**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION** ****


**Washington,
      D.C. 20549**





**FORM
      10-K**




**(Mark
      One)**


x
      Annual Report Pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of 1934.


For
      the
      fiscal year ended December 31, 2007 or


o
      Transition Report
      Pursuant to Section 12 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.
                Employer****incorporation
                or organization)**
            ****
            **Identification
                No.)******
            ****
            ******400
                Calgon Carbon Drive**
            ****
            ******Pittsburgh,
                Pennsylvania**
            ****
            **15205****(Address
                of principal executive offices)**
            ****
            **(Zip
                Code)**





**Registrant's
      telephone number, including area code: (412) 787-6700**





**Securities
      registered pursuant to Section 12(b) of the Act:**





**Title
                of each class**
            ****
            **Name
                of each exchange on which registered**Common
                Stock, par value $0.01 per share
            
            New
                York Stock Exchange





**Securities
      registered pursuant to Section 12(g) of the Act:**


**None**


**(Title
      of class)**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
o
      No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act.


Yes
o 
No
x





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 if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.





Yes
o
      No x




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





Large
      accelerated filer oAccelerated
      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 Exchange Act).


Yes
o
      No x





As
      of
      February 27, 2008, there were outstanding 40,741,795 shares of Common Stock,
      par
      value of $0.01 per share.





The
      aggregate market value of the voting stock held by non-affiliates as of June
      30,
      2007 was $404,150,071.










The
      following documents have been incorporated by reference:




**Document**
            **Form 10-K**
              **Part
                Number**Proxy
                Statement filed pursuant to Regulation 14A in connectionwith
                registrant's Annual Meeting of Shareholders to be held onMay
                1, 2008
            III


2





**INDEX**





**PART
                I**Item
                1.
            Business
            5Item
                1A.
            Risk
                Factors
            18Item
              1B.
            Unresolved
                Staff Comments
            29Item
                2.
            Properties
            30Item
                3.
            Legal
                Proceedings
            33Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            34**PART
                II**Item
                5.
            Market
                for Registrant’s Common Equity, Related Shareholder
                Matters and Issuer Repurchases of Equity Securities
            34Item
                6.
            Selected
                Financial Data
            36Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            37Item
                7A.
            Quantitative
                and Qualitative Disclosures about Market Risk
            56Item
                8.
            Financial
                Statements and Supplementary Data
            57Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure
            126Item
                9A.
            Controls
                and Procedures
            126Item
              9B.
            Other
                Information
            126**PART
                III**Item
                10.
            Directors,
                Executive Officers, and Corporate Governance of
                the Registrant
            127Item
                11.
            Executive
                Compensation
            127Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management
                and Related Shareholder Matters
            128Item
                13.
            Certain
                Relationships, Related Transactions, and Director Independence
            129Item
                14.
            Principal
                Accounting Fees and Services
            130**PART
                IV**Item
                15.
            Exhibits
                and Financial Statement Schedules
            130SIGNATURES
            135CERTIFICATIONS




3




**Forward-Looking
      Information Safe Harbor**


This
      Annual Report contains historical information and forward-looking statements.
      Forward-looking statements typically contain words such as “expect,” “believes,”
“estimates,” “anticipates,” or similar words indicating that future outcomes are
      uncertain. Statements looking forward in time, including statements regarding
      future growth and profitability, price increases,
      cost savings, broader product lines, enhanced competitive posture and
      acquisitions, are included in this Annual Report pursuant to the “safe harbor”
provision 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 future periods to be materially different from any future performance
      suggested herein. Further, the Company operates in an industry
      sector where securities values may be volatile and may be influenced by economic
      and other factors beyond the Company’s control. Some of the factors that could
      affect future performance of the Company are higher energy and raw material
      costs, costs of imports and related tariffs, labor relations, capital and
      environmental requirements, changes in foreign currency exchange rates,
      borrowing restrictions, validity of patents and other intellectual property,
      and
      pension costs. In the context of the forward-looking information provided in
      this Annual Report, please refer to the discussions of risk factors and other
      information detailed in, as well as the other information contained in this
      Annual Report.


**Explanatory
        Note**
  Effective
        December 31, 2006, The Company adopted Statement of Financial Accounting
        Standards 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 No. 158”). SFAS No. 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. The Company complied with the provisions of SFAS No. 158; however,
        the Company incorrectly presented the effect of this transition adjustment
        as
        part of 2006 comprehensive income on its Consolidated Statements of Income
        (Loss) 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 impact of removing the SFAS No. 158 transition adjustment from
        the 2006 Consolidated Statements of Income (Loss) and Comprehensive Income
        (Loss) changes the reported comprehensive income (loss) from $(3,935,000)
        to
        $1,440,000. The Consolidated Statements of Income (Loss) and Comprehensive
        Income (Loss) set forth in Item 8: Financial Statements and Supplementary
        Data
        correctly presents 2006 comprehensive income (loss) excluding the SFAS No.
        158 transition adjustment. The reported net loss of $(7,798,000) for 2006
        and
        the related loss per share of $(.20) are unaffected by this change. There
        are no
        other changes to the Consolidated Statements of Income (Loss) and
        Comprehensive Income (Loss) included in the Company’s Annual Report on
        Form 10-K for the fiscal year ended December 31, 2006, other than this
        correction of 2006 comprehensive income.


4





**PART
      I**




**Item
      1. Business:**





*The
      Company:*





The
      Company is a global leader in services, products, and solutions for purifying
      water and air. The Company has three reportable segments: Activated Carbon
      and
      Service, Equipment, and Consumer. These reportable segments are composed of
      global profit centers that make and sell different products and
      services.





The
      Activated Carbon and Service segment manufactures granular activated carbon
      for
      use in applications to remove organic compounds from water, air, and other
      liquids and gases. The service aspect of the segment consists of the leasing,
      monitoring and maintenance of carbon adsorption equipment (explained below).
      The
      Equipment segment provides solutions to customers’ air and water purification
      problems through the design, fabrication and operation of systems that utilize
      a
      combination of the Company’s enabling technologies: carbon adsorption,
      ultraviolet (“UV”) and advanced ion exchange separation (“ISEP®”) among others.
      The Consumer segment primarily consists of the manufacture and sale of carbon
      cloth and new consumer products based on the Company’s technologies already
      proven in large-scale industrial applications.




*Acquisitions:*


In
      May
      2005, the Company formed a joint venture with C. Gigantic Carbon to provide
      carbon reactivation services to the Thailand market. The joint venture was
      named
      Calgon Carbon (Thailand) Ltd., and is 20% owned by the Company after an initial
      investment of $0.2 million.





*Discontinued
      Operations:*




On
      February 4, 2005, the Company’s Board of Directors approved a re-engineering
      plan presented by the Company. The plan included the divestiture of two non-core
      businesses in order to allow the Company to increase focus on its core activated
      carbon and service-related businesses. In the fourth quarter of 2005, management
      concluded such divestitures were probable, and the Company presents the
      following businesses as discontinued operations for all periods presented:
      Charcoal/Liquid in Bodenfelde, Germany and Solvent Recovery in Columbus, Ohio;
      Vero Beach, Florida; and Ashton, United Kingdom. The Charcoal/Liquid and Solvent
      Recovery businesses were reported in the Company’s Consumer and Equipment
      segments, respectively.




5





On
      February 17, 2006, Calgon Carbon Corporation, through its wholly owned
      subsidiary Chemviron Carbon GmbH, executed an agreement (the “Charcoal Sale
      Agreement”) with proFagus GmbH, proFagus Grundstuecksverwaltungs GmbH and
      proFagus Beteiligungen GmbH (as Guarantor) to sell, and sold, substantially
      all
      the assets, real estate, and specified liabilities of the Bodenfelde, Germany
      facility (the “Charcoal/Liquid business”). The facility includes the production
      of charcoal for consumer use and liquids that are recovered during charcoal
      production. The products are sold to retail and industrial markets. The
      aggregate sales price, based on an exchange rate of 1.19 Dollars per Euro,
      consisted of $20.4 million of cash, which included a final working capital
      adjustment of $1.3 million. The Company provided guarantees to the buyer related
      to pre-divestiture tax liabilities, future environmental remediation costs
      related to pre-divestiture activities and other contingencies. Management
      believes the ultimate cost of such guarantees is not material. An additional
      4.25 million Euros could be received dependent upon the business meeting certain
      earnings targets over the next three years. No contingent consideration was
      received for the years ended December 31, 2007 and 2006. For the year ended
      December 31, 2006, the Company recorded a pre-tax gain of $4.8 million or $1.7
      million, net of tax, on the sale of the Charcoal/Liquid divestiture.





On
      April
      24, 2006, the Company completed the sale of the assets of its Solvent Recovery
      business to MEGTEC Systems, Inc. (“MEGTEC”), a subsidiary of Sequa Corporation.
      The Solvent Recovery unit provides turnkey on-site regenerable solvent recovery
      systems, distillation systems, on-site regenerable volatile organic compound
      concentrators, vapor-phase biological oxidation systems, and related services
      on
      a worldwide basis. The sales price of $1.8 million included cash proceeds of
      approximately $0.8 million and $0.7 million of assumed liabilities, primarily
      accounts payable. The transaction was also subject to a pre-tax working capital
      adjustment of $0.4 million, which management finalized and recorded in the
      fourth quarter of 2006. For the year ended December 31, 2006, the Company
      recorded a pre-tax gain of $63 thousand or $41 thousand, net of tax, on the
      sale
      of the Solvent Recovery business.





For
      further information, see Note 4 to the Financial Statements.





***Products
      and Services:***





The
      Company offers a diverse range of products, services, and equipment specifically
      developed for the purification, separation, and concentration of liquids, gases,
      and other media through its three business segments. The Activated Carbon and
      Service segment primarily consists of activated carbon products, field services,
      and reactivation. The Equipment segment designs and builds systems that include
      multiple technologies. The Consumer segment supplies carbon products for
      everyday use by consumers.




***Activated
      Carbon and Service.*** T he
      sale
      of activated carbon is the principal component of the Activated Carbon and
      Service business segment. Activated carbon is a porous material that removes
      organic compounds from liquids and gases by a process known as “adsorption.” In
      adsorption, organic molecules contained in a liquid or gas are attracted and
      bound to the surface of the pores of the activated carbon as the liquid or
      gas
      is passed through.




6




The
      primary raw material used in the production of the Company’s activated carbons
      is bituminous coal which is crushed, sized, and processed in low temperature
      bakers followed by high temperature furnaces. This heating process is known
      as
“activation” and develops the pore structure of the carbon. Through adjustments
      in the activation process, pores of the required size for a particular
      purification application are developed. The Company’s technological expertise in
      adjusting the pore structure in the activation process has been one of a number
      of factors enabling the Company to develop many special types of activated
      carbon with most available in several particle sizes. The Company also markets
      activated carbons from other raw materials, including coconut and
      wood.





The
      Company produces and sells a broad range of activated, impregnated or acid
      washed carbons in granular, powdered or pellet form. Granular Activated Carbon
      (“GAC”) particles are irregular in shape and generally used in fixed filter beds
      for continuous flow purification processes. Powdered Activated Carbon (“PAC”) is
      carbon which has been pulverized into powder and often used in batch
      purification processes, in municipal water applications, and for flue gas
      emissions control. Pelletized activated carbon has been extruded and each
      particle is cylindrical in shape. Pelletized carbon is typically used for gas
      phase applications because of the low pressure drop, high mechanical strength,
      and low dust content of the product.





Another
      important component of the Activated Carbon and Service business segment is
      the
      various services associated with the supply of products and systems for
      purification, separation, concentration, taste and odor control. These services
      include carbon reactivation, handling and transportation as well as the supply
      of equipment through leasing arrangements. The Company supplies complete process
      and treatment services at customers’ facilities which are particularly suited
      for treating fluids or gases containing either or both non-hazardous or
      hazardous organic compounds. The service is based primarily on reactivation
      of
      spent carbon and transportation of activated carbon to and from the reactivation
      facility, but also includes feasibility testing, process design, on-site
      equipment, initial activated carbon supply, performance monitoring and major
      maintenance of Company-owned equipment (such equipment is referred to as
“customer capital”). In the reactivation process, the spent carbon is subjected
      to high temperature re-manufacturing conditions that destroy the adsorbed
      organics and assure the activated carbon is returned to usable quality. This
      recycling is conducted at several locations throughout the world. Granular
      activated carbon is reactivated for environmental and economic reasons to
      destroy adsorbed organic compounds and also to conserve natural resources.
      The
      Company provides reactivation/recycling services in packages ranging from a
      fifty-five gallon drum to truckload quantities.





Purification
      services provided by the Company are used to improve the quality of food,
      chemical, pharmaceutical and petrochemical products. These services may be
      utilized in permanent installations or in temporary applications, such as pilot
      studies for a new manufacturing process or recovery of off-specification
      products.




7




Sales
      from continuing operations for the Activated Carbon and Service segment were
      $295.6 million, $265.3 million, and $241.9 million for the years ended December
      31, 2007, 2006, and 2005, respectively .





***Equipment.*** The
      Company has a complete line of standardized, pre-engineered, adsorption systems
      - capable of treating liquid flows from 1 gpm to 1,400 gpm - which can be
      quickly delivered and easily installed at treatment sites. These self-contained
      adsorption systems are used for vapor phase applications such as volatile
      organic compound (“VOC”) control, air stripper off-gases, and landfill gas
      emissions. Liquid phase equipment systems are used for applications of process
      purification, wastewater treatment, groundwater remediation, and
      de-chlorination. The Company also custom designs systems to solve unique
      treatment challenges, providing equipment for activated carbon, ion exchange
      resins or UV technologies each of which can be used for the purification,
      separation and concentration of liquids or gases.





More
      than
      20 years ago, the Company introduced an advanced UV oxidation process to
      remediate contaminated groundwater. In 1998, the Company’s scientists invented a
      UV disinfection process that could be used to inactivate Cryptosporidium,
      Giardia and other similar pathogens in surface water, rendering them harmless
      to
      humans. Effective in both drinking water and wastewater, UV light alters the
      DNA
      of pathogens, killing them or making it impossible for pathogens to reproduce
      and infect humans. In combination with hydrogen peroxide, UV light is effective
      in destroying many contaminants common in groundwater remediation applications.
      The Company continues to lead the market with innovative UV technologies with
      the Sentinel® line designed to protect municipal drinking water supplies from
      pathogens, the C3 SeriesTM open-channel wastewater disinfection product line for
      municipal wastewater disinfection, and Rayox® UV advanced oxidation equipment
      for treatment of contaminants such as 1,4-Dioxane, MTBE and Vinyl Chloride
      in
      groundwater, process water, and industrial wastewater.





UV
      oxidation equipment can also be combined with activated carbon to provide
      effective solutions for taste and odor removal in municipal drinking water.
      Backed by years of experience and extensive research and development, the
      Company can recommend the best solution for taste and odor problems, whether
      it’s using activated carbon, UV oxidation, or both. The Company also offers a
      low cost, non-chemical solution for quenching excess peroxide after our advanced
      oxidation processes.





The
      Company also produces a wide range of odor control equipment which utilizes
      catalytic, activated carbon to control odors at municipal wastewater treatment
      facilities and pumping stations.




8




The
      proprietary ISEP® (Ionic Separator) continuous ion exchange units are used for
      the purification of many products in the food, pharmaceutical and biotechnology
      industries. These ISEP® Continuous Separator units perform ion exchange
      separations using countercurrent processing. The ISEP® and CSEP®
(chromatographic separator) systems are currently used at over 300 installations
      worldwide in more than 40 applications including Good Manufacturing Processes
      (“GMP”), as well as removing nitrate and perchlorate contaminants from drinking
      water.





Sales
      from continuing operations for the Equipment segment were $41.3 million, $37.9
      million, and $36.9 million for the years ended December 31, 2007, 2006, and
      2005, respectively.





***Consumer.*** The
      primary product offered in the Consumer segment is carbon cloth. Carbon cloth,
      which is activated carbon in cloth form, is manufactured in the United Kingdom
      and sold to the medical and specialty markets.





Activated
      carbon and carbon cloth are used as the primary raw materials in the Company’s
      consumer home products group. The Company currently has two primary product
      lines that it markets to the retail channel. The first product line, PreZerve®
storage products, uses carbon cloth to protect and preserve jewelry and
      keepsakes from deterioration. The PreZerve® line currently offers over 40
      different items. The second product line, AllGone®, is an odor elimination
      system that utilizes activated carbon discs to adsorb odors and impurities
      from
      the air safely and naturally.





Sales
      from continuing operations for the Consumer segment were $14.2 million, $13.0
      million, and $12.0 million for the years ended December 31, 2007, 2006 and
      2005,
      respectively.





For
      further information, see Note 20 to the Financial Statements.





***Markets:***





The
      Company participates in five primary areas: Potable Water, Industrial Process,
      Food, Environmental Water and Air, and Specialty markets. Potable Water
      applications include municipal drinking water purification as well as point
      of
      entry and point of use devices. Applications in the Industrial Process markets
      include catalysis, product recovery and purification of chemicals, and
      pharmaceuticals as well as process water treatment. Food applications include
      brewing, bottling, and sweetener purification. Remediation of water and VOC
      removal from vapor are the major sub-segments for the Environmental markets.
      Medical, personal protection, cigarette, automotive, consumer, and precious
      metals applications comprise the Specialty markets.




9





***Potable
      Water Market.*** The
      Company sells activated carbons, equipment, services, ion exchange technology
      and UV technologies to municipalities for the treatment of potable water to
      remove pesticides and other dissolved organic and inorganic material to meet
      or
      exceed current state or federal regulations and to remove tastes and odors
      to
      make the water acceptable to the public. The Company also sells to OEM
      manufacturers of home water purification systems. Granular and powdered
      activated carbon products are sold in this market and in many cases the granular
      carbon functions both as the primary filtration media as well as an adsorption
      media to remove the contaminants from the water. UV oxidation and disinfection
      systems are sold for the destruction or inactivation of waterborne contaminants
      and organisms.





***Industrial
      Process Market.*** The
      Company’s products used in industrial processing are used either for
      purification, separation or concentration of customers’ products in the
      manufacturing process or for direct incorporation into the customers’ products.
      The Company sells a wide range of activated carbons and reactivation services
      to
      the chemical, petroleum refining, and process industries for the purification
      of
      organic and inorganic chemicals, amine, antibiotics and vitamins. Activated
      carbon products and services are also used to decolorize chemicals such as
      hydrochloric acid and remove pollutants from wastewater. Further, activated
      carbon is used in treatment of natural gas, flue gas and other vapor streams
      for
      removal of carbon dioxide, acetylene, hydrogen, sulfur and mercury compounds.
      The liquefied natural gas industry uses activated carbons to remove mercury
      compounds which would otherwise corrode process equipment. Activated carbons
      are
      also sold for gasoline vapor recovery equipment.





***Environmental
      Water and Air Market*** **.** Providing products used for the cleanup of contaminated groundwater, surface
      impoundments and accidental spills comprises the significant need in this
      market. The Company provides carbon, services, and carbon equipment for these
      applications as well as emergency and temporary cleanup services for public
      and
      private entities, utilizing both activated carbon adsorption and UV oxidation
      technologies.





The
      Company offers its products and services to private industry to meet stringent
      environmental requirements imposed by various government entities. The Company’s
      reactivation/recycling service is an especially important element if the
      customer has contaminants which are hazardous organic chemicals. The hazardous
      organic chemicals which are adsorbed by the activated carbons are decomposed
      at
      the high temperatures of the reactivation furnace and thereby removed from
      the
      environment. Reactivation eliminates the customers’ expense and difficulty in
      securing long-term containment (such as landfills) for hazardous organic
      chemicals.





Activated
      carbon is also used in the chemical, pharmaceutical, and refining industries
      for
      purification of air discharge to remove contaminants such as benzene, toluene,
      and other volatile organics. Reduction of mercury emissions from coal-fired
      power plants is a growing market for the Company. The planned re-start of B-line
      at its Catlettsburg, Kentucky plant to produce up to 70 million pounds of
      FLUEPAC® powdered activated carbon represents major progress in a multi-step
      program that would enable the Company to provide potentially hundreds of
      millions of pounds of powdered carbon to power companies.




10




Municipal
      sewage treatment plants purchase the Company’s odor control systems and
      activated carbon products to remove objectionable odors emanating from plants
      and to treat the wastewater to meet operating requirements. Granular activated
      carbon is used as a filtration/adsorption medium and the powdered activated
      carbons are used to enhance the performance of existing biological waste
      treatment processes.





The
      Company’s UV oxidation systems offer an ideal solution for groundwater
      remediation and the treatment of process water and industrial wastewater. The
      Company’s Rayox® System is an industry staple for the destruction of organic
      compounds in groundwater. Rayox® is also used as a process water and wastewater
      treatment option for the removal of alcohol, phenol, acetone, TOC and
      COD/BOD.





***Food
      Market.*** Sweetener manufacturers are a principal purchaser of the Company’s products in
      the food industry. As a major supplier, the Company’s specialty acid-washed
      activated carbon products are used in the purification of dextrose and high
      fructose corn syrup. Activated carbons are also sold for use in the purification
      of cane sugar. Other food processing applications include de-colorization and
      purification of many different foods and beverages and for purifying water,
      liquids and gas prior to usage in brewing and bottling. Continuous ion exchange
      systems are also used in this market for the production of lysine and vitamin
      E
      as well as purification of dextrose and high fructose corn syrup.





***Specialty
      Markets.*** The
      Company is a major supplier of activated carbon to manufacturers of gas masks
      supplied to the United States and European military as well as protective
      respirators and collective filters for first responders and private industry.
      The markets for collective filters for military equipment, indoor air quality
      and air containment in incineration and nuclear applications are also
      served.





Other
      specialty applications using activated carbons include precious metals producers
      to recover gold and silver from low-grade ore, and cigarette manufacturers
      in
      charcoal filters. The Company’s activated carbon cloth product is used in
      medical and other specialty applications.




***Sales
      and Marketing:***





The
      Company has a direct sales force in the United States with offices located
      in
      Pittsburgh, Pennsylvania; Santa Fe Springs, California; and Marlton, New Jersey.
      The Company conducts activated carbon related sales in Canada, Brazil, and
      Mexico through distributor relationships and maintains offices in Sao Paulo,
      Brazil and Mexico City, Mexico. The Company maintains offices in Singapore;
      Beijing and Shanghai, China; Taipei, Taiwan; and Tokyo, Japan (joint venture)
      to
      manage sales in the Asia Pacific Region.





In
      Europe, the Company has sales offices in Feluy, Belgium; Ashton and Houghton
      Le
      Spring, United Kingdom; and Beverungen, Germany. The Company also has a network
      of agents and distributors that conduct sales in certain countries in Europe,
      the Middle East, Africa, Latin America, the Far East, Australia and New Zealand.





All
      offices can play a role in sales of products or services from any of the
      Company’s segments.




11




Geographic
      sales information can be found in Note 20 to the Financial
      Statements.


Over
      the
      past three years, no single customer accounted for more than 10% of the total
      sales of the Company in any year.




*Backlog:*





The
      Company had a sales backlog from continuing operations of $11.8 million and
      $17.1 million as of January 31, 2008 and 2007, respectively, in the Equipment
      segment. The Company expects to carry less than one-third of the 2008 balance
      into 2009.





***Competition:***





The
      Company has a major global presence with several competitors in the worldwide
      market with respect to the production and sale of activated carbon-related
      products: Norit, N.V., a Dutch company, Mead/Westvaco Corporation, a United
      States company and Siemens Water, a United States company, are the primary
      competitors. Chinese producers of coal-based activated carbon and certain East
      Asian producers of coconut-based activated carbon participate in the market
      on a
      worldwide basis and sell principally through numerous resellers. Competition
      in
      activated carbons, carbon equipment and services is based on quality,
      performance and price. Other sources of competition for the Company’s activated
      carbon services and systems are alternative technologies for purification,
      filtration, and extraction processes that do not employ activated
      carbons.





A
      number
      of other smaller competitors engage in the production and sale of activated
      carbons in local markets, but do not compete with the Company on a global basis.
      These companies compete with the Company in the sale of specific types of
      activated carbons, but do not generally compete with a broad range of products
      in the worldwide activated carbon business.





In
      the
      United States and Europe, the Company competes with several small regional
      companies for the sale of its reactivation services and carbon equipment.





The
      Company’s UV technologies product line competitors include Trojan Technologies,
      Inc., a Canadian company owned by Danaher Corporation, a United States Company,
      and Wedeco Ideal Horizons, a German company owned by ITT Industries, a United
      States company.




12





***Raw
      Materials:***





The
      principal raw material purchased by the Company for its Activated Carbon and
      Service segment is bituminous coal from mines in the Appalachian Region and
      mines outside the United States, usually purchased under both long-term and
      annual supply contracts.





