain
      carbon and service products. Partially offsetting this increase was the decline
      in demand in the European potable water market as well as in the U.S. and Asia
      specialty carbon markets of $0.8 million and $2.0 million, respectively. The
      increase for the year-to-date period  was
      primarily due to higher prices. Partially offsetting this increase was lower
      demand in the worldwide specialty carbon market of $3.4 million. Foreign
      currency translation had a positive impact of $1.7 million and $3.7 million,
      respectively, for the quarter and year-to-date periods ended June 30, 2007.
      Net sales for the Equipment segment increased $1.2 million or 12.8% and $3.7
      million or 20.9% for the quarter and year-to-date periods ended June 30, 2007,
      respectively, versus the comparable 2006 periods. The increase was primarily
      due
      to higher demand for municipal odor and ultra-violet light (UV) equipment
      of $2.4 million for the quarter ended June 30, 2007. Partially
      offsetting this increase was the decline in demand for traditional carbon
      adsorption equipment and ion exchange systems of $0.8 million and $0.4 million,
      respectively. The increase for the year-to-date period  was
      primarily due to higher demand for municipal odor equipment. Foreign currency
      translation was comparable for the quarter and year-date periods ended June
      30,
      2007. Net sales for the Consumer segment decreased $0.6 million or 16.0% and
      $0.2 million or 2.3% for the quarter and year-date periods ended June 30, 2007
      versus the comparable 2006 periods. The decrease was attributable to lower
      demand for PreZerve® products.  Foreign
      currency translation had a positive impact of $0.1 million and $0.4 million,
      respectively, for the quarter and year-to-date periods ended June 30, 2007.
      The
      total positive impact of foreign currency translation on consolidated net sales
      for the quarter and year-to-date periods ended June 30, 2007 was $1.8 million
      and $4.2 million, respectively.





Net
      sales
      less cost of products sold, as a percentage of net sales, was 32.7% for the
      quarter ended June 30, 2007 compared to 25.5% for the similar 2006 period,
      a
      7.2% increase or $8.3 million. The increase was primarily in the Activated
      Carbon and Service segment of $8.5 million or 7.3% which was principally driven
      by volume as well as higher prices for certain carbon and service products.
      The
      Equipment and Consumer segments were comparable for the quarter ended June
      30,
      2007 versus the similar 2006 period. Net sales less cost of products sold,
      as a
      percentage of net sales, was 31.2% for the year-to-date period ended June 30,
      2007 compared to 25.3% for the similar 2006 period, a 5.9% increase or $13.8
      million. The increase was primarily in the Activated Carbon and Service segment
      in the amount of $13.7 million or 5.9%, which was principally driven by higher
      prices for certain carbon and service products. The Equipment and Consumer
      segments were comparable for the year-to-date period ended June 30, 2007 versus
      the similar 2006 period. The
      Company’s cost of products sold excludes depreciation and amortization;
      therefore it may not be comparable to that of other companies.




The
      depreciation and amortization decrease of $0.5 million and $1.0 million during
      the quarter and year-to-date periods ended June 30, 2007 versus the comparable
      2006 periods was primarily due to an increase in fully depreciated fixed
      assets.




Selling,
      general and administrative expenses for the quarter and year-to-date periods
      ended June 30, 2007 decreased by $1.6 million and $1.3 million, respectively,
      versus the comparable 2006 periods. The decrease in both periods was primarily
      due to decreased legal expenses as a result of the substantial completion of
      the
      Company’s UV patent cases and anti-dumping petition related to steam activated
      carbon imports from China. The year-to-date 2006 period also included a $1.2
      million reduction related to the change in estimate of the Company’s
      environmental liabilities assumed in the 2004 Waterlink acquisition (Note
      7).




25




Research
      and development expenses for the quarter and year-to-date periods ended June
      30,
      2007 decreased $0.1 million and $0.5 million, respectively, versus the
      comparable 2006 periods primarily due to decreased employee related expenses
      and
      a decline in rent expense.





The
      gain
      from insurance settlement of $4.9 million for the year-to-date period ended
      June
      30, 2006 is related to the damage to the Company’s Pearlington, Mississippi
      plant which was caused by Hurricane Katrina in 2005.