The
      Company purchases natural gas from various suppliers for use in its Activated
      Carbon and Service segment production facilities. In both the United States
      and
      Europe, substantially all natural gas is purchased pursuant to various annual
      and multi-year contracts with natural gas companies.





The
      Company purchases hydrogen peroxide via an annual supply contract for its UV
      technologies business.





The
      only
      other raw material that is purchased by the Company in significant quantities
      is
      pitch, which is used as a binder in the carbon manufacturing process. The
      Company purchases pitch from various suppliers in the United States and China,
      under annual supply contracts and spot purchases.





The
      purchase of key equipment components is coordinated through agreements with
      various suppliers.





Recent
      increases in coal prices and worldwide coal demand, as well as increased
      transportation costs, have provided the Company’s coal suppliers with added
      incentives to avoid their contractual obligations in some cases. However, to
      date, the Company’s coal suppliers have not breached their contracts. The
      Company does not presently anticipate any problems in obtaining adequate
      supplies of its other raw materials or equipment components.





***Research
      and Development:***





The
      Company's primary research and development activities are conducted at a
      research center in Pittsburgh, Pennsylvania. This facility is used for the
      evaluation of experimental activated carbon and equipment and application
      development. Experimental systems are also designed and evaluated at this
      location. Facilities in Ashton, United Kingdom supplement the work performed
      in
      Pittsburgh.





The
      principal goals of the Company's research program are to improve the Company's
      position as a technological leader in solving customers' problems with its
      products, services and equipment; develop new products and services; and provide
      technical support to customers and operations of the Company.




13





The
      Company's research programs include new and improved methods for manufacturing
      and utilizing new and enhanced activated carbons. New activated carbons are
      developed to address specific needs for a given market. For example, in response
      to the needs of power plants for a carbon for mercury removal from flue gas,
      four new products have been developed and field tested. Two of these products
      address the specific needs of utilities that use their fly ash as a concrete
      supplement. Research and development activities also include the Company's
      Ion
      Exchange and UV technologies. A regenerable resin for perchlorate removal has
      been successfully piloted using a licensed technology. Commercial systems are
      now being proposed. Expansion of the UV technologies product line continued
      in
      2007 with the development of a new Sentinel® reactor and an innovative Advanced
      Oxidation reactor. Improvements to the equipment design continue and additional
      patent applications have been filed.





Research
      and development expenses were $3.7 million, $4.2 million, and $4.5 million
      in
      2007, 2006 and 2005, respectively.





***Patents
      and Trade Secrets:***





The
      Company possesses a substantial body of technical knowledge and trade secrets
      and owns 61 United States patent applications and/or patents and 205 patent
      applications and/or patents in other countries. The issued United States and
      foreign patents expire in various years from 2008 through 2025.





The
      technology embodied in these patents, trade secrets and technical knowledge
      applies to all phases of the Company's business including production processes,
      product formulations and application engineering. The Company considers this
      body of technology important to the conduct of its business.




*Regulatory
      Matters:*





*USA.* The
      Company is subject to extensive environmental laws and regulations concerning
      emissions to the air, discharges to waterways and the generation, handling,
      storage, transportation, treatment and disposal of waste materials and is also
      subject to other federal and state laws regarding health and safety matters.
      The
      Company believes it is presently in substantial compliance with these laws
      and
      regulations. These laws and regulations are constantly evolving, and it is
      impossible to predict the effect these laws and regulations may have on the
      Company in the future.




14





The
      U.S.
      Environmental Protection Agency (“EPA”) has issued certain regulations under the
      Resource Conservation and Recovery Act (“RCRA”) dealing with the transportation,
      storage and treatment of hazardous waste that impact the Company in its carbon
      reactivation services. When activated carbon supplied to a customer can no
      longer cost-effectively adsorb contaminants, it is returned to the Company's
      facilities for reactivation and subsequent reuse. If the substance(s) adsorbed
      by the spent carbon is (are) considered hazardous, under these EPA regulations
      the activated carbon used in the treatment process is also considered hazardous.
      Therefore, a permit is required to transport the hazardous carbon to the
      Company's facility for reactivation. The Company possesses the necessary federal
      and state permits to transport hazardous waste. At the Company's reactivation
      sites, the hazardous spent activated carbon is placed in temporary storage
      tanks. Under the EPA regulations, the Company is required to have a hazardous
      waste storage permit. The Company has obtained RCRA Part B permits to store
      hazardous waste at its Pittsburgh and Catlettsburg facilities. The process
      of
      reactivating the spent activated carbon, which destroys the hazardous organic
      substances, is
      regulated
      under RCRA interim status standards for thermal treatment units until a RCRA
      Part B permit for a Subpart X miscellaneous treatment unit is issued by the
      EPA
      or an authorized state. The
      Company has been issued a Part B permit for the reactivation process at the
      Pittsburgh facility. The Company has filed for a Part B treatment permit
      at its Catlettsburg facility and is operating
      under the interim status standards whileworking toward obtaining the
      permit with the relevant government agencies. The Company does not accept
      carbons containing certain hazardous materials for reactivation.





Each
      of
      the Company’s U.S. production facilities has permits and licenses regulating air
      emissions and water discharges. All of the Company’s U.S. 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 known as B-line. The Company will need to install pollution
      abatement equipment in order to remain in compliance with state requirements
      regulating air emissions before resuming full operation of B-line. On January
      15, 2008, the Company announced its intention to restart B-line. The Company
      estimates it will invest approximately $20.0 million in this line and that
      the
      project is estimated to be completed in early 2009.





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 December 31, 2006. The reduction of the liability
      was recorded as a reduction of selling, general and administrative expenses
      on
      the Company’s condensed consolidated statement of operations for the year ended
      December 31, 2006. The Company has not incurred any environmental remediation
      expense for the year ended December 31, 2007 and has incurred a total of $0.2
      million of environmental remediation expense to date. It is reasonably possible
      that a change in the estimate of this obligation will occur as remediation
      preparation and remediation activity commences. 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.





In
      January 2007, the Company received a Notice of Violation (“NOV”) from the United
      States Environmental Protection Agency, Region 4 (“EPA”) alleging multiple
      violations of the Federal Resource Conservation and Recovery Act and
      corresponding EPA and Kentucky Department of Environmental Protection (“KYDEP”)
      hazardous waste management rules and regulations. The alleged violations are
      based on information provided by the Company during and after a Multi Media
      Compliance Evaluation inspection of the Company’s Big Sandy Plant, located in
      Catlettsburg, Kentucky, conducted by the EPA and the KYDEP in September 2005,
      and concern the hazardous waste spent activated carbon regeneration facility
      located at the Big Sandy Plant. The Company submitted its initial written
      response to the NOV in June 2007. In August 2007, the EPA notified the Company
      that it believes there are significant RCRA violations that are unresolved
      by
      the information in the Company’s submittals. The Company met with the EPA in
      December 2007 to discuss alleged violations. The EPA indicated at the meeting
      that it would evaluate its enforcement options and expects to contact the
      Company within the next several months to explore a resolution. The EPA can
      take
      formal enforcement action to require the Company to remediate alleged
      violations, which could involve the assessment of substantial civil penalties
      as
      well. The Company is awaiting further response from the EPA and cannot predict
      with any certainty the probable outcome of this matter or range of potential
      loss, if any.





In
      June
      2007, the Company received a Notice Letter from the New York State Department
      of
      Environmental Conservation (“NYSDEC”) stating that the NYSDEC has determined
      that the Company 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 the Company 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, estimated to cost between approximately $11 million and $14 million,
      which would be shared among the PRPs. The Company has not determined what
      portion of the costs associated with the remedial program it would be obligated
      to bear, therefore the Company cannot predict with any certainty the outcome
      of
      this matter or range of potential loss. The Notice Letter also demands payment
      of all monies that the NYSDEC has already expended for investigation and
      remediation of the Site, but does not specify the amount that the NYSDEC has
      expended.




15




In
      July
      2007, the Company received an 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 submitted a response to the NOV and the
      KYDEP’s comments in December 2007. The KYDEP has not indicated whether or not it
      will take formal enforcement action, and has not specified a monetary amount
      of
      civil penalties it might pursue in any such action, if any. On October 18,
      2007,
      the Company received an NOV from the EPA related to this permit application
      and
      submitted a revised application to both the KYDEP and the EPA within the
      mandated timeframe. At this time the Company cannot predict with any certainty
      the outcome of this matter or range of loss, if any.





*Europe.* The
      Company is also subject to various environmental health and safety laws and
      regulations at its facilities in Belgium, Germany, and the United Kingdom.
      These
      laws and regulations address substantially the same issues as those applicable
      to the Company in the United States. The Company believes it is presently in
      substantial compliance with these laws and regulations.





*Indemnification.* The
      Company has a limited indemnification agreement with the previous owner of
      the
      Company which will fund certain environmental costs if they are incurred at
      the
      Company's Catlettsburg, Kentucky plant. The Company believes that the amount
      of
      the indemnification is sufficient to fund these liabilities if they
      arise .




*Employee
      Relations:*





As
      of
      December 31, 2007, the Company employed 868 persons on a full-time basis, 591
      of
      whom were salaried production, office, supervisory and sales personnel. The
      United Steelworkers represent 216 hourly personnel in the United States. The
      current contracts with the United Steelworkers expire on April 1, 2009 and
      February 15, 2010, at the Catlettsburg, Kentucky and Columbus, Ohio facilities,
      respectively. The Contract with the United Steelworkers for the Company’s
      Neville Island plant located in Pittsburgh, Pennsylvania terminated on February
      29, 2008 following two extensions of the expiring agreement. The Company is
      operating this facility with its salaried employees and temporary replacement
      workers until a new agreement is reached. The 61 hourly personnel at the
      Company's Belgian facility are represented by two national labor organizations
      with contracts expiring on July 31, 2009. The Company also has hourly employees
      at three non-union United Kingdom facilities, one non-union United States
      facility located in Mississippi, and at two non-union China facilities.




16




***Copies
      of Reports:***





The
      periodic and current reports of the Company filed with the SEC pursuant to
      Section 13(a) of the Securities Exchange Act of 1934 are available free of
      charge, as soon as reasonably practicable after the same are filed with or
      furnished to the SEC, at the Company’s website at www.calgoncarbon.com. All
      other filings with the SEC are available on the SEC’s website at
      www.sec.gov.




***Copies
      of Corporate Governance Documents:***





The
      following Company corporate governance documents are available free of charge
      at
      the Company’s website at www.calgoncarbon.com and such information is available
      in print to any shareholder who requests it by contacting the Secretary of
      the
      Company at 400 Calgon Carbon Drive, Pittsburgh, PA 15205.





·
            Corporate
                Governance Guidelines


·
            Audit
                Committee Charter


·
            Compensation
                Committee Charter


·
            Governance
                Committee Charter


·
            Code
                of Ethical Business Conduct


·
            Code
                of Ethical Business Conduct Supplement for Chief Executive and Senior
                Financial Officers




17




**Item
      1A.** ***Risk
      Factors:***





***Risks
      relating to our business***





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





We
      sponsor various pension plans in the United States and Europe that are
      underfunded and require significant cash payments. We contributed $5.4 million
      and $9.2 million to our U.S. Pension plans and $2.4 million and $2.2 million
      to
      our European pension plans in 2007 and 2006, respectively. We currently expect
      to contribute approximately $3.7 million to our U.S. pension plans and $2.5
      million to our European pension plans in 2008. If our cash flow from operations
      is insufficient to fund our worldwide pension liability, we may be forced to
      reduce or delay capital expenditures, seek additional capital or restructure
      or
      refinance our indebtedness.





The
      funding status of our pension plans is determined using many assumptions, such
      as inflation, investment rates, mortality, turnover and interest rates, any
      of
      which could prove to be different than projected. If the performance of the
      assets in our pension plans does not meet our expectations, or if other
      actuarial assumptions are modified, or not realized, we may be required to
      contribute more to our pension plans than we currently expect. For example,
      an
      approximate 25-basis point decline in the funding target interest rate under
      Section 730 of the Internal Revenue Code, as added by the Pension Protection
      Act
      of 2006 for minimum funding requirements, would increase our minimum required
      contributions to our U.S. pension plans by approximately $1.0 million to $1.5
      million over the next three years.





Our
      pension plans in the aggregate are underfunded by approximately $24 million
      as
      of December 31, 2007 (based on the actuarial assumptions used for SFAS No.
      87,
“Employers’ Accounting for Pensions,” purposes and comparing our projected
      benefit obligation to the fair value of plan assets) and required a certain
      level of mandatory contributions as prescribed by law. Our U.S. pension plans,
      which were underfunded by approximately $11 million as of December 31, 2007,
      are
      subject to ERISA. In the event our U.S. pension plans are terminated for any
      reason while the plans are less than fully funded, we will incur a liability
      to
      the Pension Benefit Guaranty Corporation that may be equal to the entire amount
      of the underfunding at the time of the termination. In addition, changes in
      required pension funding rules that were affected by the enactment of the
      Pension Protection Act of 2006 will significantly increase our funding
      requirements beginning in 2008, which will have an adverse effect on our cash
      flow and could require us to reduce or delay our capital expenditures, seek
      additional capital or restructure or refinance our indebtedness. See Note 13
      to
      our consolidated financial statements contained in Item 8 of this Annual
      Report.




18





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





We
      use
      bituminous coal as the main raw material in our granular activated carbon
      production process. We estimate that coal will represent approximately 38%
      of
      our carbon product costs in 2008. We have various annual and multi-year
      contracts in place for the supply of coal that expire at various intervals
      from
      2008 to 2011. Interruptions in coal supply caused by mine accidents, labor
      disputes, transportation delays, breach of supplier contractual obligations,
      or
      other events for other than a temporary period could have an adverse effect
      on
      our being able to meet our customer demand. In addition, increases in the prices
      we pay for coal under our supply contracts could adversely affect our financial
      results by significantly increasing production costs. During 2007, our aggregate
      costs for coal increased by $1.3 million, or 8.4%, compared to 2006. Based
      upon
      the estimated usage of coal in 2008, a hypothetical 10% increase in the price
      of
      coal would result in $1.2 million of additional pre-tax expenses to us. We
      may
      not be able to pass through raw materials price increases to our
      customers





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





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





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





We
      face
      pressure and competition in our U.S. and European markets from brokers of low
      cost imported activated carbon products, primarily from China. We believe we
      offer the market technically superior products and related customer support. However
      in some applications, low cost imports have become accepted as viable
      alternatives to our products because they have been frequently sold at less
      than
      fair value in the market. If the markets in which we compete experience an
      increase in these imported low cost carbons, especially if sold at less than
      fair value, we could see declines in net sales. In addition, the sales of these
      low cost activated carbons may make it more difficult for us to pass through
      raw
      material price increases to our customers.




19




In
      response to a petition from the U.S. activated carbon industry filed in March
      2006, the United States Department of Commerce (the “DOC”) announced the
      imposition of anti-dumping duties starting in October 2006. The DOC announcement
      was based on extensive economic analysis of the operations and pricing practices
      of the Chinese producers and exporters. The DOC announcement required U.S.
      Customs and Border Protection to require importers of steam activated carbon
      from China to post a provisional bond or cash deposit in the amount of the
      duties. The anti-dumping duties are intended to offset the amount by which
      the
      steam activated carbon from China is sold at less than fair value in the
      U.S.





In
      March
      2007, the International Trade Commission (the “ITC”) determined that these
      unfairly priced steam activated carbon imports from China caused material injury
      to the U.S. activated carbon industry. This affirmative decision by the ITC
      triggered the imposition of significant anti-dumping duties in the form of
      cash
      deposits, ranging from 62 % to 228 %. The anti-dumping duties will be imposed
      for at least five years but are subject to periodic review within that time
      frame. The first review period begins April 2008. The significant anti-dumping
      duties imposed by the DOC and the affirmative decision by the ITC has had an
      adverse impact on the cost of Chinese manufactured activated carbon imported
      into the U.S. However, the anti-dumping duties could be reduced or eliminated
      in
      the future, which could adversely affect demand or pricing for our
      product.





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





We
      have
      collective bargaining agreements in place at four of our production facilities
      covering approximately 32% of our full-time workforce as of December 31, 2007.
      Those collective bargaining agreements expire from 2008 through 2010. Any work
      stoppages as a result of disagreements with any of the labor unions or our
      failure to renegotiate any of the contracts as they expire could disrupt
      production and significantly increase product costs as a result of less
      efficient operations caused by the resulting need to rely on temporary labor.
      For example, our contract with the United Steelworkers for the Company’s Neville
      Island plant located in Pittsburgh, Pennsylvania terminated on February 29,
      2008
      following two extensions of the expiring agreement. The Company is operating
      this facility with its salaried employees and temporary replacement workers
      until a new agreement is reached.





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


We
        conduct significant business operations in several foreign countries. Of
        our
        2007 net sales, approximately 45% were sales to countries other than the
        United
        States, and 2007 net sales denominated in non-U.S. dollars represented
        approximately 34% of our overall net sales. We conduct business in the local
        currencies of each of our foreign subsidiaries or affiliates. Those local
        currencies are then translated into U.S. dollars at the applicable exchange
        rates for inclusion in our consolidated financial statements. The exchange
        rates
        between some of these currencies and the U.S. dollar in recent years have
        fluctuated significantly and may continue to do so in the future. Changes
        in
        exchange rates, particularly the strengthening of the U.S. dollar, could
        significantly reduce our sales and profitability from foreign subsidiaries
        or
        affiliates from one period to the next as local currency amounts are translated
        into fewer U.S. dollars.


20




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





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





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





Our
      Equipment segment represented approximately 12% of our 2007 net sales. This
      business generally has a long project life cycle from bid solicitation to
      project completion and often requires customers to make large capital
      commitments well in advance of project execution. In addition, this business
      is
      usually affected by the general health of the overall economy. As a result,
      sales and earnings from the Equipment segment could be volatile.





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





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




21




If
      our
      liquidity would remain constrained for more than a temporary period, we may
      need
      to either delay certain strategic growth projects or access higher cost capital
      markets in order to fund our projects, which may adversely affect our financial
      results.





**Our
      required capital expenditures may exceed our estimates.**





Our
      capital expenditures were $11.8 million in 2007, primarily including
      improvements to our manufacturing facilities and equipment to be utilized in
      our
      service business. Future capital expenditures may be significantly higher and
      may vary substantially if we are required to undertake certain actions to comply
      with new regulatory requirements or compete with new technologies. We may not
      have the capital to undertake these capital investments. If we are unable to
      do
      so, we may not be able to effectively compete.





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





In
      January 2006, we announced the temporary idling of our reactivation facility
      in
      Blue Lake, California. It is our 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.





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





As
      of
      December 31, 2007, we had consolidated goodwill of approximately $27.8 million
      recorded in our business segments, primarily from our Activated Carbon and
      Service and Equipment segments. We test our goodwill on an annual basis or
      when
      an indication of possible impairment exists in order to determine whether the
      carrying value of our assets is still supported by the fair value of the
      underlying business. To the extent that it is not, we are required to record
      an
      impairment charge to reduce the asset to fair value. For the year ended December
      31, 2006, we recorded a $6.9 million impairment charge associated with our
      UV
      equipment reporting unit, principally as a result of the fourth quarter decision
      by the Federal Court of Canada, which found that our patent for the use of
      UV
      light to prevent infection from Cryptosporidium in drinking water is invalid.
      As
      a result, our estimate of future royalty income used in determining the fair
      value of the reporting unit declined substantially from the prior year. A
      decline in the operating performance of any of our business segments or sale
      of
      a business at an amount less than book value could result in a goodwill
      impairment charge which could have a material effect on our financial
      results.




22




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





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





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





The
      Company has also anticipated increased demand for powdered activated carbon
      products beginning in 2009 that would be driven by the EPA's Clean Air Mercury
      Rule, which established an emissions trading system to reduce mercury emissions
      from coal-fired power plants by approximately 70% over a 10 year period. On
      February 8, 2008, the United States Circuit Court of Appeals for the District
      of
      Columbia vacated the Clean Air Mercury Rule. Additional appeals, litigation,
      and
      regulatory proceedings could defer implementation of another EPA mercury
      reduction regulation for years, although any such regulation could be
      substantially more stringent, leading to higher than expected demand for the
      Company's products at a later date. Even if adoption of a new Clean Air Mercury
      Rule is delayed indefinitely by the legal and regulatory process, existing
      federal and state laws and regulations, as well as federal legislation
      introduced in response to the Court of Appeals decision and new litigation,
      could result in substantially more stringent regulation, resulting in
      higher-than expected demand for the Company's products, within the near future.
      The Company is unable to predict with certainty when and how the outcome of
      these complex legal, regulatory and legislative proceedings will affect demand
      for its products.




23




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





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





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





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





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





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





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





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




24




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





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





From
      time
      to time in the course of our business, we have to address competitive challenges
      to our patented technology. Following protracted litigation in multiple
      jurisdictions, the U.S. Court of Appeals for the Federal Circuit held that
      our
      process patents for the use of ultraviolet light to prevent infection from
      Cryptosporidium and Giardia in drinking water thereby concluding this case
      (the
“UV patents”) are invalid in the United States. On March 3, 2008, the Supreme
      Court of Canada held that our Canadian UV patents are invalid, thereby
      concluding this case. We did not appeal the ruling in the United States. A
      German trial court has found that a competitor infringed our UV patents with
      respect to medium pressure ultraviolet light, but did not infringe with respect
      to low pressure ultraviolet light. The Company appealed the decision relating
      to
      low pressure ultraviolet light. The competitor did not appeal. Oral argument
      is
      scheduled for September 2008. The validity of the German UV patents, as
      distinguished from issues of infringement which were decided in the trial court,
      is the subject of administrative proceedings in Germany. The outcome of these
      cases has impaired the Company’s ability to capitalize on substantial future
      revenues from the licensing of its UV patents.





With
      the
      exception of 2007, we have incurred significant legal fees and expenses in
      recent years litigating these matters. For example, legal expenses related
      to
      these patent litigation matters totaled approximately $4.7 million in 2006
      and
      $3.9 million in 2005. We may be required to incur additional significant legal
      expenses to defend our intellectual property in the future.





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




25




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





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





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





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





Our
      production facilities are subject to environmental laws and regulations in
      the
      jurisdictions in which they operate or maintain properties. Costs may be
      incurred in complying with such laws and regulations. Each of our domestic
      production facilities require permits and licenses issued by local, state and
      federal regulators which regulate air emissions and water discharges. These
      permits are subject to renewal and, in some circumstances, revocation.
      International environmental requirements vary and could have substantially
      lesser requirements that may give competitors a competitive advantage.
      Additional costs may be incurred if environmental remediation measures are
      required. In addition, the discovery of contamination at any of our current
      or
      former sites or at locations at which we disposed of waste may expose us to
      cleanup obligations and other damages. For example, the Company received a
      Notice of Violation (“NOV”) from the U.S. EPA in January 2007 and from the
      Kentucky Department of Environmental Protection in July 2007. While the Company
      is attempting to resolve these matters, an unfavorable result could have a
      significant adverse impact on financial results. If we receive similar demands
      in the future, we may incur significant costs in connection with the resolution
      of those matters.




26




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





We
      have
      manufacturing facilities and sales offices in Europe, China, Japan, Taiwan,
      Singapore, Brazil, Mexico, Canada, and the United Kingdom which are subject
      to
      economic conditions and political factors within the respective countries which,
      if changed in a manner adverse to us, could negatively affect our results of
      operations and cash flow. Political factors include, but are not limited to,
      taxation, nationalization, inflation, currency fluctuations, increased
      regulation and quotas, tariffs and other protectionist measures. Approximately
      85% of our sales in 2007 were generated by products sold in the U.S., Canada,
      and Western Europe while the remaining sales were generated in other areas
      of
      the world, such as Asia, Eastern Europe, and Latin America.





**We
      face risks in connection with compliance with Sarbanes-Oxley Section 404 and
      any
      other related remedial measures that we may undertake.**





During
      2006, the Company had identified and subsequently remediated a material weakness
      in its internal controls. If we are unable to effectively remediate any other
      material weaknesses or significant deficiencies in internal control over
      financial reporting that are identified in the future and to assert that
      disclosure controls and procedures including internal control over financial
      reporting are effective in any future period, we could lose investor confidence
      in the accuracy and completeness of our financial reports, which could have
      an
      adverse effect on our stock price and potentially subject us to litigation.
      In
      addition, we may be required to incur additional costs including but not limited
      to the hiring of additional personnel to improve our existing internal control
      system.




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





As
      of
      December 31, 2007, we had $13.1 million of deferred tax assets associated with
      net operating loss carryforwards (“NOLs”) and tax credit carryforwards that were
      generated from both our domestic and foreign operations. We have established
      a
      valuation reserve of $6.2 million for these deferred tax assets that are not
      deemed more likely than not to be realized. If we do not meet our projections
      of
      profitability in the future, we may not be able to realize these NOLs or tax
      credits, and we may be required to record an additional valuation allowance,
      which would adversely affect our financial results. In addition, if some or
      all
      of these NOLs or tax credits expire, they will not be available to offset our
      tax liability.




27




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





As
      of
      December 31, 2007, we had NOLs of approximately $0.5 million for federal income
      tax purposes and approximately $61.4 million for state income tax purposes.
      Under Section 382 of the Internal Revenue Code, if a corporation undergoes
      an
“ownership change,” the corporation’s ability to use its pre-change NOLs and
      other pre-change tax attributes to offset its post-change income may be limited.
      An ownership change is generally defined as a greater than 50% change in its
      equity ownership by value over a three-year period. We may experience an
      ownership change in the future as a result of subsequent shifts in our stock
      ownership. If we were to trigger an ownership change in the future, our ability
      to use any NOLs existing at that time could be limited.





**We
      may not have sufficient funds necessary to settle conversion of our convertible
      notes due in 2036 or to purchase the convertible notes upon a fundamental change
      or other purchase date, and our future debt may contain limitations on our
      ability to pay cash upon conversion or repurchase of the
      notes.**





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





We
      may
      not have sufficient financial resources, or may not be able to arrange
      financing, to pay the settlement amount in cash, or the purchase price or
      fundamental change purchase price for the notes tendered by the holders in
      cash.
      Our ability to pay the settlement amount in cash, or the purchase price or
      fundamental change purchase price for the notes in cash will be subject to
      limitations we may have in our credit facilities, or any other indebtedness
      we
      may have in the future. If the notes are converted or we are required to
      purchase them, we may seek the consent of our lenders or attempt to refinance
      our debt, but there can be no assurance that we will be able to do so. At
      December 31, 2007, the conversion option was triggered based on the trading
      price of our common stock. As such, the note holders have the right to convert
      their notes to cash and common stock. Unless we have made alternative financing
      arrangements, a portion of the convertible debt will be considered
      current.





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




28




**The
      fundamental change provisions in our convertible notes may delay or prevent
      an
      otherwise beneficial takeover attempt of our company.**





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





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





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





·
            providing
                for a board of directors with staggered, three-year
                terms;


·
            requiring
                super-majority voting to affect certain amendments to our certificate
                of
                incorporation and bylaws;


·
            limiting
                the persons who may call special stockholders’
                meetings;


·
            limiting
                stockholder action by written
                consent;


·
            establishing
                advance notice requirements for nominations for election to the board
                of
                directors or for proposing matters that can be acted upon at stockholders’
                meetings; and


·
            allowing
                our board of directors to issue shares of preferred stock without
                stockholder approval.





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





**Item
      1b.** ***Unresolved
      Staff Comments:***





None.




29




**Item
      2. Properties:**





The
      Company owns nine production facilities, two of which are located in Pittsburgh,
      Pennsylvania; and one each in the following locations: Catlettsburg, Kentucky;
      Pearlington, Mississippi; Blue Lake, California; Feluy, Belgium; Grays, United
      Kingdom; Datong, China; and Columbus, Ohio. The Company leases one production
      facility in each of the following locations: Pittsburgh, Pennsylvania; Houghton
      Le Spring, United Kingdom; Ashton-in-Makerfield, United Kingdom; and Tianjin,
      China. The Company’s 49% owned joint venture; Calgon Mitsubishi Chemical
      Corporation has one facility in Fukui, Fukui Prefecture, Japan. The Company
      also
      leases twenty warehouses, service centers, and sales office facilities. Of
      these, eighteen are located in the United States and one each in the United
      Kingdom and Canada. Six of the United States facilities are located in
      Pittsburgh, Pennsylvania and one each in the following locations: Downingtown,
      Pennsylvania; Providence, Rhode Island; Rockdale, Illinois; Santa Fe Springs,
      California; Houston, Texas; Marlton, New Jersey; Stockton, California; South
      Point, Ohio; Huntington, West Virginia; Ironton, Ohio; Wurtland, Kentucky;
      and
      Sulphur, Louisiana. The facility in the United Kingdom is located in
      Ashton-in-Makerfield. The Canadian facility is located in Richmond Hill,
      Ontario.





The
      Catlettsburg, Kentucky plant is the Company's largest facility, with plant
      operations occupying approximately 50 acres of a 226-acre site. This plant,
      which serves the Activated Carbon and Service segment, produces granular and
      powdered activated carbons and acid washed granular activated carbons and
      reactivates spent granular activated carbons.





The
      Pittsburgh, Pennsylvania carbon production plant occupies a four-acre site
      and
      serves the Activated Carbon and Service segment. Operations at the plant include
      the reactivation of spent granular activated carbons, the impregnation of
      granular activated carbons and the grinding of granular activated carbons into
      powdered activated carbons. The plant also has the capacity to produce
      coal-based or coconut-based specialty activated carbons.





The
      Pearlington, Mississippi plant occupies a site of approximately 100 acres.
      The
      plant has one production line that produces granular activated carbons and
      powdered carbons for the Activated Carbon and Service segment.





The
      Columbus plant occupies approximately 27 acres in Columbus, Ohio. Operations
      at
      the plant include reactivation of spent granular activated carbons, impregnation
      of activated carbon, crushing activated carbon to fine mesh, acid and water
      washing, filter-filling, and various other value added processes to granular
      activated carbon for the Activated Carbon and Service segment.


30





The
      Blue
      Lake plant, located near the city of Eureka, California occupies approximately
      two acres. The primary operation at the plant includes reactivation of spent
      granular activated carbons for the Activated Carbon and Service segment. This
      plant has been temporarily idled since December 2005.





The
      Pittsburgh, Pennsylvania equipment and assembly plant is located on Neville
      Island and is situated within a 16-acre site that includes a 300,000 square
      foot
      building. The Equipment and Assembly plant occupies 85,000 square feet with
      the
      remaining space used as a centralized warehouse for carbon inventory. The plant,
      which serves the Equipment and Activated Carbon and Service segments,
      manufactures and assembles fully engineered carbon equipment for purification,
      concentration and separation systems. This plant also serves as the east coast
      staging and refurbishment point for carbon service equipment.




The
      Pittsburgh, Pennsylvania Engineered Solutions plant is a 37,500 sq. ft.
      production facility located on Neville Island. The primary focus of this
      facility is the manufacture of UV and Ion Exchange (ISEP®) equipment, including
      mechanical and electrical assembly, controls systems integration and validation
      testing of equipment. This location also serves as the Pilot Testing facility
      for Process Development, as well as the spare parts distribution center for
      UV
      and ISEP® systems.





The
      Feluy
      plant occupies a site of approximately 21 acres located 30 miles south of
      Brussels, Belgium. Operations at the plant include both the reactivation of
      spent granular activated carbons and the grinding of granular activated carbons
      into powdered activated carbons for the Activated Carbon and Service segment.





The
      Grays
      plant occupies a three-acre site near London, United Kingdom. Operations at
      the
      plant include the reactivation of spent granular activated carbons for the
      Activated Carbon and Service segment.





The
      Ashton-in-Makerfield plant occupies a 1.6 acre site, 20 miles west of
      Manchester, United Kingdom. Operations at the plant include the impregnation
      of
      granular activated carbons for the Activated Carbon and Service segment. The
      plant also has the capacity to finish coal-based or coconut-based activated
      carbons.





The
      Houghton Le Spring plant, located near the city of Newcastle, United Kingdom,
      occupies approximately two acres. Operations at the plant include the
      manufacture of woven and knitted activated carbon textiles and their
      impregnation and lamination for the Consumer segment.





The
      Fukui, Fukui Prefecture, Japan plant is 49% owned by Calgon Carbon as part
      of a
      joint venture with Mitsubishi Chemical Company. The joint venture is Calgon
      Mitsubishi Chemical Corporation. The plant, which serves the Activated Carbon
      and Service segment, occupies a site of approximately six acres and has one
      production line for carbon reactivation.


31





The
      Datong plant located in Datong, China occupies 15,000 square meters. This plant
      produces agglomerated activated carbon intermediate product for the Activated
      Carbon and Service segment for use in both the potable and industrial
      markets.





The
      Tianjin plant is located in Tianjin, China and is licensed to export activated
      carbon products. It occupies approximately 35,000 square meters. This plant
      finishes, sizes, tests, and packages activated carbon products for the Activated
      Carbon and Service segment for distribution both inside China and for
      export.





The
      Company believes that the plants and leased facilities are adequate and suitable
      for its operating needs.


32





**Item
      3.** ***Legal Proceedings:***




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 for
      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. A jury returned
      a
      verdict in favor of the Company and against the defendants in the amount of
      $10.0 million on January 26, 2007 which has not been recorded in operations
      as
      of December 31, 2007. After the Court denied all post-trial motions, including
      the defendants’ motion for a new trial and the Company’s motion for the award of
      prejudgment interest, all parties appealed to the United States Circuit Court
      of
      Appeals for the Third Circuit. The parties settled the case in January 2008
      when
      the defendants agreed to pay the Company $9.25 million. This sum was received
      in
      February 2008.





Following
      protracted litigation in multiple jurisdictions, the U.S. Court of Appeals
      for
      the Federal Circuit held that the Company’s process patents for the use of
      ultraviolet light to prevent infection from Cryptosporidium and Giardia in
      drinking water (the “UV patents”) are invalid in the United States. On March 3,
      2008, the Supreme Court of Canada held that the Company’s Canadian UV patents
      are invalid, thereby concluding this case. The Company did not appeal the ruling
      in the United States and the Canadian ruling concluded the litigation. 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 the
      Company’s UV patents. In 2007, a German trial court found that a competitor
      infringed the Company’s UV patents with respect to medium pressure ultraviolet
      light, but did not infringe with respect to low pressure ultraviolet light.
      The
      Company appealed the decision relating to low pressure light. The competitor
      did
      not appeal. Oral argument is scheduled in this case for September 2008. The
      validity of the German UV patents, as distinguished from issues of infringement
      which were decided in the trial court, is the subject of pending administrative
      proceedings in Germany. The outcome of these cases has impaired the Company’s
      ability to capitalize on substantial future revenues from the licensing of
      its
      UV patents.





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


33





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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of 2007.





**PART
      II**




**Item
      5.** ***Market
      for Registrant's Common Equity, Related Shareholder Matters, and Issuer
      Repurchases of Equity Securities:***





COMMON
      SHARES AND MARKET INFORMATION





Common
      shares are traded on the New York Stock Exchange under the trading symbol CCC.
      There were 1,345 registered shareholders at December 31, 2007.





Quarterly
      Common Stock Price Ranges and Dividends





2007
            
            2006Fiscal
                Quarter
            
            High
            
            Low
            
            Dividend
            
            High
            
            Low
            
            DividendFirst
            
            
            9.52
            
            
            5.43
            
            
            -
            
            
            8.69
            
            
            5.50
            
            
            -Second
            
            
            12.20
            
            
            7.37
            
            
            -
            
            
            7.94
            
            
            5.45
            
            
            -Third
            
            
            14.74
            
            
            10.30
            
            
            -
            
            
            6.14
            
            
            4.15
            
            
            -Fourth
            
            
            16.96
            
            
            11.64
            
            
            -
            
            
            6.53
            
            
            4.35
            
            
            -





The
      Company did not declare or pay any dividends in 2007 and 2006. Dividend
      declaration and payout are at the discretion of the Board of Directors. Future
      dividends will depend on the Company’s earnings, cash flows, and capital
      investment plans to pursue long-term growth opportunities. The Company’s Credit
      Facility contains covenants which include limitation on the ability to declare
      or pay cash dividends or make other restricted payments, subject to certain
      exceptions, such as dividends declared and paid by its subsidiaries and cash
      dividends paid by the Company in an amount not to exceed $6.0 million in the
      aggregate during any fiscal year if certain conditions are met.





The
      information appearing in Item 12 of Part III below regarding common stock
      issuable under the Company’s equity compensation plans is incorporated herein by
      reference.





**Shareholder
      Return Performance Graph**




The
      following performance graph and related information shall not be deemed “filed”
with the Securities and Exchange Commission, nor shall such information be
      incorporated by reference into any future filing under the Securities Act of
      1933 or Securities Exchange Act of 1934, each as amended, except to the extent
      that the Company specifically incorporates it by reference into such
      filing.


34





The
      graph
      below compares the yearly change in cumulative total shareholder return of
      the
      Company’s common stock with the cumulative total return of the Standard &
Poor’s (S&P’s) 500 Stock Composite Index and a Peer Group. The Company
      believes that its core business consists of purifying air, water and other
      products. As such, the Company uses a comparative peer group benchmark. The
      companies included in the group are BHA Group Holdings Inc. (2003-2004), Cuno,
      Inc.(2003-2005), Ionics, Inc. (2003-2005) , Clarcor, Inc., Donaldson Co. Inc.,
      Esco Technologies Inc., Flanders Corp., Lydall, Inc., Millipore Corp., and
      Pall
      Corp. BHA Group Holdings Inc., Cuno, Inc., and Ionics, Inc. were acquired during
      the time period between 2003 and 2007. The data for these companies is included
      from the year 2003 until the point at which they were acquired and their common
      stock ceased to be publicly traded.











*Assumes
      that the value of the investment in Calgon Carbon Common Stock and the index
      and
      Peer Group was $100 on December 31, 2002 and that all dividends are
      reinvested.


35





**Issuer
      Repurchases of Equity Securities**




**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**October
                1 –
                October 31,
                2007
            
            
            —
            
            
            —
            
            
            —
            
            
            —November
                1 – November 30, 2007
            
            
            1,531
            
            $
            15.00
            
            
            —
            
            
            —December
                1 – December 31, 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. Future purchases under this plan will be dependent upon
      employee elections and forfeitures.





**Item
      6.** ***Selected
      Financial Data:***




FIVE-YEAR
      SUMMARY OF SELECTED FINANCIAL DATA


Calgon
      Carbon Corporation




(Dollars
                  in thousands, except per share data)
            
            2007(1)
            
            2006
            
            2005
            
            2004(2)
            
            2003Income
                Statement Data:Net
                sales
            
            $
            351,124
            
            $
            316,122
            
            $
            290,835
            
            $
            295,877
            
            $
            253,178Income
                (loss) from continuing operations
            
            $
            15,453
            
            $
            (9,012
            )
            $
            (10,507
            )
            $
            3,968
            
            $
            3,810Income
                (loss) from continuing operations per common share, basic
            
            $
            0.39
            
            $
            (0.23
            )
            $
            (0.27
            )
            $
            0.10
            
            $
            0.10Income
                (loss) from continuing operations per common share,
                diluted
            
            $
            0.31
            
            $
            (0.23
            )
            $
            (0.27
            )
            $
            0.10
            
            $
            0.10Cash
                dividends declared per common share
            
            $
            -
            
            $
            -
            
            $
            0.09
            
            $
            0.12
            
            $
            0.12Balance
                Sheet Data (at year end):Total
                assets
            
            $
            348,140
            
            $
            322,364
            
            $
            347,868
            
            $
            363,898
            
            $
            302,195Long-term
                debt
            
            $
            12,925
            
            $
            74,836
            
            $
            83,925
            
            $
            84,600
            
            $
            53,600


(1)
            Excludes
                $62.5 million of debt which is classified as current. See Note 9
                to the
                Consolidated Financial Statements for further
                information.


(2)
            Includes
                the February 2004 acquisition of Waterlink Specialty
                Products


36




**Item
      7.** ***Management's
      Discussion and Analysis of Financial Condition and Results of Operations:***





**Overview**


In
      2007,
      the Company reported net income of $15.3 million or $0.31 per diluted share,
      as
      compared to a net loss of $7.8 million, or $(0.20) per diluted share for 2006.
      Net sales increased 11.1% to $351.1 million for 2007 from $316.1 million for
      2006. Selling, general and administrative expenses decreased 1.1% as compared
      to
      2006, which was primarily attributable to a decline in litigation expenses
      as a
      result of the substantial completion of the Company’s UV patent cases and
      anti-dumping petitions related to steam activated carbon imports from China.


37





A
      final
      determination regarding the anti-dumping ruling (the “Ruling”), as described in
      the Company’s Form 8-K filed on March 30, 2007, was issued by the International
      Trade Commission (“ITC”) on March 29, 2007. The final anti-dumping duties will
      be imposed for at least five years. The imposition of the anti-dumping duties
      led to price increases during 2007 that significantly contributed to the overall
      profit improvement.





**Results
      of Operations**





**2007
      Versus 2006**





**Continuing
      Operations:**


Consolidated
      net sales increased in 2007 compared to 2006 by $35.0 million or 11.1%. Sales
      increased in the Activated Carbon and Service segment by $30.3 million or 11.4%.
      The increase was primarily due to higher pricing for certain activated carbon
      products and services. Increased demand as well as higher pricing in the
      industrial process and environmental air treatment markets of $3.9 million
      and
      $15.5 million, respectively, also contributed to the increase. Foreign currency
      translation had a positive impact of $8.3 million. Sales in the Equipment
      segment increased approximately $3.4 million or 9.1%. The increase was
      principally due to higher demand for the Company’s UV and municipal odor
      equipment of approximately $5.0 million collectively. Partially offsetting
      this
      increase was a decrease in demand for traditional carbon adsorption equipment
      of
      $1.2 million. Foreign currency translation had a positive impact of $0.2
      million. Sales for the Consumer segment increased by $1.2 million or 9.5% due
      to
      higher demand for activated carbon cloth and the positive impact of foreign
      currency translation of $0.8 million. The total sales increase for all segments
      attributable to the effect of foreign currency translation was $9.3 million.





Net
      sales
      less cost of products sold, as a percent of net sales, was 31.0% in 2007
      compared to 25.1% in 2006, an increase of 5.9%. The increase was primarily
      from
      the Activated Carbon and Service segment which was 31.0% in 2007 versus 23.8%
      in
      2006, an increase of 7.2%. The increase was principally due to higher pricing
      of
      certain activated carbon products and service. The Equipment segment was 27.7%
      in 2007 versus 29.9% in 2006, a 2.2% decline which was primarily related to
      an
      increase in manufacturing related costs. The Consumer segment reported 39.8%
      in
      2007 versus 38.0% in 2006, an increase of 1.8% primarily due to volume for
      higher value activated carbon cloth. The Company’s cost of products sold
      excludes depreciation; therefore it may not be comparable to that of other
      companies.




Depreciation
        and amortization decreased by $1.7 million or 8.9% in 2007 as compared to
        2006
        primarily due to an increase in fully depreciated fixed assets.
  Selling,
        general and administrative expenses decreased by $0.7 million or 1.1% in
        2007.
        The decline was primarily due to a decrease in litigation expense of $6.9
        million which was principally related to the substantial completion of the
        Company’s UV patent cases and anti-dumping petition for steam activated carbon
        imports from China. Partially offsetting this decrease was an increase in
        employee related expenses of $1.1 million, $0.6 million of bad debt expense,
        and
        $3.3 million of professional service fees principally related to accounting,
        tax, and Sarbanes-Oxley compliance and planning projects. The 2006 period
        included a $1.3 million reduction related to the change in estimate of the
        Company’s environmental liabilities assumed in the 2004 Waterlink acquisition.
        On a segment basis, selling, general and administrative expenses increased
        in
        2007 by approximately $2.9 million in the Activated Carbon and Service segment
        which was primarily related to higher employee related expenses. The 2006
        period
        included the aforementioned $1.3 million reduction in the Company’s
        environmental liabilities. Selling, general and administrative expenses for
        the
        Equipment segment decreased by approximately $3.6 million primarily due to
        decreased litigation expense related to the substantial completion of the
        UV
        patent cases and was comparable for the Consumer segment year over
        year.


38





Research
      and development expenses decreased by $0.5 million or 12.9%. The decrease was
      primarily due to a reduction in employee related expenses.





The
      gain
      from insurance settlement of $8.1 million in 2006 related to the claim for
      damage to the Company’s Pearlington, Mississippi plant which was caused by
      Hurricane Katrina in 2005.





The
      Company recorded a $6.9 million impairment charge in 2006 related to the
      goodwill associated with the Company’s UV reporting unit of its Equipment
      segment which is more fully described in Note 7 to the financial statements.





Interest
      income increased in 2007 versus 2006 by $0.9 million or 106.2% primarily as
      a
      result of the Company’s higher cash balance carried throughout
      2007.





Interest
      expense decreased in 2007 versus 2006 by $0.5 million or 7.8% as a result of
      lower average borrowing levels and lower average interest rates paid on the
      Company’s borrowings in 2007 versus 2006.




Other
      expense - net decreased in 2007 versus 2006 by $0.8 million or 34.8% primarily
      due to the write-off of deferred financing fees associated with the Company’s
      former credit facility that occurred in 2006.





Income
      tax expense from continuing operations for 2007 was $7.8 million as compared
      to
      a tax benefit of $2.7 million for 2006. The effective tax rate for 2007 was
      36.7% compared to a rate of 22.4% for 2006. The overall increase in tax expense
      was caused by pre-tax earnings in 2007 compared to the pre-tax loss incurred
      in
      2006. The effective tax rate in 2006 was significantly impacted by a
      non-deductible goodwill charge which caused the Company’s 2006 effective tax
      rate to differ from the U.S. Federal statutory rate of 35% by 17.1%. During
      2007, the overall tax rate did not differ significantly from the Federal
      statutory rate.





In
      part
      due to an overall foreign loss, the Company is unable to use its foreign tax
      credits and has recorded a valuation allowance related to them which, on a
      net
      basis, caused the overall tax rate to increase by 4.9% in 2007. In addition, the
      Company received a dividend from its Japanese joint venture which increased
      the
      tax rate by 3.5%. The Company’s rate was lower than the U.S. statutory rate by
      3.4% because of lower statutory tax rates in its foreign jurisdictions. The
      Company also benefited from other deferred tax rate adjustments in 2007.





Equity
      in
      income of equity investments increased in 2007 versus 2006 by $1.7 million.
      The
      increase was principally due to lower cost of products sold and a favorable
      mix
      for products sold by the Company’s joint venture with Calgon Mitsubishi Chemical
      Corporation in Japan.





**Discontinued
      Operations:**


Loss
      from
      discontinued operations was $0.2 million as compared to income from discontinued
      operations of $1.2 million in 2006. The 2006 results include a $1.7 million
      gain, net of tax, related to the 2006 sales of the Company’s Charcoal/Liquid and
      Solvent Recovery businesses.


39





**2006
      Versus 2005**





Consolidated
      net sales increased in 2006 compared to 2005 by $25.3 million or 8.7%. Sales
      increased in the Activated Carbon and Service segment by $23.3 million or 9.6%.
      The increase was primarily due to increased sales of activated carbon to the
      Company’s joint venture, Calgon Mitsubishi Chemical Corporation, of $4.9 million
      as well as higher demand for carbon and service products in the world-wide
      environmental water treatment and food markets of $7.6 million and $2.8 million,
      respectively. Also contributing to this increase was higher demand in the
      potable water market in the U.S. and Europe and in the industrial process market
      in Asia and Europe of $3.6 million and $1.7 million, respectively. Higher prices
      for certain carbon and service products also contributed to the increase.
      Foreign currency translation had a positive impact of $1.3 million. Sales in
      the
      Equipment segment increased $1.0 million or 2.8%. The increase was principally
      due to higher demand for traditional carbon adsorption equipment for municipal
      and industrial applications. Foreign currency translation had a positive impact
      of $0.1 million. Sales for the Consumer segment increased by $0.9 million or
      7.7% due to higher demand for both activated carbon cloth of $0.4 million and
      PreZerve® products of $0.5 million. The total sales increase for all segments
      attributable to the effect of foreign currency translation was $1.5 million.





Net
      sales
      less cost of products sold, as a percent of net sales, was 25.1% in 2006
      compared to 26.0% in 2005. The decline was primarily from the Activated Carbon
      and Service segment which was 23.8% in 2006 versus 25.1% in 2005. The Activated
      Carbon and Service segment decline was principally due to higher raw material,
      energy, and freight costs of $11.9 million or 3.8%, partially offset by
      increased volume of $7.6 million or 2.4%. The Equipment and Consumer segments
      reported increases of 29.9% versus 28.7%, and 38.0% versus 34.1%, respectively,
      in 2006 as compared to 2005 primarily due to increased volume. The Company’s
      cost of products sold excludes depreciation; therefore it may not be comparable
      to that of other companies.





Depreciation
      and amortization decreased by $2.1 million or 10.0% in 2006 as compared to
      2005
      primarily due to decreased intangible amortization and decreased depreciation
      due to an increase in fully depreciated fixed assets.