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





Other
      expense for the quarter and year-to-date periods ended June 30, 2007 decreased
      $0.1 million and $0.5 million as compared to the 2006 periods. The decrease
      for
      the quarter ended June 30, 2007 was primarily due to a decrease in financing
      fees. The decrease for the year-to-date period 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 and year-to-date periods ended
      June 30, 2007 decreased $0.3 million and $0.6 million, respectively, versus
      the
      comparable 2006 periods. The decline in both periods is as a result of lower
      average borrowing levels and lower average interest rates paid on the Company’s
      borrowings in 2007 versus the similar 2006 periods.





Income
      tax expense for the quarter and year-to-date periods ended June 30, 2007
      increased $4.1 million and $6.8 million, respectively, versus the comparable
      2006 periods. This increase in both periods was caused primarily by increases
      to
      income from continuing operations before income tax and equity in income from
      equity investments.





The
      effective tax rate for the year-to-date period ended June 30, 2007 was 52.3%
      compared to 55.2% for the year-to-date period ended June 30, 2006. The
      year-to-date period ended June 30, 2007 tax rate was higher than the statutory
      Federal Income Tax Rate due to several factors. In foreign jurisdictions, the
      Company is in an income position without a corresponding benefit of a foreign
      tax credit in the United States which accounted for a 3.0% increase in the
      taxable rate. The impact of state taxes and other permanent, non-deductible
      expenses also increased the rate by approximately 5.7% and 6.0%, respectively.
      In addition to the aforementioned increases, the Company is no longer able
      to
      claim a benefit due to the expiration of the Extraterritorial Income Exclusion
      Benefit. The year-to-date period ended June 30, 2006 tax rate was higher than
      the statutory Federal Income Tax Rate due to the Company’s lower than expected
      profit for the quarter and the estimated full year and certain benefits,
      principally the exclusion provided under United States income tax laws with
      respect to the Extraterritorial Income Exclusion Benefit and recognition of
      state income tax benefits.





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





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





Equity
      in
      income from equity investments for the quarter and year-to-date periods ended
      June 30, 2007 increased $0.4 million and $1.3 million, respectively, versus
      the
      similar 2006 periods. 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 Calgon Mitsubishi Chemical Corporation in Japan. The Company
      expects the joint venture’s results for the remainder of the year to be
      approximately breakeven.





26





**Discontinued
      Operations:**





Income
      from discontinued operations was $0.3 million and $1.9 million, respectively,
      for the quarter and year-to-date periods ended June 30, 2006 and was primarily
      due to the gains recognized on the sales of the Company’s Charcoal/Liquid and
      Solvent Recovery businesses.





Financial
      Condition





Working
      Capital and Liquidity





Cash
      flows provided by operating activities were $12.5 million for the period ended
      June 30, 2007 compared to cash flows used in operating activities of $5.1
      million for the comparable 2006 period. The $17.6 million increase is primarily
      due to improved earnings of $5.5 million and a $2.7 million decrease in
      operating working capital (exclusive of debt) in 2007 versus the comparable
      2006
      period offset by a $1.0 million decrease in depreciation and amortization and
      a
      $1.3 million increase in equity income from equity investments. The 2006 period
      also included the gains from the sales of assets of $6.7 million and gain on
      insurance settlement of $4.9 million. The cash flows discussed for the period
      ended June 30, 2006 include discontinued operations.





Total
      debt at June 30, 2007 was $76.6 million, an increase of $1.7 million from
      December 31, 2006. The increase was primarily the result of the addition of
      short-term debt of $1.4 million related to the Company’s operations in China and
      is more fully described in Note 9. The additional borrowings were used to
      financing normal working capital and capital expenditure
      activities.





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





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





27




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





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 June 30, 2007, no contingent events have
      occurred.





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





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





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





The
      Company sold the Notes to the original purchaser at a discount of
      $3.3 million that will be amortized over a period of five years. The
      discount is reflected as a deduction from the face amount of the debt. As of
      the
      period ended June 30, 2007, the Company recorded interest expense of
      $2.2 million, of which $0.3 million related to the amortization of the
      discount and $1.9 million related to the Notes. The Company incurred
      issuance costs of $1.5 million which were deferred and are being amortized
      over a five year period.