Selling,
      general and administrative expenses increased by $2.5 million or 4.1% in 2006.
      The increase was primarily due to an increase in litigation expenses of $3.5
      million which mainly related to the Company’s UV patent cases and
      anti-dumping  duty
      petitions. Partially offsetting this increase was a decrease due to the change
      in the estimate of the Company’s environmental liabilities assumed in the
      Waterlink acquisition of approximately $1.3 million. On a segment basis,
      selling, general and administrative expenses increased in 2006 by approximately
      $2.5 million in the Activated Carbon and Service segment and decreased in the
      Consumer segment by approximately $1.1 million. The year over year changes
      are
      primarily due to a redistribution of the corporate overhead allocation that
      occurred as a result of the 2006 divestiture of the Charcoal/Liquid business
      combined with increased litigation expense for the Activated Carbon and Service
      segment relating to the anti-dumping  duty
      petitions. Selling, general and administrative expenses for the Equipment
      segment increased by approximately $1.1 million primarily due to the litigation
      expenses relating to the UV patent cases.


40





Research
      and development expenses decreased by $0.3 million or 5.7%. The decrease was
      primarily due to a reduction in operating supplies utilized in research and
      development efforts.





The
      Company recorded a gain of $8.1 million in 2006 versus a loss of $1.0 million
      in
      2005 as a result of costs recovered in its insurance settlement for damages
      sustained by Hurricane Katrina at its Pearl River plant which is more fully
      described in Note 2 to the financial statements.





The
      Company recorded a $6.9 million impairment charge in 2006 related to the
      goodwill associated with the Company’s UV reporting unit of its Equipment
      segment which is more fully described in Note 7 to the financial statements.
      The
      impairment charge for the year 2005 of $2.2 million resulted from the Company’s
      decision to cancel the construction of a reactivation facility on the U.S.
      Gulf
      Coast and to suspend the construction of such a facility for the foreseeable
      future.





The
      Company recorded a $7 thousand restructuring charge in 2006 versus a charge
      of
      $0.4 million in 2005. The 2005 charge was primarily related to $0.2 million
      of
      pension curtailment charges and $0.2 million pertaining to the closure of two
      small manufacturing facilities as a result of the Company’s 2005 re-engineering
      plan.





Interest
      income in 2006 was comparable to 2005.





Interest
      expense increased in 2006 versus 2005 by $1.1 million or 22.2% due to the
      general trend of increasing interest rates in 2006 and the Company paying higher
      interest spreads on its borrowings under its old credit facility during the
      first seven months of 2006 as a result of a lower trailing twelve months EBITDA.





Other
      expense - net in 2006 was comparable to 2005.





The
      effective income tax rate for 2006 was a benefit of 22.4%, or $2.7 million
      on a
      pre-tax loss from continuing operations of $12.0 million. The statutory federal
      income tax rate of 35%, which would have resulted in a tax benefit of $4.2
      million, was reduced by several factors, the most significant of which is the
      goodwill impairment. Of the total goodwill impairment of $6.9 million, 84%
      cannot be deducted for income tax purposes in the foreign jurisdiction to which
      it is attributable, reducing the tax benefit by $2.0 million. Other factors
      reducing the tax benefit and the effective tax rate include the tax rate
      differential on foreign income ($0.7 million or 5.9%) and foreign tax credits
      ($0.1 million or 1.0%). Partially offsetting these reductions were higher tax
      benefits resulting from state income taxes ($0.6 million or 5.2%) and from
      the
      extraterritorial income exclusion ($0.6 million or 4.8%), as well as the
      reversal of tax contingency accruals due to legal statutes expiring during
      the
      year ($0.5 million or 3.8%).




The
      effective tax rate for 2005 was a benefit of 49.8%, or $9.7 million on a pre-tax
      loss from continuing operations of $19.5 million. The tax benefit of $6.8
      million at the 35% statutory rate was increased by $2.2 million, or 11.1% due
      to
      the reversal of tax contingency accruals from the expiration of legal statutes
      during the year. Also contributing to the recognition of higher tax benefits
      were state income taxes ($0.7 million or 3.4%) and foreign tax credits ($0.4
      million or 2.0%).


41





The
      change in the effective tax rate between 2006 and 2005 was driven by two primary
      factors: 2006 goodwill impairment and higher reversals of tax contingency
      accruals in 2005. The 2006 goodwill impairment reduced the 2006 effective tax
      rate by 17.1%. Because the 2005 impairment charge relates to the cancellation
      of
      a construction project, it is deductible for tax purposes and does not impact
      the effective tax rate. In 2005, the $2.2 reversal of tax contingency accruals
      due to legal statutes expiring during the year increased the effective tax
      rate
      by 11.1% compared to a rate increase of 3.8% in 2006 on reversals of $0.5
      million. Also contributing to the change in the effective tax rate were the
      effects of rate differentials on foreign income, extraterritorial income
      exclusion, and foreign tax credits. In 2006, the extraterritorial income
      exclusion increased the tax benefit rate by 4.8%. In 2005, an adjustment of
      the
      benefit previously recognized reduced the 2005 benefit to less than $.1 million.
      Because this benefit was phased out, no further extraterritorial income
      exclusion was recorded in 2007.





Equity
      in
      income (loss) of equity investments increased in 2006 versus 2005 by $1.0
      million. The increase is due to a non-recurring charge of $1.9 million incurred
      in 2005 related to the shutdown of a carbon production facility in Japan owned
      and operated by the joint venture, Calgon Mitsubishi Chemical Corporation,
      partially offset by higher cost of sales for the joint venture in 2006 due
      to an
      unfavorable sales mix.





**Discontinued
      Operations:**


Income
      from discontinued operations was $1.2 million in 2006 compared with $3.1 million
      in 2005. The decrease is primarily due to the Company having only approximately
      two months of Charcoal/Liquid operations and approximately four months of
      Solvent Recovery operations due to the 2006 divestiture of both businesses.
      The
      2006 results include $1.7 million of gain, net of tax, related to the sales
      of
      the two discontinued businesses.




**Working
      Capital and Liquidity**


Cash
      flows provided by operating activities were $29.4 million for the year ended
      December 31, 2007 as compared to cash flows used in operating activities of
      $5.8
      million for the year ended December 31, 2006. The $35.2 million increase was
      primarily due to improved operating results of $23.1 million, decreased pension
      contributions of $3.6 million and a $2.9 million increase in operating working
      capital (exclusive of debt). The 2006 period included non-cash impairment and
      restructuring charges of $7.7 million and gains from the sales of assets of
      $6.7
      million and a gain on insurance settlement of $8.1 million.





Total
      debt, net of currency translation adjustments, increased during the year by
      $2.1
      million at December 31, 2007. The increase was primarily the result of the
      addition of short-term debt of $1.5 million related to the Company’s operations
      in China and is more fully described in Note 9. The additional borrowings were
      used to finance normal working capital and capital expenditure
      activities.





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





*5.00%
      Convertible Senior Notes due 2036*


42





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 prior to the
      maturity date. Upon conversion, the Company will pay cash and shares of its
      common stock, if any, based on a daily conversion value (as described herein)
      calculated on a proportionate basis for each day of the 25 trading-day
      observation period.





For
      the
      period ended December 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      December 31, 2007. As a result, as of December 31, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although the Company does not anticipate that a significant amount of these
      Notes will be converted, if any, as of December 31, 2007, the Company is
      required to reclassify as a current liability, that portion of the Notes that
      can not be refinanced on a long-term basis under the Company’s Credit Facility
      as provided for by SFAS No. 6, “Classification of Short-Term Obligations
      Expected to be Refinanced,” which was $65.0 million at December 31,
      2007.





The
      initial conversion rate is 196.0784 shares of the Company’s common stock per
      $1,000 principal amount of Notes, equivalent to an initial conversion price
      of
      approximately $5.10 per share of common stock. The conversion rate is subject
      to
      adjustment in some events, including the payment of a dividend on the Company’s
      common stock, but will not be adjusted for accrued interest, including any
      additional interest. In addition, following certain fundamental changes
      (principally related to changes in control) 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 issue 7 which indicates that if a reset of the
      conversion rate due to a contingent event occurs the Company would need to
      calculate if there is a beneficial conversion and record if applicable. Through
      December 31, 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.


43





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. 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.





The
      Company sold the Notes to the original purchaser at a discount of $3.3 million
      that is being amortized over a period of five years. During 2007, the Company
      recorded interest expense of $4.5 million, of which $3.9 million related to
      the
      Notes and $0.6 million related to the amortization of the discount. The Company
      incurred issuance costs of $1.5 million which have been deferred and are being
      amortized over a five year period.





*Credit
      Facility*





The
      Credit Facility was initially a $50.0 million facility and included a separate
      U.K. sub-facility and a separate Belgian sub-facility. On February 5, 2007,
      the
      Credit Facility was amended to increase the commitment amount to $55.0 million
      and was syndicated to include one additional lender. The 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 the
      year ended December 31, 2007, the carrying amount of assets pledged as
      collateral was $51.1 million. The carrying amount as of the year ended December
      31, 2007 for domestic, U.K., and Belgian borrowers were $41.2 million, $5.3
      million, and $4.6 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 the year ended December 31, 2007,
      total availability was $34.5 million. Availability as of the year ended December
      31, 2007 for domestic, U.K., and Belgian borrowers was $30.4 million, $4.1
      million, and zero, respectively.


44





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 December
      31, 2007 totaled $16.6 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
      Credit Facility contains a number of affirmative and negative covenants. For
      the
      period ended December 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      December 31, 2007. As a result, as of December 31, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although currently not anticipated by the Company, the ability of holders of
      the
      Notes to convert 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 can
      be
      converted up to that amount and classified as long-term debt as the Company
      has
      the ability and intent to refinance it under the Credit Facility. The Credit
      Facility also includes a provision for up to $3.0 million of letters of credit
      under the Company’s U.S., Belgium, and UK sub-limits that can be issued having
      expiration dates that are more than one year but not more than three years
      after
      the date of issuance.




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





Management
      cannot be assured that, after the December 31, 2007 audited 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 tendering by holders of a substantial
      portion of the Notes as described above would increase the risk of violation
      of
      the financial covenant related to the fixed charge coverage ratio due to the
      increased borrowing under the Credit Facility.





*Contractual
      Obligations*





The
      Company is obligated to make future payments under various contracts such as
      debt agreements, lease agreements, and unconditional purchase obligations.
      The
      Company is contractually obligated to make monthly, quarterly, and semi-annual
      interest payments on its outstanding debt agreements. At December 31, 2007,
      the
      weighted average effective interest rate was 5.93% and long-term borrowings
      totaled $12.9 million. The Company is also required to make minimum funding
      contributions to its pension plans which are estimated at $6.2 million for
      the
      year ended December 31, 2008. The following table represents the significant
      contractual cash obligations and other commercial commitments of the Company
      as
      of December 31, 2007.


45





Due
                in(Thousands)
            
            2008
            
            2009
            
            2010
            
            2011
            
            2012
            
            Thereafter
            
            TotalShort-term
              debt
            
            $
            1,504
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1,504Current
                portion of long-debt*
            
            
            -
            
            
            -
            
            
            -
            
            
            65,000
            
            
            -
            
            
            -
            
            
            65,000Long-term
                debt
            
            
            -
            
            
            2,925
            
            
            -
            
            
            10,000
            
            
            -
            
            
            -
            
            
            12,925Interest
                on Notes
            
            
            3,750
            
            
            3,750
            
            
            3,750
            
            
            2,369
            
            
            -
            
            
            -
            
            
            13,619Operating
                leases
            
            
            3,733
            
            
            3,009
            
            
            2,409
            
            
            1,921
            
            
            1,798
            
            
            4,711
            
            
            17,581Unconditional
                  purchaseobligations**
            
            
            21,925
            
            
            20,725
            
            
            19,202
            
            
            16,659
            
            
            1,575
            
            
            1,838
            
            
            81,924Total
                  contractual cashobligations
            
            $
            30,912
            
            $
            30,409
            
            $
            25,361
            
            $
            95,949
            
            $
            3,373
            
            $
            6,549
            
            $
            192,553


*The
      2011
      maturity excludes debt discount of $2,493. This amount is classified as
      currently payable at December 31, 2007. See Note 9.


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




The
      long-term tax payable of $12.6 million, pertaining to the tax liability related
      to the adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FASB Statement No. 109” (“FIN No. 48”), 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
      Company does not have any significant long-term employment
      agreements.





The
      Company does not have any special-purpose entities or off-balance sheet
      financing arrangements except for the operating leases disclosed above as well
      as indemnities and guarantees disclosed in Note 18.





The
      Company maintains qualified defined benefit pension plans (the “Qualified
      Plans”), which cover substantially all non-union and certain union employees in
      the United States and Europe. The
      Company’s pension expense for all pension plans approximated $2.4 million and
      $6.4 million for the years ended December 31, 2007 and 2006, respectively.





The
      fair
      value of the Company’s Qualified Plan assets has increased from $81.6 million at
      December 31, 2006 to $88.9 million at December 31, 2007. During the year ended
      December 31, 2007, the Company funded its Qualified Plans with $7.8 million
      in
      contributions. The Company expects that it will be required to fund the
      Qualified Plans with approximately $6.2 million in contributions for the year
      ending December 31, 2008.





The
      Company did not declare or pay any dividends in 2007. Dividend declaration
      and
      payout are at the discretion of the Board of Directors. Future dividends will
      depend on the Company’s earnings, cash flow and capital investment plans to
      pursue long-term growth opportunities. The Company’s Credit Facility contains
      covenants which include limitations on its ability to declare or pay cash
      dividends or make other restricted payments, subject to certain exceptions,
      such
      as dividends declared and paid by its subsidiaries and cash dividends paid
      by
      the Company in an amount not to exceed $6.0 million in the aggregate during
      any
      fiscal year if certain conditions are met.





As
      of
      December 31, 2007, the holders of the Company’s 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 December 31, 2007, the Company is required to reclassify as a current
      liability, that portion of the Notes that can not be refinanced on a long-term
      basis under the Company’s Credit Facility as provided by SFAS No. 6,
“Classification of Short-Term Obligations Expected to be Refinanced.” The
      Company expects that cash from operating activities plus cash balances and
      available external financing will be sufficient to meet its cash
      requirements. ****


46





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 cash on hand or 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, cash on hand, and borrowings will adequately support each of the
      segments cash needs.





**Capital
      Expenditures and Investments**


Capital
      expenditures were $11.8 million in 2007, $12.9 million in 2006, and $16.0
      million in 2005. Expenditures for 2007 primarily included $8.4 million for
      improvements to manufacturing facilities and $3.3 million for customer capital.
      Expenditures for 2006 primarily included $9.3 million for improvements to
      manufacturing facilities, $2.2 million related to the repair of the Company’s
      Pearl River plant as a result of Hurricane Katrina, and $1.0 million for
      customer capital. Capital expenditures for 2008 are projected to be
      approximately $52.0 million which includes approximately $20.0 million related
      to the planned re-start of a previously idled production line at the Company’s
      Catlettsburg, Kentucky facility. The aforementioned expenditures are expected
      to
      be funded by operating cash flows, cash on hand, and borrowings.





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 $1.5 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
      re-start the plant, operating results would be adversely affected by impairment
      charges.





The
      2005
      cash outflow for the purchase of a business of $0.9 million, as shown on the
      statement of cash flows, represents the Company’s acquisition of the additional
      20% interest of Datong Carbon Corporation of $0.7 million and $0.2 million
      related to the joint venture that was formed with C. Gigantic Carbon
      Corporation.





Other
      cash flows from investing activities include the receipt of $21.3 million in
      2006 for the sale of the Charcoal/Liquid and Solvent Recovery businesses and
      the
      2006 receipt of $4.6 million in connection with the insurance settlement for
      damage caused to the Company’s Pearlington, Mississippi plant by Hurricane
      Katrina. Proceeds for sales of property, plant and equipment totaled $0.5
      million in 2007 compared to $1.2 million in 2006 and $1.4 million in
      2005.





**Critical
      Accounting Policies**


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


Discussion
      and Analysis (“MD&A”) and the financial statements and related footnotes
      provide a meaningful
      and fair perspective of the Company.


47





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





**Revenue
      Recognition**


The
      Company recognizes revenue and related costs when goods are shipped or services
      are rendered to customers provided that ownership and risk of loss have passed
      to the customer.




Revenue
      for major equipment projects is recognized under the percentage of completion
      method. The Company’s major equipment projects generally have a long project
      life cycle from bid solicitation to project completion. The nature of the
      contracts are generally fixed price with milestone billings. The Company
      recognizes revenue for these projects based on the fixed sales prices multiplied
      by the percentage of completion. In applying the percentage-of-completion
      method, a project’s percent complete as of any balance sheet date is computed as
      the ratio of total costs incurred to date divided by the total estimated costs
      at completion.




As
      changes in the estimates of total costs at completion and/or estimated total
      losses on projects are identified, appropriate earnings adjustments are recorded
      during the period that the change or loss is identified. The Company has a
      history of making reasonably dependable estimates of costs at completion on
      our
      contracts that follow the percentage-of-completion method; however, due to
      uncertainties inherent in the estimation process, it is possible that estimated
      project costs at completion could vary from our estimates. The principal
      components of costs include material, direct labor, subcontracts, and allocated
      indirect costs. Indirect costs primarily consist of administrative labor and
      associated operating expenses, which are allocated to the respective projects
      on
      actual hours charged to the project utilizing a standard hourly
      rate.





**Allowance
      for Doubtful Accounts**


The
      Company maintains allowances for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required payments. The
      amount of allowance recorded is based upon a quarterly review of specific
      customer receivables that remain outstanding at least
      three months beyond their respective due dates. The Company’s provision for
      doubtful accounts and loss experience have not varied materially from period
      to
      period. However, if the financial condition of the Company’s customers were to
      deteriorate resulting in an impairment of their ability to make payments,
      additional allowances may be required.


48


**Inventories**


The
      Company’s inventories are carried at the lower of cost or market. The Company
      provides for inventory obsolescence based upon a review of specific products
      that have remained unsold for a prescribed period of time. If the market demand
      for various products softens, additional allowances may be required.





**Goodwill
      and Other Intangible Assets**


Goodwill
      represents the excess of the cost of an acquired business over the fair value
      of
      the identifiable tangible and intangible assets acquired and liabilities assumed
      in a business combination. Identifiable intangible assets acquired in business
      combinations are recorded based on their fair values at the date of acquisition.
      In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,”
goodwill and identifiable intangible assets with indefinite lives are not
      subject to amortization but must be evaluated for impairment. None of the
      Company’s identifiable intangible assets other than goodwill have indefinite
      lives.





The
      Company tests goodwill for impairment at least annually by initially comparing
      the fair value of each of the Company’s reporting units to their related
      carrying values. If the fair value of the reporting unit is less than its
      carrying value, the Company performs an additional step to determine the implied
      fair value of the goodwill. The implied fair value of goodwill is determined
      by
      first allocating the fair value of the reporting unit to all of the assets
      and
      liabilities of the unit and then computing the excess of the unit’s fair value
      over the amounts assigned to the assets and liabilities. If the carrying value
      of goodwill exceeds the implied fair value of goodwill, such excess represents
      the amount of goodwill impairment, and the Company recognizes such impairment
      accordingly. Fair values are estimated using discounted cash flow and other
      valuation methodologies that are based on projections of the amounts and timing
      of future revenues and cash flows, assumed discount rates and other assumptions
      as deemed appropriate. The Company also considers such factors as historical
      performance, anticipated market conditions, operating expense trends and capital
      expenditure requirements.




On
      November 14, 2006, the Federal Court of Canada found that the Company’s patent
      for the use of UV light to prevent infection from Cryptosporidium in drinking
      water was invalid. As a result, the Company’s estimate of future royalties used
      in determining the fair value of the UV
      reporting unit as of December 31, 2006 declined substantially from the prior
      year resulting in goodwill impairment of $6.9 million. This impairment
      represents the difference between the implied fair value of goodwill for the
      UV
      reporting unit and the carrying value of the goodwill
      before recognition of the impairment.


49





The
      following table summarizes the relevant assumptions used for determining the
      fair value for each of the significant reporting units at December 31, 2007
      and
      2006:





******Discount
                Rate**
            
            **Capitalization**
              **Rate**********
            
            **Compound
                Annual**
              ******Growth
                Rate****Reporting
                Unit**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Activated
                Carbon and Service Segment:Americas/Asia
            
            
            15.0
            %
            
            13.0
            %
            
            12.0
            %
            
            10.0
            %
            
            3.0
            %
            
            3.0
            %Europe
            
            
            15.0
            %
            
            13.0
            %
            
            12.0
            %
            
            10.0
            %
            
            3.0
            %
            
            3.0
            %Equipment
                Segment:ISEP®
            
            
            15.0
            %
            
            14.5
            %
            
            12.0
            %
            
            11.5
            %
            
            3.0
            %
            
            14.0
            %UV
            
            
            17.0
            %
            
            16.5
            %
            
            14.0
            %
            
            13.5
            %
            
            20.2
            %*
            
            19.0
            %*


*Represents
      compound annual growth rate used for the discrete projection period, which
      was 5
      years for all reporting units
      except for the UV reporting unit. Discrete projections for 10 years were used
      for the UV reporting unit to enable growth from recent government regulations
      to
      subside to a normalized long-term rate. The aforementioned government
      regulations, which were published in the Federal Register in January 2006,
      require water municipalities to install an abatement process to remove certain
      harmful bacteria from drinking water.





The
      discount rates used in the 2007 impairment analysis for all reporting units
      increased due to an overall increase in the Company’s stock beta as well as for
      the inherent market risk related to the Equipment segment. The capitalization
      rate represents the difference between the discount rate and the long-term
      growth rate. Management re-evaluated its growth assumption for the ISEP®
reporting unit in 2007 in accordance with the ISEP® strategic plan. As a result
      of this process, the Company concluded that a 3% compound annual growth rate
      was
      appropriate at December 31, 2007.





Additional
      assumptions used in the analysis include the following:





·
            Revenue
                assumptions were based on the Company’s historical performance and
                anticipated market conditions and the Company’s strategy thereto. These
                assumptions varied among reporting
                units.


·
            Gross
                profit generally is expected to increase as revenues improve in most
                reporting units.


·
            Operating
                expenses are expected to increase in absolute dollars but decrease
                as a
                percentage of revenues.


·
            Depreciation
                expense is expected to increase as capital expenditures increase
                over the
                most recent five-year trend.


·
            An
                effective tax rate of 40% was used for all reporting
                units.





Except
      as
      noted above, the assumptions used for the 2007 impairment analysis were
      consistent with those used for the 2006 analysis.





The
      following table shows the impact on the fair value of each significant reporting
      unit of (a) a 1% decrease in revenues and costs and (b) a 1% increase in the
      discount rate:


50





(Dollars
                  in Thousands)
              
              **Fair
                  Value at December 31, 2007****Reporting
                  Unit**
              
              **Impairment**
                **Analysis**
              
              **If 1% Decrease in
                  Revenues/Costs**
              
              **If 1% Increase in
                  Discount Rate**
              
              **Carrying**
                **Value of Unit**Activated
                  Carbon and Service Segment:Americas/Asia
              
              $
              267,832
              
              $
              258,186
              
              $
              248,719
              
              $
              134,361Europe
              
              
              78,188
              
              
              75,115
              
              
              72,276
              
              
              53,761Equipment
                  Segment:ISEP®
              
              
              12,545
              
              
              12,177
              
              
              11,790
              
              
              6,273UV
              
              
              12,030
              
              
              10,781
              
              
              10,233
              
              
              10,053





The
      Company’s identifiable intangible assets other than goodwill have finite lives.
      Certain of these intangible assets, such as customer relationships, are
      amortized using an accelerated methodology while others, such as patents, are
      amortized on a straight-line basis over their estimated useful lives. In
      addition, intangible assets with finite lives are evaluated for impairment
      whenever events or circumstances indicate that their carrying amount may not
      be
      recoverable, as prescribed by Statement of Financial Accounting Standards (SFAS)
      No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
      No. 144").





**Pensions**


The
      Company maintains Qualified Plans which cover substantially all non-union and
      certain union employees in the United States and Europe. Pension expense, which
      totaled $2.4 million in 2007 and $6.4 million in 2006, is calculated based
      upon
      a number of actuarial assumptions, including expected long-term rates of return
      on our Qualified Plans’ assets, which range from 6.45% to 8.00%. In developing
      the expected long-term rate of return assumption, the Company evaluated
      input from its actuaries, including their review of asset class return
      expectations as well as long-term inflation assumptions. The Company also
      considered the historical performance of its benchmark portfolio over the
      trailing ten and fifteen year period of 7.03% and 9.53%, respectively, as the
      best indicator of expected future performance. The Company also considered
      its
      historical 10-year compounded return which ranges from 5.65% to 7.27%. The
      expected long-term return on the U.S. Qualified Plans’ assets is based on an
      asset allocation assumption of 75.0% with equity managers and 25.0% with
      fixed-income managers. The European Qualified Plans’ assets are based on an
      asset allocation assumption of 41.1% with equity managers, 44.4% with
      fixed-income managers, and 14.5% with other investments. Because of market
      fluctuation, the Company’s actual U.S. asset allocation as of December 31, 2007
      was 74.3% with equity managers, 25.1% with fixed-income managers, and 0.6%
      with
      other investments. The Company’s actual European asset allocation as of December
      31, 2007 was 41.7% with equity managers, 42.2% with fixed-income managers,
      and
      16.1% with other investments. The Company regularly reviews its asset allocation
      and periodically rebalances its investments to the targeted allocation when
      considered appropriate. The Company continues to believe that the range of
      6.45%
      to 8.00% is a reasonable long-term rate of return on its Qualified Plans assets.
      The Company will continue to evaluate its actuarial assumptions, including
      its expected
      rate of return, at least annually, and will adjust as necessary.





The
      discount rates that the Company utilizes for its Qualified Plans to determine
      pension obligations is based on a review of long-term bonds that receive one
      of
      the two highest ratings given by a recognized rating agency. The discount rate
      determined on this basis has increased
      from a range of 4.45% to 5.60% at December 31, 2006 to a range of 4.89% to
      5.93%
      at December 31, 2007. The Company estimates that its pension expense for the
      Qualified Plans will approximate $3.3 million in 2008. Future actual pension
      expense will depend on future investment performance, funding levels, changes
      in
      discount rates and various other factors related to the populations
      participating in its Qualified Plans.


51





A
      sensitivity analysis of the projected incremental effect of a hypothetical
      1
      percent change in the significant assumptions used in the pension calculations
      is provided in the following table:


Hypothetical
                RateIncrease
                (Decrease)U.S.
                Plans
            
            European
                Plans(Thousands)
            
            (1%)
            
            1%
            
            (1%)
            
            1%**Discount
                rate**Pension
                liabilities at December 31, 2007
            
            $
            11,624
            
            $
            (10,024
            )
            $
            7,308
            
            $
            (5,429
            )Pension
                Costs for the year ended December 31, 2007
            
            $
            514
            
            $
            (587
            )
            $
            327
            
            $
            (261
            )**Indexation**Pension
                liabilities at December 31, 2007
            
            $
            -
            
            $
            -
            
            $
            (753
            )
            $
            829Pension
                Costs for the year ended December 31, 2007
            
            $
            -
            
            $
            -
            
            $
            (45
            )
            $
            65**Expected
                return on plan assets**Pension
                costs for the year ended December 31, 2007
            
            $
            625
            
            $
            (625
            )
            $
            215
            
            $
            (213
            )**Compensation**Pension
                liabilities at December 31, 2007
            
            $
            (1,098
            )
            $
            1,129
            
            $
            (1,384
            )
            $
            2,115Pension
                costs for the year ended December 31, 2007
            
            $
            (210
            )
            $
            220
            
            $
            (274
            )
            $
            314





**Income
      Taxes**


During
      the ordinary course of business, there are many transactions and calculations
      for which the ultimate tax determination is uncertain. Significant judgment
      is
      required in determining the Company’s annual effective tax rate and in
      evaluating tax positions. As described in Note 14, on January 1, 2007, the
      Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes - an interpretation of FASB Statement No. 109, Accounting for
      Income Taxes” (“FIN 48”). FIN 48 contains a two-step approach to recognizing and
      measuring uncertain tax positions accounted for in accordance with SFAS No.
      109,
“Accounting for Income Taxes.” The first step is to evaluate the tax position
      for recognition by determining if the weight of available evidence indicates
      that it is more likely than not that the position will be sustained on audit,
      including resolution of related appeals or litigation processes, if any. The
      second step is to measure the tax benefit as the largest amount that is more
      than 50% likely of being realized upon settlement.





Although
      we believe we have adequately reserved for our uncertain tax positions, no
      assurance can be given that the final tax outcome of these matters will not
      be
      different. We adjust these reserves in light of changing facts and
      circumstances, such as the closing of a tax audit, the refinement of an
      estimate, or a lapse of a tax statute. To the extent that the final tax outcome
      of these matters is different than the amounts recorded, such differences will
      impact the provision for income taxes in the period in which such determination
      is made. The provision for income taxes includes the impact of reserve
      provisions and changes to reserves that are considered appropriate, as well
      as
      the related net interest.


52





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





The
      Company recognizes benefits associated with foreign and domestic net operating
      loss and credit carryforwards when the Company believes that it is more likely
      than not that its future taxable income in the relevant tax jurisdictions will
      be sufficient to enable the realization of the tax benefits. As of December
      31,
      2007, the Company had recorded a net deferred tax asset of $14.3 million, of
      which $13.1 million (before consideration of a $6.2 million valuation allowance)
      represents tax benefits from foreign and domestic operating loss and credit
      carryforwards. Approximately 80% of the net benefit for the operating loss
      and
      credit carryforwards relates to: (a) federal operating loss carryforwards,
      which
      do not begin to expire until 2025, (b) state operating loss carryforwards,
      of
      which 90% will not expire until 2018 or later; (c) federal alternative minimum
      tax credits which do not expire; and(d) foreign tax credits which can be carried
      forward 10 years and expire from 2009 through 2017. The remaining 20% relates
      to
      foreign operating loss carryforwards, which generally have unlimited
      carryforward periods but may be subject to limitations based on specific types
      of income. Generally, the Company believes that it is more likely than not
      that
      its future taxable income in the relevant tax jurisdictions will be sufficient
      to enable the realization of these tax benefits. However, the Company has
      recorded a valuation allowance of $5.9 million related to foreign tax credits
      of
      $9.1 million to reduce these tax credit carryforwards to an amount more likely
      than not to be realized.





The
      Company based its conclusions on normalized historical performance and on
      projections of future taxable income in the relevant tax jurisdictions.
      Normalized historical performance for purposes of this assessment includes
      adjustments for those income and expense items that are unusual and
      non-recurring in nature and are not expected to affect results in future
      periods. Such unusual and non-recurring items include the effects of
      discontinued operations, legal fees or settlements associated with specific
      litigation matters, pension curtailment costs,
      and restructuring costs. For the three-year period ended December 31, 2007,
      the
      Company’s normalized historical performance on a cumulative basis, indicated a
      profit, which supports the likelihood of future federal taxable income. The
      Company’s projections of future taxable income for state purposes consider known
      events, such as the passage of legislation or expected
      occurrences, and do not reflect a general growth assumption. Certain major
      assumptions affecting the income projections relate to government standards,
      which impact the entire industry. Government regulations passed in 2005 are
      expected to expand market opportunities
      in both the UV market and the mercury removal market. Also, effective in 2007,
      the Department of Commerce notified the Company that tariffs ranging from 62%
      to
      228% were imposed on all steam activated carbon products imported from China.
      The imposition of duties has favorably affected its markets. Incorporation
      of
      these known or pending events into the projections of future taxable income
      results in significant growth in the near term. While management believes the
      risks associated with these events not occurring may be low, the ultimate impact
      of the events on the Company’s taxable income remains uncertain. For example, if
      the Company is unable to achieve its projected share of the expanded markets
      resulting from government regulations or anti-dumping duties, the Company’s
      projected future taxable income may not be realized. For the 15-year period
      beginning in 2012, which generally represents the period after the impact of
      the
      known or pending events has stabilized, the compound annual growth rate of
      projected taxable income is less than 5%. The Company’s projections do not
      include income from the reversal of deferred tax liabilities. The Company
      believes that its assumptions and the resulting projections are reasonable
      and
      fully support the recognized deferred tax assets associated with state net
      operating loss and credit carryforwards.


53





Approximately
      77% of the Company’s deferred tax assets, or $23.1 million, represent temporary
      differences associated with pensions, accruals, goodwill, and other assets.
      Over
      60% of the Company’s deferred tax liabilities of $15.7 million at December 31,
      2007 relate to property, plant and equipment. These temporary differences will
      reverse in the future due to the natural realization of temporary differences
      between annual book and tax reporting. The Company believes that the deferred
      tax liabilities generally will impact taxable income of the same character
      (ordinary income), timing, and jurisdiction as the deferred tax
      assets.




On
      October 22, 2004, the American Jobs Creation Act of 2004 (“AJCA”) was signed
      into law. This law repealed an export tax benefit, provided for a 9% deduction
      on U.S. manufacturing income, and allowed the repatriation of foreign earnings
      at a reduced rate for one year, subject to certain limitations. The Company
      did
      not benefit from the manufacturing deduction in 2007 due to the Company’s net
      operating loss carryforwards.





The
      AJCA
      also reduced the Federal Income tax rate to 5.25 percent on earnings distributed
      from non-U.S. based subsidiaries for a one-year period. In 2005, the Company
      repatriated a total of $4.9 million from two of its wholly owned subsidiaries
      ($1.7 million from Calgon Carbon Canada, Inc. and $3.2 million from Chemviron
      Carbon Ltd.). The current income tax included in the 2005 income tax provision
      for this repatriation is $0.3 million. The Company has not changed its policy
      of
      permanent reinvestment under APB No. 23 due to this one-time repatriation of
      earnings.





**Litigation**


The
      Company is involved in various asserted and unasserted legal claims. An estimate
      is made to accrue for a loss contingency relating to any of these legal claims
      if it is probable that a liability was incurred at the date of the financial
      statements and the amount of loss can be reasonably estimated. Because of the
      subjective nature inherent in assessing the outcome of legal
      claims and because the potential that an adverse outcome in a legal claim could
      have a material
      impact on the Company’s legal position or results of operations, such estimates
      are considered
      to be critical accounting estimates. The Company will continue to evaluate
      all
      legal matters as additional information becomes available. Reference is made
      to
      Note 18 of the financial statements for a discussion of litigation and
      contingencies.





**Long-Lived
      Assets**


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


54





**New
      Accounting Pronouncements**





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an amendment of FASB Statement No. 115” (“SFAS No.
      159”). This Statement permits entities to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses on these instruments in earnings. SFAS No. 159 is effective as of
      January 1, 2008. The Company has chosen not to elect the fair
      value option under SFAS No. 159 for financial assets and liabilities as of
      December 31, 2007.





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, except as it relates to
      nonrecurring fair value measurements of non-financial assets and liabilities
      for
      which SFAS No. 157 is effective for fiscal years beginning after November 15,
      2008. The Company will adopt SFAS No. 157 as required for the fiscal year 2008
      and expects that the adoption will not have a material
      impact on its financial position or results of operations.


In
        December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
        Combinations” (“SFAS No.141(R)”), which replaces SFAS No. 141, “Business
        Combinations.” SFAS No. 141(R) retains the underlying concepts of SFAS
        No. 141 in that all business combinations are still required to be
        accounted for at fair value under the acquisition method of accounting, but
        SFAS
        No. 141(R) changes the method of applying the acquisition method in a
        number of significant aspects. Acquisition costs will generally be expensed
        as
        incurred; noncontrolling interests will be valued at fair value at the
        acquisition date; in-process research and development will be recorded at
        fair
        value as an indefinite-lived intangible asset at the acquisition date;
        restructuring costs associated with a business combination will generally
        be
        expensed subsequent to the acquisition date; and changes in deferred tax
        asset
        valuation allowances and income tax uncertainties after the acquisition date
        generally will affect income tax expense. SFAS No. 141(R) is effective on
        a
        prospective basis for all business combinations for which the acquisition
        date
        is on or after the beginning of the first annual period subsequent to
        December 15, 2008, with an exception related to the accounting for
        valuation allowances on deferred taxes and acquired contingencies related
        to
        acquisitions completed before the effective date. SFAS No. 141(R) amends
        SFAS No. 109 to require adjustments, made after the effective date of this
        statement, to valuation allowances for acquired deferred tax assets and income
        tax positions to be recognized as income tax expense. Beginning January 1,
        2009,
        the Company will apply the provisions of SFAS No. 141(R) to its accounting
        for
        applicable business combinations.


In
      December 2007, the FASB issued SFAS No. 160 (“SFAS No. 160”),
“Noncontrolling Interests in Consolidated Financial Statements.” SFAS No. 160
      changes the classification of noncontrolling (minority) interests on the
      balance sheet and the accounting for and reporting of transactions between
      the
      reporting entity and holders of such noncontrolling interests. Under the new
      standard, noncontrolling interests are considered equity and are to be reported
      as an element of stockholders’ equity rather than outside of equity in the
      balance sheet. In addition, the current practice of reporting minority interest
      expense or benefit also will change. Under the new standard, net income will
      encompass the total income before minority interest expense. The income
      statement will include separate disclosure of the attribution of income between
      the controlling and noncontrolling interests. Increases and decreases in the
      noncontrolling ownership interest amount are accounted for as equity
      transactions. SFAS No. 160 is effective for fiscal years beginning after
      December 15, 2008 and earlier application is prohibited. Upon adoption, the
      balance sheet and the income statement should be recast retrospectively for
      the
      presentation of noncontrolling interests. The other accounting provisions of
      the
      statement are required to be adopted prospectively. The Company will adopt
      SFAS
      No. 160 as required and expects that the adoption will not have a material
      impact on its financial position or results of operations.


55





**Item
      7A.** ***Quantitative
      and Qualitative Disclosures About Market Risk:***





**Commodity
      Price Risk**


In
      the
      normal course of its business, the Company is exposed to market risk or price
      fluctuations related to the production of activated carbon products. Coal and
      natural gas, which are significant to the manufacturing of activated carbon,
      have market prices that fluctuate regularly. Based on the estimated 2008 usage
      of coal and natural gas, a hypothetical 10% increase (or decrease) in the price
      of coal and natural gas, would result in a pre-tax loss (or gain) of $1.2
      million and $0.2 million, respectively.





To
      mitigate the risk of fluctuating prices, the Company has entered into long-term
      contracts to hedge the purchase of a percentage of the estimated need of coal
      and natural gas at fixed prices. The future commitments under these long-term
      contracts, which provide economic hedges, are disclosed within Note 10 to the
      Financial Statements. The value of the cash-flow hedges for natural gas is
      disclosed in Note 17 to the Financial Statements.





**Interest
      Rate Risk**


The
      Company’s current and long-term debt is based on fixed rates, rates that float
      with the Euro Dollar, or prime, and the carrying value approximates fair value.
      The Company’s senior convertible notes, which represent the majority of the
      Company’s outstanding debt balance at December 31, 2007, are based on a fixed
      rate and therefore would not be subject to interest rate risk. A hypothetical
      change of 10% in the Company’s effective interest rate from year-end 2007 would
      not result in a material change to interest expense.





**Foreign
      Currency Exchange Risk**


The
      Company is subject to risk of price fluctuations related to anticipated revenues
      and operating costs, firm commitments for capital expenditures, and existing
      assets and liabilities
      denominated in currencies other than U.S. dollars. The Company enters into
      foreign currency forward exchange contracts and purchases options to manage
      these exposures. At December 31, 2007, nine foreign currency forward exchange
      contracts were outstanding. A hypothetical 10% strengthening (or weakening)
      of
      the U.S. dollar, British Pound Sterling, Canadian Dollar, and Euro at December
      31, 2007 would result in a pre-tax loss (or gain) of approximately $0.3 million.
      The foreign currency forward exchange contracts purchased during 2007 have
      been
      accounted for according to SFAS No. 133, "Accounting for Derivative Instruments
      and Hedging Activities" ("SFAS No. 133").





The
      Company had also 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 subsidiary, Chemviron Carbon Ltd. The swap agreement provides
      the offset for the foreign currency fluctuation and neutralizes its effect
      on
      loan payments and valuation. This swap transaction has been accounted for in
      accordance with SFAS No. 133.




56


**Item
        8.** ***Financial
        Statements and Supplementary Data:***
 
 **REPORT
        OF MANAGEMENT**
 Responsibility
        for Preparation of the Financial Statements and Establishing and Maintaining
        Adequate Internal Control Over Financial Reporting.


**Responsibility
      for Financial Statements**


Management
      is responsible for the preparation of the financial statements included in
      this
      Annual Report. The Consolidated Financial Statements were prepared in accordance
      with accounting principles generally accepted in the United States of America
      and include amounts that are based on the best estimates and judgments of
      management. The Notes to the Consolidated Financial Statements contained within
      this Annual Report are consistent with the Consolidated Financial
      Statements.





**Management’s
      Annual Report on Internal Control over Financial Reporting**


Management
      is responsible for establishing and maintaining adequate internal controls
      over
      financial reporting. The Company’s internal control system is designed to
      provide reasonable assurance concerning the reliability of the financial data
      used in the preparation of the Company’s financial statements, as well as
      reasonable assurance with respect to safeguarding the Company’s assets from
      unauthorized use or disposition. However, no matter how well designed and
      operated, an internal control system can provide only reasonable, not absolute,
      assurance that the objectives of the control system are met.





Management
      conducted an evaluation of the effectiveness of the Company’s internal control
      over financial reporting as of December 31, 2007. In making this evaluation,
      management used the criteria set forth by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO) in *Internal Control -
      Integrated Framework*. Management’s evaluation included reviewing the
      documentation of our controls, evaluating the design effectiveness of controls,
      and testing their operating effectiveness. Based on this evaluation, management
      believes that, as of December 31, 2007, the Company’s internal controls over
      financial reporting were effective and provide reasonable assurance that the
      accompanying financial statements do not contain any material
      misstatement.





The
      effectiveness of internal control over financial reporting as of
      December 31, 2007, has been audited by Deloitte & Touche LLP, an
      independent registered public accounting firm, who also audited our consolidated
      financial statements. Deloitte & Touche LLP’s attestation report on the
      effectiveness of our internal control over financial reporting appears below.





**Changes
      in Internal Control**


There
      have been no changes to our internal control over financial reporting that
      occurred that have materially affected, or are reasonably likely to materially
      affect, our internal control over financial reporting.


57


INTERNAL
        CONTROLS - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Board of Directors and Shareholders of
 Calgon
        Carbon Corporation
 Pittsburgh,
        Pennsylvania
 
 We
        have
        audited the internal control over financial reporting of Calgon Carbon
        Corporation and subsidiaries (the “Company”) as of December 31, 2007, based on
        the criteria established in *Internal
        Control–Integrated
        Framework* issued
        by the Committee of Sponsoring Organizations of the Treadway Commission. 
The Company's management is responsible for maintaining effective internal
        control over financial reporting and for its assessment of the effectiveness
        of
        internal control over financial reporting, included in the accompanying *Management’s
        Annual Report on Internal Control over Financial Reporting* ,
        included in the *Report
        of Management* . 
        Our responsibility is to express an opinion on the Company's internal control
        over financial reporting based on our audit.


We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require that
      we plan and perform the audit to obtain reasonable assurance about whether
      effective internal control over financial reporting was maintained in all
      material respects.  Our audit included obtaining an understanding of
      internal control over financial reporting, assessing the risk that a material
      weakness exists, testing and evaluating the design and operating effectiveness
      of internal control based on the assessed risk, and performing such other
      procedures as we considered necessary in the circumstances.  We believe
      that our audit provides a reasonable basis for our opinion.





A
      company's internal control over financial reporting is a process designed by,
      or
      under the supervision of, the company's principal executive and principal
      financial officers, or persons performing similar functions, and effected by
      the
      company's board of directors, management, and other personnel to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles.  A company's internal control
      over financial reporting includes those policies and procedures that (1) pertain
      to the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company's
      assets that could have a material effect on the financial
      statements.





Because
      of the inherent limitations of internal control over financial reporting,
      including the possibility of collusion or improper management override of
      controls, material misstatements due to error or fraud may not be prevented
      or
      detected on a timely basis.  Also, projections
      of any evaluation of the effectiveness of the internal control over financial
      reporting to future periods are subject to the risk that the controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, the Company maintained, in all material respects, effective internal
      control over financial reporting as of December 31, 2007, based on the criteria
      established in *Internal
      Control–Integrated
      Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission.





We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States) the consolidated financial statements as of
      and
      for the year ended December 31, 2007 of the Company and our report dated March
      14, 2008 expressed an unqualified opinion on those financial statements and
      included an explanatory paragraph regarding the adoption of Financial Accounting
      Standards Board Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* .





DELOITTE
      & TOUCHE LLP





Pittsburgh,
      Pennsylvania


March
      14,
      2008


58




FINANCIAL
      STATEMENTS - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM




To
      the
      Board of Directors and Shareholders of


Calgon
      Carbon Corporation


Pittsburgh,
      Pennsylvania





We
      have
      audited the accompanying consolidated balance sheets of Calgon Carbon
      Corporation and subsidiaries (the "Company") as of December 31, 2007 and 2006,
      and the related consolidated statements of income (loss) and comprehensive
      income (loss), shareholders' equity, and cash flows for each of the three years
      in the period ended December 31, 2007.  These financial statements are the
      responsibility of the Company's management.  Our responsibility is to
      express an opinion on the financial statements based on our audits. We did
      not
      audit the financial statements of Chemviron Carbon Ltd. and subsidiaries
      (“Chemviron UK”) (a subsidiary) for the year ended December 31, 2005, which
      statements reflect total revenues constituting 12 percent of consolidated total
      revenues for the year ended December 31, 2005. Those financial statements were
      audited by other auditors whose report has been furnished to us, and our
      opinion, insofar as it relates to the amounts included for Chemviron UK, is
      based solely on the report of such other auditors.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require that
      we plan and perform the audit to obtain reasonable assurance about whether
      the
      financial statements are free of material misstatement.  An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements.  An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation.  We believe that
      our audits and the report of the other auditors provide a reasonable basis
      for our opinion.





In
      our
      opinion, based on our audits and the report of the other auditors, such
      consolidated financial statements present fairly, in all material respects,
      the
      financial position of Calgon Carbon Corporation and subsidiaries as of December
      31, 2007 and 2006, and the results of their operations and their cash flows
      for
      each of the three years in the period ended December 31, 2007, in conformity
      with accounting principles generally accepted in the United States of
      America.




As
      discussed in Note 1 to the consolidated financial statements, the Company
      adopted the provisions of Financial Accounting Standards Board Interpretation
      No. 48,*Accounting
      for Uncertainty in Income Taxes*on
      January 1, 2007, the provisions of Statement of Financial Accounting Standards
      No. 158,*Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans*on
      December 31, 2006 and the provisions of Statement of Financial Accounting
      Standards No. 123(R),*Share
      Based Payment*on
      January 1, 2006.


We
          have
          also audited, in accordance with the standards of the Public Company Accounting
          Oversight Board (United States), the Company's internal control over financial
          reporting as of December 31, 2007, based on the criteria established in *Internal*  *Control–Integrated
          Framework* issued
          by the Committee of Sponsoring Organizations of the Treadway Commission
          and our
          report dated March 14, 2008 expressed an unqualified opinion on the Company's
          internal control over financial reporting.




DELOITTE
      & TOUCHE LLP


Pittsburgh,
      Pennsylvania


March
      14,
      2008


59





FINANCIAL
      STATEMENTS - REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM




To
      the
      Board of Directors and Shareholders of


Chemviron
      Carbon Limited





We
      have
      audited the accompanying consolidated statements of income, shareholders'
      equity, and cash flows of Chemviron Carbon Limited and subsidiaries for the
      year ended December 31, 2005. These consolidated financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the results of the operations and cash
      flows of Chemviron Carbon Limited and subsidiaries for the year
      ended December 31, 2005, in conformity with U.S. generally accepted
      accounting principles.