The
      Company and the Subsidiary Guarantors sold the Notes and Subsidiary Guarantees
      in August 2006 to initial purchasers for resale only to qualified institutional
      buyers in reliance on Rule 144A under the Securities Act of 1933, as
      amended (the “Securities Act”) in an offering exempt from the registration
      requirements of the Securities Act and applicable state securities laws. In
      a
      related registration rights agreement, the Company and the Subsidiary Guarantors
      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 under the Securities Act resales
      of
      the Notes, the Subsidiary Guarantees and common stock issuable upon conversion
      of the Notes. The 90-day period expired on November 16, 2006 and the
      240-day period expired on April 15, 2007. The Company did not file a shelf
      registration statement within the 90-day period or cause such shelf registration
      to become effective within the 240-day period and, as a result, is obligated
      to
      pay predetermined additional interest to holders of the Notes pursuant to the
      terms of the registration rights agreement through the time when the
      registration statement was filed and declared effective. 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. The Company has filed a resale shelf
      registration statement on July 10, 2007, and the registration statement was
      declared effective on July 18, 2007, ending the Company’s obligation to pay
      penalty interest. The Company will pay the penalty interest due in the third
      quarter of 2007.





28





**Credit
      Facility**





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





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





As
      of
      June 30, 2007, the carrying amount of assets pledged as collateral was
      $56.0 million. The carrying amount as of June 30, 2007 for domestic,
      U.K., and Belgian borrowers were $44.3 million, $7.0 million, and
      $4.7 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 June 30, 2007, total availability was
      $37.4 million. Availability as of June 30, 2007 for domestic, U.K.,
      and Belgian borrowers was $32.7 million, $5.6 million, and zero,
      respectively. The Company can issue letters of credit up to $20.0 million
      of the available commitment amount under the Credit Facility. Sub-limits for
      letters of credit under the U.K. sub-facility and the Belgian sub-facility
      are
      $2.0 million and $6.0 million, respectively. Letters of credit
      outstanding at June 30, 2007 totaled $17.6 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 June 30, 2007.





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





29




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 June 30, 2007 and is currently in compliance with
      such
      covenants.





Management
      cannot be assured that, after the June 30, 2007 financial statements have been
      provided to the lenders, there will not be any violation in future periods
      of
      the covenants contained in the Credit Facility. 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
      June 30, 2007, with the exception of the addition of short-term debt as well
      as
      the reclassification of a portion of the Company’s Notes to short-term, there
      have been no changes in the payment terms of lease agreements, and unconditional
      purchase obligations since December 31, 2006. The following table represents
      the
      significant cash contractual obligations and other commercial
      commitments.


Due
                  in(Thousands)
              
              2007
              
              2008
              
              2009
              
              2010
              
              2011
              
              Thereafter
              
              TotalShort-term
                  debt *
              
              $
              1,444
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              65,000
              
              $
              -
              
              $
              66,444Long-term
                  debt
              
              
              -
              
              
              -
              
              
              2,925
              
              
              -
              
              
              10,000
              
              
              -
              
              
              12,925Interest
                  on Notes
              
              
              3,750
              
              
              3,750
              
              
              3,750
              
              
              3,750
              
              
              2,369
              
              
              -
              
              
              17,369Operating
                  leases
              
              
              4,127
              
              
              3,056
              
              
              2,673
              
              
              2,357
              
              
              2,000
              
              
              10,604
              
              
              24,817Unconditional
                  purchaseobligations**
              
              
              26,981
              
              
              19,853
              
              
              10,019
              
              
              7,753
              
              
              5,711
              
              
              -
              
              
              70,317Total
                  contractual cashObligations
              
              $
              36,302
              
              $
              26,659
              
              $
              19,367
              
              $
              13,860
              
              $
              85,080
              
              $
              10,604
              
              $
              191,872




**The
      2011 maturity excludes debt discount of $2,795. See additional discussion in
      Note 9.*




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




The
      long-term tax payable of $11.6 million pertaining to the FIN 48 tax liability
      has been excluded from the above table due to the fact that the Company is
      unable to determine the period in which the liability will be
      resolved.





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




Capital
      Expenditures and Investments





Capital
      expenditures for property, plant and equipment totaled $4.5 million for the
      six
      months ended June 30, 2007 compared to expenditures of $7.3 million for the
      same
      period in 2006. The expenditures for the period ended June 30, 2007 consisted
      primarily of improvements to the Company’s manufacturing facilities of $4.0
      million and customer capital of $0.2 million. The comparable 2006 expenditures
      consisted primarily of $3.9 million for improvements to manufacturing
      facilities, $2.3 million related to the repair of the Company’s Pearl River
      plant as a result of Hurricane Katrina, and $0.9 million for customer capital.
      Capital expenditures for 2007 are projected to be approximately $14.0 million
      and are expected to be funded by cash flows from operations .





30




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 the future as market conditions warrant it. If management should
      determine not to restart the plant, operating results would be adversely
      affected by impairment charges.