KPMG
      LLP


Manchester,
      United Kingdom


April
      24,
      2007


60


**CONSOLIDATED
      STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
      (LOSS)**


**Calgon
      Carbon Corporation**




Year
                Ended December 31(Dollars
                in thousands except per share data)
            
            
            **2007**
            
            
            2006
            
            
            2005Net
                sales
            
            **$**
            **341,508**
            
            $
            306,770
            
            $
            286,421Net
                sales to related parties
            
            
            **9,616**
            
            
            9,352
            
            
            4,414**Total**
            
            
            **351,124**
            
            
            316,122
            
            
            290,835Cost
                of products sold (excluding depreciation)
            
            
            **242,273**
            
            
            236,673
            
            
            215,330Depreciation
                and amortization
            
            
            **17,248**
            
            
            18,933
            
            
            21,042Selling,
                general and administrative expenses
            
            
            **61,348**
            
            
            62,003
            
            
            59,547Research
                and development expenses
            
            
            **3,699**
            
            
            4,248
            
            
            4,506(Gain)
                loss from insurance settlement (Note 2)
            
            
            **-**
            
            
            (8,072
            )
            
            1,000Goodwill
                impairment charge (Note 7)
            
            
            **-**
            
            
            6,940
            
            
            -Gulf
                Coast impairment charge
            
            
            **-**
            
            
            -
            
            
            2,158Restructuring
                charges
            
            
            **-**
            
            
            7
            
            
            412**324,568**
            
            
            320,732
            
            
            303,995**Income
                (loss) from operations**
            
            
            **26,556**
            
            
            (4,610
            )
            
            (13,160
            )Interest
                income
            
            
            **1,695**
            
            
            822
            
            
            719Interest
                expense
            
            
            **(5,508**
            **)**
            
            (5,977
            )
            
            (4,891
            )Other
                expense - net
            
            
            **(1,441**
            **)**
            
            (2,209
            )
            
            (2,138
            )Income
                (loss) from continuing operations before income taxes and equity
                in income
                (loss) of equity investments
            
            
            **21,302**
            
            
            (11,974
            )
            
            (19,470
            )Income
                tax provision (benefit) (Note 14)
            
            
            **7,826**
            
            
            (2,676
            )
            
            (9,688
            )Income
                (loss) from continuing operations before equity in income (loss)
                of equity
                investments
            
            
            **13,476**
            
            
            (9,298
            )
            
            (9,782
            )Equity
                in income (loss) of equity investments, net
            
            
            **1,977**
            
            
            286
            
            
            (725
            )**Income
                (loss) from continuing operations**
            
            
            **15,453**
            
            
            (9,012
            )
            
            (10,507
            )Income
                (loss) from discontinued operations, net (Note 4)
            
            
            **(166**
            **)**
            
            1,214
            
            
            3,091Net
                income (loss)
            
            
            **15,287**
            
            
            (7,798
            )
            
            (7,416
            )Other
                comprehensive income (loss), net of tax provision (benefit) of $3,449,
                $2,752, and ($3,019), respectively
            
            
            **6,703**
            
            
            9,238
            
            
            (9,811
            )**Comprehensive
                income (loss) (2006 restated)**
            
            **$**
            **21,990**
            
            $
            1,440
            
            $
            (17,227
            )Basic
                income (loss) from continuing operations per common share
            
            **$**
            **.39**
            
            $
            (.23
            )
            $
            (.27
            )Income
                from discontinued operations per common share
            
            **$**
            **-**
            
            $
            .03
            
            $
            .08Basic
                net income (loss) per common share
            
            **$**
            **.39**
            
            $
            (.20
            )
            $
            (.19
            )Diluted
                income (loss) from continuing operations per common share
            
            **$**
            **.31**
            
            $
            (.23
            )
            $
            (.27
            )Income
                from discontinued operations per common share
            
            **$**
            **-**
            
            $
            .03
            
            $
            .08Diluted
                net income (loss) per common share
            
            **$**
            **.31**
            
            $
            (.20
            )
            $
            (.19
            )Weighted
                average shares outstanding, in thousandsBasic
            
            
            **39,788**
            
            
            39,927
            
            
            39,615Diluted
            
            
            **50,557**
            
            
            39,927
            
            
            39,615




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


61


**CONSOLIDATED
      BALANCE SHEETS**


**Calgon
      Carbon Corporation**




December
                31(Dollars
                in thousands)
            
            
            **2007**
            
            
            2006**Assets**Current
                assets:Cash
                and cash equivalents
            
            **$**
            **30,304**
            
            $
            5,631Receivables,
                net of allowance for losses of $2,834 and $1,981
            
            
            **55,195**
            
            
            53,239Receivables
                from related parties
            
            
            **2,353**
            
            
            1,797Revenue
                recognized in excess of billings on uncompleted contracts
            
            
            **7,698**
            
            
            7,576Inventories
            
            
            **81,280**
            
            
            70,339Deferred
                income taxes – current
            
            
            **9,246**
            
            
            5,761Other
                current assets
            
            
            **3,602**
            
            
            4,369Total
                current assets
            
            
            **189,678**
            
            
            148,712Property,
                plant and equipment, net
            
            
            **105,512**
            
            
            106,101Equity
                investments
            
            
            **8,593**
            
            
            6,971Intangibles,
                net
            
            
            **7,760**
            
            
            8,521Goodwill
            
            
            **27,845**
            
            
            27,497Deferred
                income taxes – long-term
            
            
            **6,419**
            
            
            20,225Other
                assets
            
            
            **2,333**
            
            
            4,337Total
                assets
            
            **$**
            **348,140**
            
            $
            322,364**Liabilities
                and Shareholders’ Equity**Current
                liabilities:Accounts
                payable and accrued liabilities
            
            **$**
            **39,436**
            
            $
            36,614Billings
                in excess of revenue recognized on uncompleted contracts
            
            
            **3,727**
            
            
            2,516Accrued
                interest
            
            
            **1,461**
            
            
            1,440Payroll
                and benefits payable
            
            
            **9,182**
            
            
            6,533Accrued
                income taxes
            
            
            **1,944**
            
            
            8,423Short-term
                debt
            
            
            **1,504**
            
            
            -Current
                portion of long-term debt
            
            
            **62,507**
            
            
            -Total
                current liabilities
            
            
            **119,761**
            
            
            55,526Long-term
                debt
            
            
            **12,925**
            
            
            74,836Deferred
                income taxes – long-term
            
            
            **1,361**
            
            
            1,679Accrued
                pension and other liabilities
            
            
            **41,844**
            
            
            42,450Total
                liabilities
            
            
            **175,891**
            
            
            174,491Commitments
                and contingencies (Notes 10 and 18)Shareholders’
                equity:Common
                shares, $.01 par value, 100,000,000 shares authorized, 43,044,318
                and
                42,550,290 shares issued
            
            
            **430**
            
            
            425Additional
                paid-in capital
            
            
            **77,299**
            
            
            70,345Retained
                earnings
            
            
            **104,936**
            
            
            94,035Accumulated
                other comprehensive income
            
            
            **17,008**
            
            
            10,305**199,673**
            
            
            175,110Treasury
                stock, at cost, 2,827,301 and 2,802,448 shares
            
            
            **(27,424**
            **)**
            
            (27,237
            )Total
                shareholders’ equity
            
            
            **172,249**
            
            
            147,873Total
                liabilities and shareholders’ equity
            
            **$**
            **348,140**
            
            $
            322,364




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


62


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Calgon
      Carbon Corporation**


Year
                      Ended December 31(Dollars
                      in thousands)
                  
                  
                  **2007**
                  
                  
                  2006
                  
                  
                  2005**Cash
                      flows from operating activities**Net
                      income (loss)
                  
                  **$**
                  **15,287**
                  
                  $
                  (7,798
                  )
                  $
                  (7,416
                  )Adjustments
                      to reconcile net income (loss) tonet
                      cash provided by (used in) operating activities:Gain
                      on insurance settlement
                  
                  
                  **-**
                  
                  
                  (8,072
                  )
                  
                  -Gain
                      from divestitures
                  
                  
                  **-**
                  
                  
                  (6,719
                  )
                  
                  -Depreciation
                      and amortization
                  
                  
                  **17,248**
                  
                  
                  18,935
                  
                  
                  22,062Non-cash
                      impairment and restructuring charges
                  
                  
                  **-**
                  
                  
                  7,728
                  
                  
                  2,976Equity
                      in (income) loss from equity investments
                  
                  
                  **(1,977**
                  **)**
                  
                  (286
                  )
                  
                  725Distributions
                      received from equity investments
                  
                  
                  **739**
                  
                  
                  -
                  
                  
                  254Employee
                      benefit plan provisions
                  
                  
                  **3,076**
                  
                  
                  3,285
                  
                  
                  4,046Stock-based
                      Compensation
                  
                  
                  **2,887**
                  
                  
                  1,309
                  
                  
                  -Deferred
                      income tax expense (benefit)
                  
                  
                  **3,196**
                  
                  
                  (973
                  )
                  
                  (6,284
                  )Changes
                      in assets and liabilities–net of effects from purchase of businesses and
                      foreign exchange:(Increase)
                      decrease in receivables
                  
                  
                  **(1,098**
                  )
                  
                  3,232
                  
                  
                  4,273Increase
                      in inventories
                  
                  
                  **(9,559**
                  **)**
                  
                  (1,508
                  )
                  
                  (13,009
                  )Decrease
                      in revenue in excess of billings on uncompleted contracts and
                      other
                      current assets
                  
                  
                  **287**
                  
                  
                  2,800
                  
                  
                  2,787Decrease
                      in restructuring reserve
                  
                  
                  **-**
                  
                  
                  (293
                  )
                  
                  (498
                  )Increase
                      (decrease) in accounts payable and accrued liabilities
                  
                  
                  **5,390**
                  
                  
                  (
                      6,631
                  )
                  
                  5,346Pension
                      contributions
                  
                  
                  **(7,787**
                  **)**
                  
                  (11,395
                  )
                  
                  (4,532
                  )Other
                      items–net
                  
                  
                  **1,724**
                  
                  
                  601
                  
                  
                  2,110Net
                      cash provided by (used in) operating activities
                  
                  
                  **29,413**
                  
                  
                  (5,785
                  )
                  
                  12,840**Cash
                      flows from investing activities**Purchase
                      of businesses (net of cash)
                  
                  
                  **-**
                  
                  
                  -
                  
                  
                  (856
                  )Proceeds
                      from divestitures
                  
                  
                  **-**
                  
                  
                  21,265
                  
                  
                  -Property,
                      plant and equipment expenditures
                  
                  
                  **(11,789**
                  **)**
                  
                  (12,855
                  )
                  
                  (15,996
                  )Proceeds
                      from insurance settlement for property and equipment
                  
                  
                  **-**
                  
                  
                  4,595
                  
                  
                  -Proceeds
                      from disposals of property, plant and equipment
                  
                  
                  **513**
                  
                  
                  1,205
                  
                  
                  1,356Net
                      cash (used in) provided by investing activities
                  
                  
                  **(11,276**
                  **)**
                  
                  14,210
                  
                  
                  (15,496
                  )**Cash
                      flows from financing activities**Issuance
                      of debt obligations
                  
                  
                  **1,504**
                  
                  
                  71,911
                  
                  
                  -Reductions
                      of debt obligations
                  
                  
                  **-**
                  
                  
                  -
                  
                  
                  (75
                  )Revolving
                      credit facility borrowings (repayments), net
                  
                  
                  **-**
                  
                  
                  (81,000
                  )
                  
                  (600
                  )Treasury
                      stock purchased
                  
                  
                  **(187**
                  **)**
                  
                  (108
                  )
                  
                  -Common
                      stock dividends
                  
                  
                  **-**
                  
                  
                  -
                  
                  
                  (3,555
                  )Common
                      stock issued
                  
                  
                  **3,090**
                  
                  
                  464
                  
                  
                  3,050Excess
                      tax benefit from stock-based compensation
                  
                  
                  **942**
                  
                  
                  -
                  
                  
                  -Net
                      cash provided by (used in) financing activities
                  
                  
                  **5,349**
                  
                  
                  (8,733
                  )
                  
                  (1,180
                  )Effect
                      of exchange rate changes on cash
                  
                  
                  **1,187**
                  
                  
                  493
                  
                  
                  502Increase
                      (decrease) in cash and cash equivalents
                  
                  
                  **24,673**
                  
                  
                  185
                  
                  
                  (3,334
                  )Cash
                      and cash equivalents, beginning of year
                  
                  
                  **5,631**
                  
                  
                  5,446
                  
                  
                  8,780Cash
                      and cash equivalents, end of year
                  
                  **$**
                  **30,304**
                  
                  $
                  5,631
                  
                  $
                  5,446




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


63


CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY


Calgon
      Carbon Corporation


Treasury
                  Stock(Dollars
                  in thousands)
              
              
              Common
                Shares
                Issued
              
              
              Common
                Shares
              
              
              Additional
                Paid-In
                Capital
              
              
              Retained
                Earnings
              
              
              Accumlated
                Other
                Comprehensive
                Income
                  (Loss)
              
              
              Sub-Total
              
              
              Shares
              
              
              Amount
              
              
              TotalBalance,
                  December 31, 2004
              
              
              41,958,933
              
              $
              420
              
              $
              65,523
              
              $
              112,804
              
              $
              16,253
              
              $
              195,000
              
              
              2,787,258
              
              $
              (27,129
              )
              $
              167,8712005Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,416
              )
              
              -
              
              
              (7,416
              )
              
              -
              
              
              -
              
              
              (7,416
              )Employee
                  and director stock plans
              
              
              500,800
              
              
              5
              
              
              3,466
              
              
              -
              
              
              -
              
              
              3,471
              
              
              -
              
              
              -
              
              
              3,471Common
                  stock dividends Cash ($0.06 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,555
              )
              
              -
              
              
              (3,555
              )
              
              -
              
              
              -
              
              
              (3,555
              )Translation
                  adjustments, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,799
              )
              
              (4,799
              )
              
              -
              
              
              -
              
              
              (4,799
              )Additional
                  minimum pension liability, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,856
              )
              
              (4,856
              )
              
              -
              
              
              -
              
              
              (4,856
              )Unrecognized
                  loss on derivatives, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (156
              )
              
              (156
              )
              
              -
              
              
              -
              
              
              (156
              )Balance,
                  December 31, 2005
              
              
              42,459,733
              
              $
              425
              
              $
              68,989
              
              $
              101,833
              
              $
              6,442
              
              $
              177,689
              
              
              2,787,258
              
              $
              (27,129
              )
              $
              150,5602006Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,798
              )
              
              -
              
              
              (7,798
              )
              
              -
              
              
              -
              
              
              (7,798
              )Translation
                  adjustments, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,644
              
              
              4,644
              
              
              -
              
              
              -
              
              
              4,644Additional
                  minimum pension Liability, net of tax (See Note 13)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,790
              
              
              4,790
              
              
              -
              
              
              -
              
              
              4,790Unrecognized
                  loss on derivatives, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (196
              )
              
              (196
              )
              
              -
              
              
              -
              
              
              (196
              )Cumulative
                  effect adjustment due to the adoption of SFAS No. 158, net of tax
                  (See
                  Note 14)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,375
              )
              
              (5,375
              )
              
              -
              
              
              -
              
              
              (5,375
              )Employee
                  and director stock plans
              
              
              90,557
              
              
              -
              
              
              1,356
              
              
              -
              
              
              -
              
              
              1,356
              
              
              -
              
              
              -
              
              
              1,356Treasury
                  stock purchased
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              15,190
              
              
              (108
              )
              
              (108
              )Balance,
                  December 31, 2006
              
              
              42,550,290
              
              $
              425
              
              $
              70,345
              
              $
              94,035
              
              $
              10,305
              
              $
              175,110
              
              
              2,802,448
              
              $
              (27,237
              )
              $
              147,8732007Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              15,287
              
              
              -
              
              
              15,287
              
              
              -
              
              
              -
              
              
              15,287Translation
                  adjustments, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,557
              
              
              2,557
              
              
              -
              
              
              -
              
              
              2,557Unrecognized
                  gain on derivatives, net of tax
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              498
              
              
              498
              
              
              -
              
              
              -
              
              
              498Employee
                  Benefit plans, net of tax (See Note 13)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,648
              
              
              3,648
              
              
              -
              
              
              -
              
              
              3,648Cumulative
                  effect adjustment due to the adoption of FIN 48, (See Note
                  14)
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,386
              )
              
              -
              
              
              (4,386
              )
              
              -
              
              
              -
              
              
              (4,386
              )Employee
                  and director stock plans
              
              
              494,028
              
              
              5
              
              
              6,954
              
              
              -
              
              
              -
              
              
              6,959
              
              
              -
              
              
              -
              
              
              6,959Treasury
                  stock purchased
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              24,853
              
              
              (187
              )
              
              (187
              )Balance,
                  December 31, 2007
              
              
              43,044,318
              
              $
              430
              
              $
              77,299
              
              $
              104,936
              
              $
              17,008
              
              $
              199,673
              
              
              2,827,301
              
              $
              (27,424
              )
              $
              172,249





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




64


**1.
      Summary of Accounting Policies**





**Operations**


Calgon
      Carbon Corporation (the “Company”) is a global leader in services and solutions
      for purifying water and air, food, beverage, and industrial process streams.
      The
      Company’s operations are principally conducted in three business segments:
      Activated Carbon and Service, Equipment, and Consumer. Each of these segments
      includes the production, design and marketing of products and services
      specifically developed for the purification, separation and concentration of
      liquids and gases. The Activated Carbon and Service segment relies on activated
      carbon as a base material, while the Equipment segment relies on a variety
      of
      other methods and materials which involve other products in addition to
      activated carbon. The Consumer segment brings the Company’s purification
      technologies directly to the consumer in the form of products and services.
      The
      Company’s largest markets are in the United States, Europe, and Japan. The
      Company also markets in Africa, Canada, India, Latin America, and Asia.





**Principles
      of Consolidation**


The
      consolidated financial statements include the accounts of Calgon Carbon
      Corporation and its wholly owned subsidiaries, Chemviron Carbon GmbH, Calgon
      Carbon Canada, Inc., Chemviron Carbon Ltd., Calgon Carbon Investments Inc.,
      Solarchem Environmental Systems Inc., Charcoal Cloth (International) Ltd.,
      Charcoal Cloth Ltd., Advanced Separation Technologies Inc., Calgon Carbon
      (Tianjin) Co. Ltd., Datong Carbon Corp., Calgon Carbon Asia Ltd., Waterlink
      UK
      Holdings Ltd., Sutcliffe Croftshaw Ltd., Sutcliffe Speakman Ltd., Sutcliffe
      Speakman Carbons Ltd., Lakeland Processing Ltd., and Sutcliffe Speakmanco 5
      Ltd.
      The Company has a 49% ownership stake in a joint venture with Mitsubishi
      Chemical Corporation named Calgon Mitsubishi Chemical Corporation (CMCC). CMCC
      is accounted for in the Company’s financial statements under the equity method.
      In May 2005, the Company formed a joint venture company with C. Gigantic Carbon.
      The joint venture company was named Calgon Carbon (Thailand) Ltd. and is 20%
      owned by the Company which is accounted for in the Company’s financial
      statements under the equity method. Intercompany accounts and transactions
      have
      been eliminated. Certain of the Company’s international operations in Europe are
      owned directly by the Company and are operated as branches.




**Foreign
      Currency**


Substantially
      all assets and liabilities of the Company’s international operations are translated
      at year-end exchange rates; income and expenses are translated at average
      exchange rates prevailing during the year. Translation adjustments represent
      other comprehensive income or loss and are accumulated in a separate component
      of shareholders’ equity, net of tax effects. Transaction gains and losses are
      included in other expense-net.





65




**Revenue
      Recognition**


Revenue
      and related costs are recognized when goods are shipped or services are rendered
      to customers provided that ownership and risk of loss have passed to the
      customer, the price to the customer is fixed or determinable and collection
      is
      reasonably assured. Revenue for major equipment projects is recognized under
      the
      percentage of completion method. The
      Company’s major equipment projects generally have a long project life cycle from
      bid solicitation to project completion. The nature of the contracts are
      generally fixed price with milestone billings. The Company recognizes revenue
      for these projects based on the fixed sales prices multiplied by the percentage
      of completion. In applying the percentage-of-completion method, a project’s
      percent complete as of any balance sheet date is computed as the ratio of total
      costs incurred to date divided by the total estimated costs at completion.
      As
      changes in the estimates of total costs at completion and/or estimated total
      losses on projects are identified, appropriate earnings adjustments are recorded
      during the period that the change or loss is identified. The Company has a
      history of making reasonably dependable estimates of costs at completion on
      contracts that follow the percentage-of-completion method; however, due to
      uncertainties inherent in the estimation process, it is possible that estimated
      project costs at completion could vary from estimates. The principal components
      of costs include material, direct labor, subcontracts, and allocated indirect
      costs. Indirect costs primarily consist of administrative labor and associated
      operating expenses, which are allocated to the respective projects on actual
      hours charged to the project utilizing a standard hourly rate.





**Allowance
      for Doubtful Accounts**


The
      Company maintains allowances for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required payments. The
      amount of allowance recorded is based upon a quarterly review of specific
      customer transactions that remain outstanding at least three months beyond
      their
      respective due dates.




**Inventories**


Inventories
      are carried at the lower of cost or market. Inventory costs are primarily
      determined using the first-in, first-out (FIFO) method.





**Property,
      Plant and Equipment**


Property,
      plant and equipment are recorded at cost. Repair and maintenance costs are
      expensed as incurred. Depreciation for financial reporting purposes is computed
      on the straight-line method over the estimated service lives of the assets,
      which are from 10 to 30 years for land improvements and buildings, 5 to 30
      years
      for furniture, and machinery and equipment, 10 to 15 years for customer capital,
      5 to 15 years for transportation equipment, and 5 to 10 years for computer
      hardware and software.





66




**Goodwill
      and Other Intangible Assets**


Goodwill
      represents the excess of the cost of an acquired business over the fair value
      of
      the identifiable tangible and intangible assets acquired and liabilities assumed
      in a business combination. Identifiable intangible assets acquired in business
      combinations are recorded based on their fair values at the date of acquisition.
      In accordance with Statement of Financial Accounting Standard (SFAS) No. 142,
      “Goodwill and Other Intangible Assets,” goodwill and identifiable intangible
      assets with indefinite lives are not subject to amortization but must be
      evaluated for impairment. None of the Company’s identifiable intangible assets
      other than goodwill have indefinite lives.





The
      Company tests goodwill for impairment at least annually by initially comparing
      the fair value of each of the Company’s reporting units to their related
      carrying values. If the fair value of the reporting unit is less than its
      carrying value, the Company performs an additional step to determine the implied
      fair value of the goodwill. The implied fair value of goodwill is determined
      by
      first allocating the fair value of the reporting unit to all of the assets
      and
      liabilities of the unit and then computing the excess of the unit’s fair value
      over the amounts assigned to the assets and liabilities. If the carrying value
      of goodwill exceeds the implied fair value of goodwill, such excess represents
      the amount of goodwill impairment, and the Company recognizes such impairment
      accordingly. Fair values are estimated using discounted cash flow and other
      valuation methodologies that are based on projections of the amounts and timing
      of future revenues and cash flows, assumed discount rates and other assumptions
      as deemed appropriate. The Company considers such factors as historical
      performance, anticipated market conditions, operating expense trends and capital
      expenditure requirements.





The
      Company’s identifiable intangible assets other than goodwill have finite lives.
      Certain of these intangible assets, such as customer relationships, are
      amortized using an accelerated methodology while others, such as patents, are
      amortized on a straight-line basis over their estimated useful lives. In
      addition, intangible assets with finite lives are evaluated for impairment
      whenever events or circumstances indicate that their carrying amount may not
      be
      recoverable, as prescribed by SFAS No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets” (“SFAS No. 144”).





**Long-Lived
      Assets**


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





67




**Income
      Taxes**


As
      described in Note 14, on January 1, 2007, the Company adopted FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN
      48”). FIN 48 prescribes recognition and measurement standards for a tax position
      taken or expected to be taken in a tax return. The evaluation of a tax position
      in accordance with FIN 48 is a two step process. The first step is the
      determination of whether a tax position should be recognized in the financial
      statements. Under FIN 48, the benefit of a tax position taken or expected to
      be
      taken in a tax return is to be recognized only if the Company determines that
      it
      is more-likely-than-not that the tax position will be sustained upon examination
      by the tax authorities based upon the technical merits of the position. In
      step
      two, for those tax positions which should be recognized, the measurement of
      a
      tax position is determined as being the largest amount of benefit that is
      greater than 50% likely of being realized upon ultimate settlement. 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. The Company recognizes interest and penalties related to
      uncertain tax positions in the income tax provision (benefit).





Deferred
      tax assets and liabilities are recognized for the future tax consequences of
      temporary differences between the book and tax basis of assets and liabilities.
      If it is more likely than not that some portion or all of a deferred tax asset
      will not be realized, a valuation allowance is recognized. The Company assesses
      its ability to realize deferred tax assets based on normalized historical
      performance and on projections of future taxable income in the relevant tax
      jurisdictions.  Normalized
      historical performance for purposes of this assessment includes adjustments
      for
      those income and expense items that are unusual and non-recurring in nature
      and
      are not expected to affect results in future periods. Such unusual and
      non-recurring items include the effects of discontinued operations, legal fees
      or settlements associated with specific litigation matters, pension curtailment
      costs, and restructuring costs. The Company’s projections of future taxable
      income consider known events, such as the passage of legislation or expected
      occurrences, and do not reflect a general growth assumption. Such projections
      do
      not include taxable income from the reversal of deferred tax liabilities. The
      Company’s estimates of future taxable income are reviewed annually or whenever
      events or changes in circumstances indicate that such projections should be
      modified.





68




No
      provision is made for U.S. income taxes on the undistributed earnings of
      non-U.S. subsidiaries because these earnings are deemed permanently invested
      or
      otherwise indefinitely retained for continuing international operations. These
      earnings would become subject to income tax if they were remitted as dividends,
      were loaned to the Company or a U.S. affiliate, or if the Company were to sell
      its stock in the subsidiaries. Determination of the amount of unrecognized
      deferred U.S. income tax liability on these unremitted earnings is not
      practicable.




**Pensions**


Accounting
      for pensions involves estimating the cost of benefits to be provided well into
      the future and attributing that cost over the time period each employee works.
      To accomplish this,
      extensive use is made of assumptions about inflation, investment returns,
      mortality,


turnover
      and discount rates. These assumptions are reviewed annually. In determining
      the
      expected return on plan assets, the Company evaluates long-term actual return
      information, the mix of investments that comprise plan assets and future
      estimates of long-term investment returns.





On
      December 31, 2006, the Company adopted Statement of Financial Accounting
      Standard No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans (“SFAS
      No. 158”). SFAS No. 158 requires recognition of the funded status of a benefit
      plan on the balance sheet; the recognition in other comprehensive income of
      gains or losses and prior service costs or credits arising during the period
      but
      which are not included as components of periodic benefit cost; the measurement
      of defined benefit plan assets and obligations as of the balance sheet date;
      and
      disclosure of additional information about the effects on periodic benefit
      cost
      for the following fiscal year arising from gains and losses in the current
      period. See Note 13 for additional disclosures including the effects of
      adoption.





**Net
      Income (Loss) per Common Share**


Basic
      net
      income (loss) per common share is computed by dividing net income (loss) by
      the
      weighted average number of common shares outstanding during the period. Diluted
      net income (loss) per common share is computed by dividing net income (loss)
      by
      the weighted average number of common shares outstanding plus all potential
      dilutive common shares outstanding during the period. Potential dilutive common
      shares are determined using the treasury stock method. Under the treasury stock
      method, exercise of options is assumed at the beginning of the period when
      the
      average stock price during the period exceeds the exercise price of outstanding
      options and common shares are assumed issued. The proceeds from exercise are
      assumed to be used to purchase common stock at the average market price during
      the period. The incremental shares to be issued are considered to be the
      potential dilutive common shares outstanding. The treasury stock method is
      also
      used for the Company’s convertible senior notes when the average stock price
      exceeds the conversion price.





69





**Cash
      and Cash Equivalents**


The
      Company considers all highly liquid, short-term investments made with an
      original maturity of three months or less to be cash equivalents.





**Derivative
      Instruments**


The
      Company applies SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities” (“SFAS No. 133”). SFAS No. 133, as amended, establishes accounting
      and reporting standards for derivative instruments, including certain derivative
      instruments embedded in other contracts and for hedging activities. Derivative
      financial instruments are occasionally utilized by the Company to manage risk
      exposure to movements in foreign exchange rates or interest rates. The Company,
      from time to time, enters into forward exchange contracts to obtain foreign
      currencies at specified rates based on expected future cash flows for each
      currency. The premium or discount on the contracts is amortized over the life
      of
      the contract. Changes in the value of derivative financial instruments are
      measured at the balance sheet date and recognized in current earnings or other
      comprehensive income depending on whether the derivative is designated as part
      of a hedge transaction and, if it is, the type of transaction. The Company
      does
      not hold derivative financial instruments for trading purposes or any fair
      value
      hedges.





**Use
      of Estimates**


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





**Labor
      Agreements**


Collective
      bargaining agreements cover approximately 32% of the Company’s labor force at
      December 31, 2007 under agreements which expire  in
      2008,
      2009, and 2010. However, the Company’s contract with the United Steelworkers for
      the Company’s Neville Island plant located in Pittsburgh, Pennsylvania
      terminated on February 29, 2008 following two extensions of the expiring
      agreement which covers approximately 22% of the bargaining unit labor force.
      The
      Company is operating this facility with its salaried employees and temporary
      replacement workers until a new agreement is reached.





**Stock-Based
      Compensation**


The
      Company has various stock-based compensation plans which are described more
      fully in Note 12. Through December 31, 2005, the Company accounted for those
      plans under the recognition and measurement principles of Accounting Principles
      Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”),
      and related interpretations. No stock-based compensation cost was reflected
      in
      net income for stock options at the date of grant, as all options granted had
      an
      exercise price equal to the market value of the underlying common stock on
      the
      date of grant. Deferred compensation for restricted stock under the Company’s
      stock-based compensation plans was charged to equity when the restricted stock
      was granted and expensed over the vesting period as contingencies of the
      restricted stock grant were met and adjusted if not met.





70




The
      Company adopted SFAS No. 123(R), “Share-based Payments” (“SFAS 123 (R)”), on
      January 1, 2006 using the modified prospective application method. See further
      discussion in Note 1 2.
      Under
      this transaction method, compensation cost recognized for the years ended
      December 31, 2007 and 2006 includes the applicable amounts of compensation
      cost
      of all stock-based payments granted prior to, but not yet vested, as of January
      1, 2006 (based on the grant-date fair value estimated in accordance with the
      original provisions of SFAS No. 123 and previously presented in the pro forma
      footnote disclosures). Compensation cost in the future will also include
      stock-based payments granted subsequent to January 1, 2006 (based on grant-date
      fair value estimated in accordance with the provisions of SFAS No. 123(R)).
      Results for prior periods have not been restated. In accordance with SFAS No.
      123(R), compensation expense for stock options is now recorded over the vesting
      period using the fair value on the date of grant, as calculated by the Company
      using the Black-Scholes model. The nonvested restricted stock grant date fair
      value, which is the market price of the underlying common stock, is expensed
      over the vesting period. The Company corrected its adoption presentation of
      SFAS
      No. 123(R) in 2007 by reclassifying its December 31, 2006 deferred compensation
      of $0.5 million to additional paid in capital.





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




(Dollars
                in thousands except per share data)
            
            Year
                  Ended
                December
                  31,2005Net
                lossAs
                reported
            
            $
            (7,416
            )Stock-based
                  employee compensation Expense included in reported net loss, net of
                  tax effect
            
            
            256Stock-based
                compensation at fair value, net of tax effects
            
            
            (769
            )Pro
                forma net loss
            
            $
            (7,929
            )Net
                loss per common shareBasic
                and dilutedAs
                reported
            
            $
            (.19
            )Pro
                forma
            
            $
            (.20
            )




71




**Concentration
      of Credit Risk**


Financial
      instruments that potentially expose the Company to concentrations of credit
      risk
      consist primarily of cash and cash equivalents and customer receivables. The
      Company places its cash with high credit quality financial institutions and
      invests in low-risk, highly liquid instruments. With respect to customer
      receivables, the Company believes that it has no significant concentration
      of
      credit risk with its largest customer receivable comprising less than 4% of
      total receivables as of December 31, 2007.





**Fair
      Value of Financial Instruments Excluding Derivative
      Instruments**


The
      Company’s financial instruments, excluding derivative instruments, consist
      primarily of cash and cash equivalents and long-term debt as well as accounts
      receivable and accounts payable. The fair value of the cash and cash
      equivalents, accounts receivable, and accounts payable approximates their
      carrying value because of the short-term maturity of the instruments. See Note
      9
      for a discussion of the fair value of the Company’s debt.





**New
      Accounting Pronouncements**





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an amendment of FASB Statement No. 115” (SFAS No.
      159). This Statement permits entities to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses on these instruments in earnings. SFAS No. 159 is effective as of
      January 1, 2008. The Company has chosen not to elect the fair
      value option under SFAS No. 159 for financial assets and liabilities as of
      December 31, 2007.





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 except as it relates to
      nonreccuring fair value measurements of non-financial assets and liabilities
      for
      which SFAS No. 157 is effective for fiscal years beginning after November 15,
      2008. The Company will adopt SFAS No. 157 as required for the fiscal year 2008
      and expects that the adoption will not have a material impact on its financial
      position or results of operations.




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No.141(R)”), which replaces SFAS No. 141, “Business
      Combinations.” SFAS No. 141(R) retains the underlying concepts of SFAS
      No. 141 in that all business combinations are still required to be
      accounted for at fair value under the acquisition method of accounting, but
      SFAS
      No. 141(R) changes the method of applying the acquisition method in a
      number of significant aspects. Acquisition costs will generally be expensed
      as
      incurred; noncontrolling interests will be valued at fair value at the
      acquisition date; in-process research and development will be recorded at fair
      value as an indefinite-lived intangible asset at the acquisition date;
      restructuring costs associated with a business combination will generally be
      expensed subsequent to the acquisition date; and changes in deferred tax asset
      valuation allowances and income tax uncertainties after the acquisition date
      generally will affect income tax expense. SFAS No. 141(R) is effective on a
      prospective basis for all business combinations for which the acquisition date
      is on or after the beginning of the first annual period subsequent to
      December 15, 2008, with an exception related to the accounting for
      valuation allowances on deferred taxes and acquired contingencies related to
      acquisitions completed before the effective date. SFAS No. 141(R) amends
      SFAS No. 109 to require adjustments, made after the effective date of this
      statement, to valuation allowances for acquired deferred tax assets and income
      tax positions to be recognized as income tax expense. Beginning January 1,
      2009,
      the Company will apply the provisions of SFAS No. 141(R) to its accounting
      for
      applicable business combinations.


In
        December 2007, the FASB issued SFAS No. 160 (“SFAS No. 160”),
“Noncontrolling Interests in Consolidated Financial Statements.” SFAS No. 160
        changes the classification of noncontrolling (minority) interests on the
        balance sheet and the accounting for and reporting of transactions between
        the
        reporting entity and holders of such noncontrolling interests. Under the
        new
        standard, noncontrolling interests are considered equity and are to be reported
        as an element of stockholders’ equity rather than outside of equity in the
        balance sheet. In addition, the current practice of reporting minority interest
        expense or benefit also will change. Under the new standard, net income will
        encompass the total income before minority interest expense. The income
        statement will include separate disclosure of the attribution of income between
        the controlling and noncontrolling interests. Increases and decreases in
        the
        noncontrolling ownership interest amount are accounted for as equity
        transactions. SFAS No. 160 is effective for fiscal years beginning after
        December 15, 2008 and earlier application is prohibited. Upon adoption, the
        balance sheet and the income statement should be recast retrospectively for
        the
        presentation of noncontrolling interests. The other accounting provisions
        of the
        statement are required to be adopted prospectively. The Company will adopt
        SFAS
        No. 160 as required and expects that the adoption will not have a material
        impact on its financial position or results of operations.




72




**2** **.
      Gain or Loss on Insurance Settlement**


In
      August
      2005, the Company’s plant located in Pearlington, Mississippi was damaged by
      Hurricane Katrina, and the Company recorded $1.0 million of non-reimbursable
      expense in the year ended December 31, 2005. In accordance with FIN No. 30,
      “Accounting for Involuntary Conversions of Non-Monetary Assets to Monetary
      Assets,” the Company wrote off the net book value of the destroyed inventory and
      property totaling $1.8 million. The replacement value of the inventory and
      property exceeded its net book value by approximately $4.9 million, which was
      recorded as a gain
      on insurance
      settlement in the year ended December 31, 2006. The Company also settled its
      business interruption insurance claim with its insurance company for $3.8
      million. This amount, net of costs related to business interruption of $0.6
      million, was recorded as a gain on insurance settlement in the year ended
      December 31, 2006.





**3.
      Restructuring of Operations**


On
      February 4, 2005, the Company’s Board of Directors approved a re-engineering
      plan. The plan included the closure of two small manufacturing facilities,
      the
      divestiture of two non-core businesses, and the elimination of approximately
      70
      employee positions globally. All activities related to these components of
      the
      re-engineering plan other than the divestitures were completed by year-end
      2005.
      The divestitures were completed in 2006. At December 31, 2007, the Company
      has
      no remaining restructuring reserves.





The
      restructuring charges for the years ended December 31, 2007, 2006, and 2005
      were:





December
                31(Thousands)
            
            2007
            
            2006
            
            2005Pension
                curtailment charge
            
            $
            -
            
            $
            -
            
            $
            215Closure
                of manufacturing facilities
            
            $
            -
            
            $
            7
            
            $
            197Total
            
            $
            -
            
            $
            7
            
            $
            412




73




**4.**
            **Discontinued
                Operations**




The
      Company’s financial statements for all periods presented were impacted by
      activities relating to the divestiture of two of the Company’s
      businesses.




On
      February 4, 2005, the Company’s Board of Directors approved a re-engineering
      plan. The plan included the divestiture of two non-core businesses in order
      to
      allow the Company to focus on its core activated carbon and service related
      businesses.





The
      Company reclassified the following businesses from continuing operations to
      discontinued operations for all periods presented: Charcoal/Liquid in
      Bodenfelde, Germany and Solvent Recovery in Columbus, Ohio; Vero Beach, Florida;
      and Ashton, United Kingdom. The Charcoal/Liquid and Solvent Recovery businesses
      were reported in the Company’s Consumer and Equipment segments, respectively.





On
      February 17, 2006, Calgon Carbon Corporation, through its wholly owned
      subsidiary Chemviron Carbon GmbH, executed an agreement (the “Charcoal Sale
      Agreement”) with proFagus GmbH, proFagus Grundstuecksverwaltungs GmbH and
      proFagus Beteiligungen GmbH (as Guarantor) to sell, and sold, substantially
      all
      the assets, real estate, and specified liabilities of the Bodenfelde, Germany
      facility (the “Charcoal/Liquid business”). The facility includes the production
      of charcoal for consumer use and liquids that are recovered during charcoal
      production. The products are sold to retail and industrial markets. The
      aggregate sales price, based on an exchange rate of 1.19 Dollars per Euro,
      consisted of $20.4 million of cash which included a final working capital
      adjustment of $1.3 million. The Company provided guarantees to the buyer related
      to pre-divestiture tax liabilities, future environmental remediation costs
      related to pre-divestiture activities and other contingencies. Management
      believes the ultimate cost of such guarantees is not material. An additional
      4.25 million Euros could be received contingent upon the business meeting
      certain earnings targets over the next three years. No contingent consideration
      was received for the years ended December 31, 2007 and 2006. During the year
      ended December 31, 2006, the Company recorded a pre-tax gain of $4.8 million
      or
      $1.7 million, net of tax, on the sale of the Charcoal/Liquid divestiture.





On
      April
      24, 2006, the Company completed the sale of the assets of its Solvent Recovery
      business to MEGTEC Systems, Inc. ("MEGTEC”), a subsidiary of Sequa Corporation.
      The Solvent Recovery unit provides turnkey on-site regenerable solvent recovery
      systems, distillation systems, on-site regenerable volatile organic compound
      concentrators, vapor-phase biological oxidation systems, and related services
      on
      a worldwide basis. The sale price of $1.8 million included cash proceeds of
      approximately $0.8 million and $0.7 million of assumed liabilities, primarily
      accounts payable. The transaction was also subject to a pre-tax working capital
      adjustment of $0.4 million, which management finalized and recorded in the
      fourth quarter of 2006. For the year ended December 31, 2007, the Company
      recorded a loss of $0.2 million, net of tax, related to an indemnity claim.
      During the year ended December 31, 2006, the Company recorded a pre-tax gain
      of
      $63 thousand or $41 thousand, net of tax, on the sale of the Solvent Recovery
      business.




74





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




Charcoal/Liquid
            
            Solvent RecoveryYear Ended December 31
            
            Year Ended December 31(Dollars in thousands)
            
            2007
            
            2006
            
            2005
            
            2007
            
            2006
            
            2005Net
                sales
            
            $
            -
            
            $
            1,375
            
            $
            30,037
            
            $
            -
            
            $
            2,775
            
            $
            13,916Income
                (loss) from operations
            
            
            -
            
            
            (589
            )
            
            2,973
            
            
            -
            
            
            (161
            )
            
            1,709Other
                income (expense)-net
            
            
            -
            
            
            4,715
            
            
            44
            
            
            (302
            )
            
            63
            
            
            -Income
                (loss) before income taxes
            
            
            -
            
            
            4,126
            
            
            3,017
            
            
            (302
            )
            
            (98
            )
            
            1,709Provision
                (benefit)for income taxes
            
            
            45
            
            
            2,848
            
            
            1,044
            
            
            (91
            )
            
            (34
            )
            
            591Income
                (loss) from discontinued operations
            
            $
            45
            
            $
            1,278
            
            $
            1,973
            
            $
            (211
            )
            $
            (64
            )
            $
            1,118




75


**5** **.
      Inventories**





December
                31(Thousands)
            
            **2007**
            
            2006Raw
                materials
            
            **$**
            **22,321**
            
            $
            16,587Finished
                goods
            
            
            **58,959**
            
            
            53,752Total
            
            **$**
            **81,280**
            
            $
            70,339





Inventories
      at December 31, 2007 and 2006 are recorded net of reserves of $1.6 million
      and
      $1.4 million, respectively, for obsolete and slow-moving items.




76


**6** **.
      Property, Plant and Equipment**





December
                31(Thousands)
            
            **2007**
            
            2006Land
                and improvements
            
            **$**
            **13,381**
            
            $
            12,960Buildings
            
            
            **29,361**
            
            
            28,247Machinery,
                equipment and customer capital
            
            
            **314,453**
            
            
            296,433Computer
                hardware and software
            
            
            **18,897**
            
            
            18,874Furniture
                and vehicles
            
            
            **8,274**
            
            
            7,812Construction-in-progress
            
            
            **10,045**
            
            
            11,631**394,411**
            
            
            375,957Less
                accumulated depreciation
            
            
            **(288,899**
            **)**
            
            (269,856
            )Net
            
            **$**
            **105,512**
            
            $
            106,101





Depreciation
      expense for the years ended December 31, 2007, 2006, and 2005 totaled $15.5
      million, $17.2 million, and $19.1 million, respectively.





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 $1.5 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.





Repair
      and maintenance expenses were $7.9 million, $7.8 million, and $9.3 million
      for
      the years ended December 31, 2007, 2006, and 2005, respectively.





77




**7** **.
      Goodwill and Other Identifiable Intangible Assets**




The
      Company has elected to do the annual impairment test of its goodwill, as
      required by SFAS No. 142, on December 31 of each year. For purposes of the
      test,
      the Company has identified reporting units, as defined within SFAS No. 142,
      at a
      regional level for the Activated Carbon and Service segment and at the
      technology level for the Equipment segment and has allocated goodwill to these
      reporting units accordingly. The goodwill associated with the Consumer segment
      is not material and has not been allocated below the segment level.





The
      following is a table showing the results of the annual impairment tests at
      December 31, 2007 and 2006:





(Dollars
      in Thousands)


At
                December 31, 2007
            
            At
                December 31, 2006Reporting
                Unit
            
            Fair
              Valueof
              Unit
            
            Carrying
              Value
                of
              Unit
            
            Carrying
              Value
                of
              Goodwill
            
            Fair
              Value
                of
              Unit
            
            Carrying
              Value
                of
              Unit
            
            Carrying
              Value
                of
              GoodwillActivated
                Carbon and Service Segment:Americas/Asia
            
            $
            267,832
            
            $
            134,361
            
            $
            16,768
            
            $
            187,000
            
            $
            141,740
            
            $
            16,768Europe
            
            
            78,188
            
            
            53,761
            
            
            4,344
            
            
            56,800
            
            
            43,306
            
            
            4,288Equipment
                Segment:ISEP®
                  equipment (ISEP®)
            
            
            12,545
            
            
            6,273
            
            
            4,419
            
            
            22,900
            
            
            4,668
            
            
            4,419Ultraviolet
                  light equipment (UV)
            
            
            12,030
            
            
            10,053
            
            
            2,254
            
            
            14,445
            
            
            9,222
            
            
            1,962Consumer
                Segment
            
            
            N/A
            
            
            N/A
            
            
            60
            
            
            N/A
            
            
            N/A
            
            
            60Total
            
            
            
            
            
            
            
            $
            27,845
            
            
            
            
            
            
            
            $
            27,497





On
      November 14, 2006, the Federal Court of Canada found that the Company’s patent
      for the use of ultraviolet light to prevent infection from Cryptosporidium
      in
      drinking water was invalid. As a result, the Company’s estimate of future
      royalties used in determining the fair value of the UV reporting unit as of
      December 31, 2006 declined substantially from the prior year resulting in
      goodwill impairment of $6.9 million. This impairment represents the difference
      between the implied fair value of goodwill for the UV reporting unit and the
      carrying value of the goodwill before recognition of the
      impairment.





The
      changes in the carrying amount of goodwill by segment for the years ended
      December 31, 2007 and 2006 are as follows:





(Dollars
                in Thousands)
            
            
            **Activated**
              **Carbon and**
              **Service Segment**
            
            
            **Equipment**
              **Segment**
            
            
            **Consumer**
              **Segment**
            
            
            **Total**Balance
                as of January 1, 2006
            
            $
            20,534
            
            $
            13,280
            
            $
            60
            
            $
            33,874Impairment
            
            
            -
            
            
            (6,940
            )
            
            -
            
            
            (6,940
            )Foreign
                currency translation
            
            
            522
            
            
            41
            
            
            -
            
            
            563Balance
                as of December 31, 2006
            
            
            21,056
            
            
            6,381
            
            
            60
            
            
            27,497Foreign
                currency translation
            
            
            56
            
            
            292
            
            
            -
            
            
            348Balance
                as of December 31, 2007
            
            $
            21,112
            
            $
            6,673
            
            $
            60
            
            $
            27,845




78





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


**** **** **** ****


**December
                31, 2007****Weighted**
              **Average**
              **Amortization**
              **Period**
            ****
            **Gross**
              **Carrying**
              **Amount**
            ****
            **Foreign**
              **Exchange**
            ****
            **Accumulated**
              **Amortization**
            ****
            **Net**
              **Carrying**
              **Amount****Amortized
                Intangible Assets:**Patents
            
            
            15.4
                Years
            
            $
            1,369
            
            $
            -
            
            $
            (877
            )
            $
            492Customer
                Relationships
            
            
            17.0
                Years
            
            
            9,323
            
            
            30
            
            
            (4,743
            )
            
            4,610License
                Agreement
            
            
            5.0
                Years
            
            
            500
            
            
            -
            
            
            (416
            )
            
            84Product
                Certification
            
            
            7.9
                Years
            
            
            1,682
            
            
            -
            
            
            (625
            )
            
            1,057Unpatented
                Technology
            
            
            20.0
                Years
            
            
            2,875
            
            
            -
            
            
            (1,358
            )
            
            1,517Total
            
            
            16.0
                Years
            
            $
            15,749
            
            $
            30
            
            $
            (8,019
            )
            $
            7,760





**December
                31, 2006****Weighted****Average**
            
            **Gross**
            
            
            
            
            
            **Net****Amortization**
            
            **Carrying**
            
            **Foreign**
            
            **Accumulated**
            
            **Carrying****Period**
            
            **Amount**
            
            **Exchange**
            
            **Amortization**
            
            **Amount****Amortized
                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
            
            
            16.0
                Years
            
            $
            14,732
            
            $
            11
            
            $
            (6,222
            )
            $
            8,521





For
      the
      years ended December 31, 2007, 2006, and 2005, the Company recognized $1.8
      million, $1.7 million, and $1.9 million, respectively, of amortization expense
      related to intangible assets for continuing operations. The Company estimates
      amortization expense to be recognized during the next five years as
      follows:





For
                the year ending December 31:2008
            
            $
            1,5712009
            
            $
            1,2992010
            
            $
            1,1552011
            
            $
            8472012
            
            $
            257





**8.
      Product Warranties**





The
      Company establishes a warranty reserve for equipment project sales and estimates
      the warranty accrual based on the history of warranty claims to total sales,
      adjusted for significant known claims in excess of established reserves.





Warranty
      terms are based on the negotiated equipment project contract and typically
      are
      either 18 months from shipment date or 12 months from project startup date.
      The
      change in the warranty reserve, which is included in accounts payable and
      accrued liabilities in the consolidated balance sheets, is as follows:




December
                31,**2007**
            
            2006
            
            2005Beginning
                Balance
            
            **$**
            **1,133**
            
            $
            1,028
            
            $
            1,184Payments
                and replacement product
            
            
            **(293**
            **)**
            
            (184
            )
            
            (468
            )Additions
                to warranty reserve for warranties issued during the
                period
            
            
            **366**
            
            
            476
            
            
            515Change
                in the warranty reserve for pre-existing warranties
            
            
            **(83**
            **)**
            
            (187
            )
            
            (203
            )Ending
                Balance
            
            **$**
            **1,123**
            
            $
            1,133
            
            $
            1,028




79


**9** **.
      Borrowing Arrangements**




**Long-Term
                Debt**
            
            December
                31(Thousands)
            
            **2007**
            
            2006Convertible
                Senior Notes
            
            **$**
            **75,000**
            
            $
            75,000Industrial
                revenue bonds
            
            
            **2,925**
            
            
            2,925Total
            
            
            **77,925**
            
            
            77,925Less
                current portion of long-term debt (net of debt discount)
            
            
            **(62,507**
            **)**
            
            -Less
                debt discount
            
            
            **(2,493**
            **)**
            
            (3,089
            )Net
            
            **$**
            **12,925**
            
            $
            74,836





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





*5.00%
      Convertible Senior Notes due 2036*





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





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





For
      the
      period ended December 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      December 31, 2007. As a result, as of December 31, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although the Company does not anticipate that a significant amount of these
      Notes will be converted, if any, as of December 31, 2007, the Company is
      required to reclassify as a current liability, that portion of the Notes that
      can not be refinanced on a long-term basis under the Company’s Credit Facility
      as provided for by SFAS No. 6, “Classification of Short-Term Obligations
      Expected to be Refinanced,” which was $65.0 million at December 31,
      2007.