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





Regulatory
      Matters





Each
      of
      the Company’s domestic production facilities has permits and licenses regulating
      air emissions and water discharges. All of the Company’s domestic production
      facilities are controlled under permits issued by local, state and federal
      air
      pollution control entities. The Company is presently in compliance with these
      permits. Continued compliance will require administrative control and will
      be
      subject to any new or additional standards. In May 2003, the Company partially
      discontinued operation of one of its three activated carbon lines at its
      Catlettsburg, Kentucky facility. The Company will need to install pollution
      abatement equipment estimated at approximately $7.0 million in order to remain
      in compliance with state requirements regulating air emissions before resuming
      full operation of this line. In the fourth quarter of 2006, management
      authorized preliminary engineering work to be performed to more accurately
      assess the costs and length of time needed to make the idled activated carbon
      line operational again due to a favorable ruling by the International Trade
      Commission (ITC) on the Company’s anti-dumping petition for steam activated
      carbon imported into the U.S. from China and subsequent expected increased
      demand of U.S. manufactured products.  During the quarter ended June
      30, 2007, management began discussions with the State of Kentucky regarding
      permitting.  Management continues to refine its assessment regarding the
      start-up of this idled activated carbon line to address potential future market
      opportunities surrounding mercury removal. The Company currently estimates
      that
      the restart of this line, including enhancements, would cost between $20 million
      and $25 million and take approximately 13 months to complete. If at any point
      it
      is determined that a shutdown of the full operation of the activated carbon
      line
      for other than a temporary period is warranted, the impact to current operating
      results would be insignificant.





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





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





31




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




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 June 30, 2007, that have
      significantly affected, or are reasonably likely to significantly affect, the
      Company’s internal controls over financial reporting.





32




PART
      II - OTHER INFORMATION





Item
      1 .  Legal
      Proceedings





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





Item
      1a .  Risk
      Factors





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




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





**Period**
            
            **Total**
              **Number**
              **of
                Shares**
              **Purchased
                (a)**
            
            **Average**
              **Price
                Paid**
              **Per
                Share**
            
            **Total
                Number of**
              **Shares
                Purchased**
              **as
                Part of Publicly**
              **Announced**
              **Repurchase
                Plans**
              **or
                Programs**
            
            **Maximum
                Number**
              **(or
                Approximate**
              **Dollar
                Value)**
              **of
                Shares that May**
              **Yet
                be Purchased**
              **Under
                the Plans or**
              **Programs**January
                1 - January 31, 2007
            
            
            —
            
            
            —
            
            
            —
            
            
            —February
                1 - February 28, 2007
            
            
            11,921
            
            $
            6.22
            
            
            —
            
            
            —March
                1 - March 31, 2007
            
            
            10,206
            
            $
            8.10
            
            
            —
            
            
            —April
                1 - June 30, 2007
            
            
            —
            
            
            —
            
            
            —
            
            
            —




(a)
      This
      column includes purchases under Calgon Carbon’s Stock Option Plan which
      represented withholding taxes due from employees relating to the restricted
      share awards issued on 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





For
      the
      quarter ended June 30, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended June
      30, 2007. As a result, as of June 30, 2007, the holders of the Notes have the
      right to convert the Notes into cash and shares of common stock. Although
      currently not anticipated by the Company, the ability of holders of the Notes
      to
      convert is an event of default of the Credit Facility. On May 29, 2007, the
      Company amended its credit agreement to include 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.




Item
      4.  Submission
      of Matters to a Vote of Security Holders





The
      annual meeting of stockholders was held May 17, 2007. In connection with the
      meeting, proxies were solicited pursuant to the Securities Exchange Act. The
      following are the voting results on the proposals considered and voted upon
      at
      the meeting and described in the proxy statement.





Election
      of directors:


Votes
                  For
              
              Votes
                  WithheldClass
                  of 2010Robert
                  W. Cruickshank
              
              
              35,441,093
              
              
              445,780Julie
                  S. Roberts
              
              
              35,446,022
              
              
              440,851




33




Ratification
      of Deloitte & Touche LLP as Independent Registered Public Accounting Firm
      for 2007:




Votes
                  For
              
              Votes
                  Against
              
              Votes
                  Withheld35,519,896
              
              
              135,932
              
              
              231,042




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.




34




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:
              August 9, 2007
            
            /s/
                Leroy M. BallLeroy
                M. Ball
              Senior
                Vice President,
              Chief
                Financial Officer




35




EXHIBIT
      INDEX




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