80





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
      (principally related to changes in control) 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 issue 7 which indicates that
      if
      a reset of the conversion rate due to a contingent event occurs the Company
      would need to calculate if there is a beneficial conversion and record if
      applicable. Through December 31, 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 (principally
      related to changes in control), 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. 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.





The
      Company sold the Notes to the original purchaser at a discount of $3.3 million
      that is being amortized over a period of five years. During 2007, the Company
      recorded interest expense of $4.5 million, of which $3.9 million related to
      the
      Notes and $0.6 million related to the amortization of the discount. The Company
      incurred issuance costs of $1.5 million which have been deferred and are being
      amortized over a five year period.





*Credit
      Facility*





The
      Credit Facility was initially a $50.0 million facility and included a separate
      U.K. sub-facility and a separate Belgian sub-facility. On February 5, 2007,
      the
      Credit Facility was amended to increase the commitment amount to $55.0 million
      and was syndicated to include one additional lender. The 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.




81





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 the
      year ended December 31, 2007, the carrying amount of assets pledged as
      collateral was $51.1 million. The carrying amount as of the year ended December
      31, 2007 for domestic, U.K., and Belgian borrowers were $41.2 million, $5.3
      million, and $4.6 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 the year ended December 31, 2007,
      total availability was $34.5 million. Availability as of the year ended December
      31, 2007 for domestic, U.K., and Belgian borrowers were $30.4 million, $4.1
      million, and zero, respectively. The
      Company can issue letters of credit up to $20.0 million of the available
      commitment amount under the Credit Facility. Sub-limits for letters of credit
      under the U.K. sub-facility and the Belgian sub-facility are $2.0 million
      and $6.0 million, respectively. Letters of credit outstanding at December
      31, 2007 totaled $16.6 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
      Credit Facility contains a number of affirmative and negative covenants. For
      the
      period ended December 31, 2007, the last reported sale price of the Company’s
      common stock was greater than 120% of the conversion price of the Notes for
      at
      least 20 trading days in the period of 30 consecutive trading days ended
      December 31, 2007. As a result, as of December 31, 2007, the holders of the
      Notes have the right to convert the Notes into cash and shares of common stock.
      Although currently not anticipated by the Company, the ability of holders of
      the
      Notes to convert 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 can
      be
      converted up to that amount and classified as long-term debt as the Company
      has
      the ability and intent to refinance it under the Credit Facility. The Credit
      Facility also includes a provision for up to $3.0 million of letters of credit
      under the Company’s U.S., Belgium, and UK sub-limits that can be issued having
      expiration dates that are more than one year but not more than three years
      after
      the date of issuance.




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




82





**Industrial
      Revenue Bonds**


The
      Mississippi Industrial Revenue Bonds totaling $2.9 million at December 31,
      2007
      and 2006, respectively, bear interest at a variable rate and mature in May
      2009.
      The interest rate as of December 31, 2007 was 3.51%. These bonds were issued
      to
      finance certain equipment acquisitions at the Company’s Pearlington, Mississippi
      plant.





**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. There are no financial covenants, and the
      Company had no outstanding borrowings under the Belgian credit facility as
      of
      December 31, 2007 and 2006. Bank guarantees of 0.9 million euros were issued
      as
      of December 31, 2007. The maturity date of this facility is December 15, 2008.
      Availability under this facility was 3.1 million euros at December 31,
      2007.





**United
      Kingdom Credit Facilities**


The
      Company also maintains a United Kingdom unsecured bonds, guarantees and
      indemnities facility totaling 616,000 British Pound Sterling. The bank, in
      its
      sole discretion, may cancel at any time its commitment to provide this facility.
      Bank guarantees of 611,924 British Pound Sterling were issued as of December
      31,
      2007.





**Chinese
      Credit Facility**


The
      Company maintains a Chinese credit facility totaling 11.0 million RMB or
      $1.5 million 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 26, 2008.  The
      facility was fully utilized at December 31, 2007.




**Fair
      Value of Debt**


At
      December 31, 2007, the Company had $75.0 million of fixed rate Senior
      Convertible Notes outstanding ($65.0 million classified as current). The fair
      value of these Notes at December 31, 2007 was $233.9 million. The increase
      in
      value is mainly due to the increase in the Company’s common stock price and its
      impact on the conversion features of the Notes. The remaining $2.9 million
      of
      long-term debt is based on prime rates, and accordingly, the carrying value
      of
      this obligation approximates its fair value.




83





**Maturities
      of Debt**


The
      Company is obligated to make principal payments on debt outstanding at
      December 31, 2007 of $1.5 million in 2008, $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 December 31,
      2007.





**10.
      Commitments**





The
      Company has entered into leases covering principally office, research and
      warehouse space, office equipment and vehicles. Future minimum rental payments
      required under all operating leases that have remaining noncancelable lease
      terms in excess of one year are $3.7 million in 2008, $3.0 million in 2009,
      $2.4
      million in 2010, $1.9 million in 2011, and $6.5 million thereafter. Total rental
      expense on all operating leases was $5.7 million, $6.6 million, and $8.2 million
      for the years ended December 31, 2007, 2006, and 2005, respectively.





The
      Company has in place long-term supply contracts for the purchase of raw
      materials, transportation, and information systems and services. The
      following table represents the total payments made for the purchases under
      the
      aforementioned supply contracts:





December
                31(Thousands)
            
            **2007**
            
            2006
            
            2005Raw
                and other materials
            
            **$**
            **22,145**
            
            $
            28,519
            
            $
            26,101Transportation
            
            
            **4,840**
            
            
            4,494
            
            
            4,297Information
                systems and services
            
            
            **2,386**
            
            
            2,503
            
            
            2,427Total
                payments
            
            **$**
            **29,371**
            
            $
            35,516
            
            $
            32,825




84


Future
      minimum purchase requirements under the terms of the aforementioned contracts
      are as follows:





Due
                in(Thousands)
            
            2008
            
            2009
            
            2010
            
            2011
            
            2012
            
            ThereafterRaw
                and other materials
            
            $
            18,290
            
            $
            17,108
            
            $
            15,585
            
            $
            15,084
            
            $
            -
            
            $
            -Transportation
            
            
            1,593
            
            
            1,575
            
            
            1,575
            
            
            1,575
            
            
            1,575
            
            
            1,838Information
                systems and services
            
            
            2,042
            
            
            2,042
            
            
            2,042
            
            
            -
            
            
            -
            
            
            -Total
                contractual cash obligations
            
            $
            21,925
            
            $
            20,725
            
            $
            19,202
            
            $
            16,659
            
            $
            1,575
            
            $
            1,838





**11.
      Shareholders’ Equity**





The
      Company’s Board of Directors in 2000 authorized the purchase of up to 500,000
      shares of the Company’s stock. As of December 31, 2007, 11,300 shares have been
      purchased under this stock buy back program.





The
      Board
      of Directors adopted a new Stockholder Rights Plan in February 2005 designed
      to
      guard against (1) coercive and abusive tactics that might be used in an attempt
      to gain control of the Company without paying all stockholders a fair price
      for
      their share or (2) the accumulation of a substantial block of stock without
      offering to pay stockholders a fair control premium. The Rights Plan will not
      prevent takeovers, but is designed to preserve the Board’s bargaining power and
      flexibility to deal with third-party acquirers and to otherwise seek to maximize
      value for all stockholders. The Plan awards one right for each outstanding
      share
      of common stock held by stockholders of record on February 3, 2005 and
      thereafter. Each right entitles the holder to purchase from the Company one
      unit
      of one ten-thousandth of a share of a newly created series of preferred stock
      at
      a purchase price of $35 per unit. The rights will be exercisable only if a
      person or group acquires beneficial ownership of 10% or more of the Company’s
      outstanding common stock (15% or more in the case of certain institutional
      investors) or commences a tender or exchange offer upon consummation of which
      such person or group would beneficially own 10% or more of the Company’s common
      stock (“Acquiring Person”). If one of those events occurs, each holder of a
      right (with the exception of the acquiring person or group) will thereafter
      have the right to receive, upon exercise, common stock (or, in certain
      circumstances, cash, property or other of the Company's securities) having
      a
      value equal to two times the exercise price of the right. The rights can be
      redeemed by the Board of Directors under certain circumstances, in which case
      the rights will not be exchangeable for shares.


85


**12.
      Stock Compensation Plans**





At
      December 31, 2007, the Company had two stock-based compensation plans that
      are
      described below.





**Employee
      Stock Option Plan**


The
      Company has an Employee Stock Option Plan for officers and other key employees
      of the Company which, as amended, authorizes grants of up to 8,238,640 shares
      of
      the Company’s common stock. Stock options may be “nonstatutory” or “incentive”
with a purchase price of not less than 100% of the fair market value on the
      date
      of grant. “Incentive” stock options granted since 1986 become exercisable no
      less than six months after the date of grant and are no longer exercisable
      after
      the expiration of four to ten years from the date of grant. This
      Plan
      also permits awards of restricted shares, restricted performance shares, and
      stock appreciation rights.


**Non-Employee
      Directors’ Stock Option Plan**


The
      1993
      Non-Employee Directors’ Stock Option Plan, as last amended in 2005, provides for
      an annual grant on the day following the Annual Meeting of Stockholders of
      stock
      options equal to a Black-Scholes calculated value of $25,000 per Director on
      the
      date of grant. The options vest and become exercisable six months after the
      date
      of grant and, in general, expire ten years after the date of grant.


86


Prior
      to
      January 1, 2006, the Company accounted for awards granted under the
      aforementioned plans following the recognition and measurement principles APB
      No. 25 and related interpretations. The Company adopted SFAS No. 123(R) on
      January 1, 2006 using the modified prospective application method.





**Stock-Based
      Compensation Expense**


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





Year Ended December 31,(Dollars
                in thousands except per share data)
            
            **2007**
            
            2006Stock-based
                compensation expense recognized:Selling,
                general and administrative expenses
            
            **$**
            **2,887**
            
            $
            1,309Tax
                benefit
            
            
            **1,059**
            
            
            515Decrease
                in net income
            
            **$**
            **1,828**
            
            $
            794Decrease
                in basic income per share
            
            **$**
            **0.05**
            
            $
            0.02Decrease
                in diluted income per share
            
            **$**
            **0.04**
            
            $
            0.02





In
      addition to the 2007 tax benefits of $1.1 million noted above, the Company
      also
      recorded a $0.9 million tax benefit related to certain stock options exercised
      in 2007. This benefit was recorded as a reduction to accrued income taxes with
      a
      corresponding increase to additional paid-in-capital.





In
      accordance with SFAS No. 123(R), compensation expense for stock options and
      stock appreciation rights (“SARs”) is recorded over the vesting period based on
      the fair value on the date of grant, as calculated by the Company using the
      Black-Scholes model and the assumptions listed below:





**Years Ended December 31**2007
            
            2006
            
            2005Average
                grant date exercise price per share of stock appreciation
                rights
            
            
            -
            
            $
            6.19
            
            
            -Average
                grant date exercise price per share of unvested awards -
                options
            
            $
            7.89
            
            $
            7.55
            
            $
            7.51Dividend
                yield
            
            
            .00
            %
            
            .00
            %
            
            .70-1.79
            %Expected
                volatility
            
            
            33-34
            %
            
            34-37
            %
            
            37-46
            %Risk-free
                interest rates
            
            
            3.99-4.54
            %
            
            3.62-5.20
            %
            
            3.03-3.62
            %Expected
                lives of options
            
            
            3-6
                years
            
            
            3-6
                years
            
            
            5
                yearsAverage
                grant date fair value per share of stock appreciation
                rights
            
            
            -
            
            $
            1.85
            
            
            -Average
                grant date fair value per share of unvested option awards
            
            $
            3.25
            
            $
            3.03
            
            $
            2.81





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





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


87





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





The *Expected
      lives of options* are
      determined from primarily historical stock option exercise data. The Company
      applied the simplified method in accordance with Staff Accounting Bulletin
      No.
      107, “Share-Based Payment.”





**Stock
      Option Activity**


The
      following tables show a summary of the status and activity of stock options
      for
      the year ended December 31, 2007:





**Employee
      Stock Option Plan:**





Weighted-AverageWeighted-
            
            Remaining
            
            AggregateAverage
            
            Contractual
            
            IntrinsicExercise
            
            Term
            
            ValueShares
            
            Price
            
            (in years)
            
            (in thousands)Outstanding
                at beginning of year
            
            
            1,982,000
            
            $
            6.69Granted
            
            
            91,900
            
            
            8.30Exercised
            
            
            (374,100
            )
            
            6.66Canceled
            
            
            (125,275
            )
            
            8.07Outstanding
                at December 31, 2007
            
            
            1,574,525
            
            $
            6.69
            
            
            5.37
            
            $
            14,161Exercisable
                at December 31, 2007
            
            
            1,437,650
            
            $
            6.58
            
            
            5.04
            
            $
            13,655





The
      weighted-average grant-date fair value of employee stock options granted during
      the year ended December 31, 2007, 2006, and 2005 was $3.39 per share, $2.99
      per
      share, and $3.14 per share or $0.3 million, $0.4 million, and $0.3 million,
      respectively. The total fair value of options vested during the year ended
      December 31, 2007, 2006, and 2005 was $3.08 per share, $2.70 per share, and
      $2.25 per share, or $0.3 million, $0.7 million, and $1.3 million,
      respectively.





**Non-Employee
      Directors’ Stock Option Plan:**





Weighted-AverageWeighted-
            
            Remaining
            
            AggregateAverage
            
            Contractual
            
            IntrinsicExercise
            
            Term
            
            ValueShares
            
            Price
            
            (in years)
            
            (in thousands)Outstanding
                at beginning of year
            
            
            510,257
            
            $
            7.16Granted
            
            
            42,985
            
            
            8.59Exercised
            
            
            (88,375
            )
            
            6.84Canceled
            
            
            -
            
            
            -Outstanding
                at December 31, 2007
            
            
            464,867
            
            $
            7.35
            
            
            5.32
            
            $
            4,058Exercisable
                at December 31, 2007
            
            
            462,867
            
            $
            7.33
            
            
            5.30
            
            $
            4,052




88





The
      weighted-average grant-date fair value of non-employee director stock options
      granted during the year ended December 31, 2007, 2006, and 2005 was $3.64 per
      share, $3.15 per share, and $2.99 per share, or $0.2 million, $0.2 million,
      and
      $0.1 million, respectively. The total fair value of options vested during the
      year ended December 31, 2007, 2006, and 2005 was $3.42 per share, $3.06 per
      share, and $2.99 per share, or $0.1 million, $0.2 million and $0.2 million,
      respectively.





During
      the year ended December 31, 2007, 2006, and 2005 the total intrinsic value
      of
      stock options exercised (i.e., the difference between the market price at
      exercise and the price paid by the employee or non-employee directors to
      exercise the option) was $3.0 million, $11 thousand, and $1.2 million,
      respectively. The total amount of cash received from the exercise of options
      was
      $3.1 million, $27 thousand, and $2.8 million, respectively.





**Stock
      Awards**


In
      accordance with SFAS No. 123(R), compensation expense for nonvested stock awards
      is recorded over the vesting period based on the fair value at the date of
      grant.





Nonvested
      restricted and performance restricted stock granted to employees under the
      Company’s Employee Stock Option Plan is valued at the grant date fair value,
      which is the market price of the underlying common stock, and vest over service
      or performance periods that range from one to three years. Outstanding
      performance restricted stock awards, a type of award granted in 2005, vest
      in
      three tranches, subject to the Company’s satisfaction of certain performance
      criteria during 2005, 2006, and 2007. All of the 69,600 shares vested in March
      2008.





Additionally,
      performance stock awards, based on Total Shareholder Performance (“TSR”), vest
      subject to the satisfaction of performance goals, at the end of a three-year
      performance period. The number of performance stock awards that are scheduled
      to
      vest is a function of TSR. Under the terms of the TSR performance stock award,
      the Company’s actual TSR for the performance period is compared to the results
      of its peer companies for the same period with the Company’s relative position
      in the group determined by percentile rank. The actual award payout is
      determined by multiplying the target award by the performance factor percentage
      based upon the Company’s percentile ranking and can vest at between zero and 200
      percent of the target award. The initial grant-date fair value of the TSR
      performance stock is determined using a Monte Carlo simulation model. The
      grant-date fair value is expensed on a straight-line basis over the
      three-year performance period. The following significant assumptions were used:





Years Ended December 312007
            
            2006Dividend
                yield
            
            
            .00
            %
            
            .00
            %Expected
                volatility
            
            
            49-53
            %
            
            45.6
            %Risk-free
                interest rates
            
            
            4.54-5.13
            %
            
            4.69
            %Performance
                period
            
            
            3 years
            
            
            3 years


89





The
      following table shows a summary of the TSR performance stock awards outstanding
      as of December 31, 2007:





UnrecognizedTSR
            
            CompensationPerformance
            
            FairValue
            
            Expense
            
            Minimum
            
            Target
            
            MaximumPeriod
            
            (inthousands)
            
            (in thousands)
            
            Shares
            
            Shares
            
            Shares2006-2008
            
            $
            784
            
            $
            600
            
            
            -
            
            
            70,900
            
            
            141,800**2007-2009**
            
            
            **825**
            
            
            **287**
            
            
            **-**
            
            
            **64,800**
            
            
            **129,600**





The
      following table shows a summary of the status and activity of nonvested stock
      awards for the year ended December 31, 2007:





Performance
              Restricted
              Stock Awards
            
            Restricted
              Stock Awards
            
            TSR
              Performance
              Stock Awards
              (a)
            
            Total
            
            Weighted-
              Average
              Grant-Date
              FairValue
              (per share)Nonvested
                at January 1, 2007
            
            
            69,600
            
            
            195,925
            
            
            62,800
            
            
            328,325
            
            $
            6.48Granted
            
            
            -
            
            
            339,280
            
            
            72,900
            
            
            412,180
            
            
            5.80Vested
            
            
            -
            
            
            (84,181
            )
            
            -
            
            
            (84,181
            )
            
            6.38Forfeited
                or expired
            
            
            -
            
            
            (15,258
            )
            
            (11,150
            )
            
            (26,408
            )
            
            5.65Nonvested
                at December 31, 2007
            
            
            69,600
            
            
            435,766
            
            
            124,550
            
            
            629,916
            
            $
            5.97





(a)
            The
                number of shares shown for the performance stock awards is based
                on the
                targetnumber
                of share awards.





The
      following table presents information on performance restricted stock awards,
      restricted stock awards, and performance stock awards granted:





**2007**
            
            2006
            
            2005Number
                of shares granted
            
            
            **412,180**
            
            
            257,200
            
            
            240,800Weighted-average
                grant-date fair value per share
            
            **$**
            **5.80**
            
            $
            5.91
            
            $
            7.10





Compensation
      expense related to nonvested stock awards totaled $2.5 million and $0.8 million
      for the years ended December 31, 2007 and 2006.





As
      of
      December 31, 2007, there was $3.0 million of total future compensation cost
      related to nonvested share-based compensation arrangements and the
      weighted-average period over which this cost is expected to be recognized is
      approximately three years.


90


**13.
      Pensions**





The
      Company sponsors defined benefit plans covering substantially all employees.
      The
      Company uses a measurement date of December 31 for all of its pension plans.





The
      Company adopted SFAS No. 158 effective December 31, 2006. SFAS No. 158 requires
      an employer to recognize the funded status of each of its defined pension and
      postretirement benefit plans as a net asset or liability in its statement of
      financial position with an offsetting amount in accumulated other comprehensive
      income, and to recognize changes in that funded status in the year in which
      changes occur through comprehensive income. Following the adoption of SFAS
      No.
      158, additional minimum pension liabilities (“AML”) and related intangible
      assets are no longer recognized. The provisions of SFAS No. 158 are to be
      applied on a prospective basis.





For
      U.S.
      plans, the incremental change due to the adoption of SFAS No. 158 at December
      31, 2006 is as follows:





Balance
            
            
            
            BalancePrior to
            
            
            
            AfterSFAS 158
            
            SFAS 158
            
            SFAS 158(Thousands)
            
            Adjustments
            
            Adjustments
            
            AdjustmentsIntangible
                pension asset
            
            $
            1,040
            
            $
            (1,040
            )
            $
            -Accrued
                and minimum pension liability
            
            $
            (12,626
            )
            $
            (5,478
            )
            $
            (18,104
            )Accumulated
                other comprehensive income (loss), pre-tax
            
            $
            2,494
            
            $
            5,478
            
            $
            7,972Deferred
                tax assets
            
            
            982
            
            
            2,156
            
            
            3,138Accumulated
                other comprehensive income, net of tax
            
            $
            1,512
            
            $
            3,322
            
            $
            4,834





For
      all
      U.S. plans, at December 31, 2007 and 2006 the projected benefit obligation
      and
      accumulated benefit obligation each exceed plan assets.


91





For
      U.S.
      plans, the following table provides a reconciliation of changes in the plans’
benefit obligations and fair value of assets over the two-year period ended
      December 31, 2007 and the funded status as of December 31 of both
      years:





(Thousands)
            
            **2007**
            
            2006**Change
                in Projected Benefit Obligations**Projected
                benefit obligations at January 1
            
            **$**
            **79,888**
            
            $
            88,537Service
                cost
            
            
            **1,070**
            
            
            2,459Interest
                cost
            
            
            **4,664**
            
            
            4,884Actuarial
                gain
            
            
            **(4,623**
            **)**
            
            (5,626
            )Benefits
                paid
            
            
            **(2,207**
            **)**
            
            (2,227
            )Settlement
            
            
            **(1,754**
            **)**
            
            (3,432
            )Curtailment
            
            
            **(265**
            **)**
            
            (4,707
            )Projected
                benefit obligations at December 31
            
            
            **76,773**
            
            
            79,888**Change
                in Plan Assets**Fair
                value of plan assets at January 1
            
            
            **61,784**
            
            
            51,488Actual
                return on plan assets
            
            
            **2,516**
            
            
            6,742Employer
                contributions
            
            
            **5,413**
            
            
            9,213Settlement
            
            
            **(1,754**
            **)**
            
            (3,432
            )Benefits
                paid
            
            
            **(2,207**
            **)**
            
            (2,227
            )Fair
                value of plan assets at December 31
            
            
            **65,752**
            
            
            61,784**Funded
                status at December 31**
            
            **$**
            **(11,021**
            **)**
            **$**
            **(18,104**
            **)****Amounts
                recognized in the Balance sheet**Current
                liability - Accrued benefit cost
            
            **$**
            **(82**
            **)**
            $
            (82
            )Noncurrent
                liability - Accrued benefit cost
            
            
            (**10,939**
            **)**
            
            (18,022
            )**Net
                amount recognized**
            
            **$**
            **(11,021**
            **)**
            $
            (18,104
            )





**Amounts
      recognized in Accumulated Other Comprehensive Income consist
      of:**





(Thousands)
            
            **2007**
            
            2006Accumulated
                prior service cost
            
            **$**
            **1,142**
            
            $
            1,390Accumulated
                net actuarial loss
            
            
            **4,208**
            
            
            6,582Net
                amount recognized, before tax effect
            
            **$**
            **5,350**
            
            $
            7,972





The
      2007
      and 2006 settlements were the result of participants in the U.S. salaried
      plan receiving lump sums. The 2007 curtailment was as a result of the Company
      freezing the benefits under one of its bargaining unit plans as of April 30,
      2007. The 2006 curtailment was as a result of the Company freezing the benefits
      under its U.S. salaried plan as of December 31, 2006 as well as a reduction
      in
      workforce that occured during the period.





The
      accumulated benefit obligation at the end of 2007 and 2006 was $72.0 million
      and
      $73.9 million, respectively.


92





For
      U.S.
      plans, the assumptions used to determine benefit obligations are shown in the
      following table:




**2007**
            
            2006Weighted
                average actuarial assumptions at December 31:Discount
                rate
            
            
            **6.15**
            **%**
            
            5.86
            %Rate
                of increase in compensation levels
            
            
            **4.00**
            **%**
            
            4.00
            %





The
      asset
      allocation for the Company’s pension plans at the end of 2007 and 2006, and the
      target allocation for 2008, by asset category, follows:





Target
            
            Percentage of Plan AssetsAllocation
            
            at Year EndAsset
                Category
            
            2008
            
            **2007**
            
            2006Equity
                securities
            
            
            75.0
            %
            
            **74.3**
            %
            
            73.5
            %Debt
                securities
            
            
            25.0
            
            
            **25.1**
            
            
            24.5Other
            
            
            -
            
            
            **0.6**
            
            
            2.0Total
            
            
            100.0
            %
            
            **100.0**
            %
            
            100.0
            %





The
      Company’s investment strategy is to earn the highest possible long-term total
      rate of return while minimizing the associated risk to ensure the preservation
      of the plan assets for the provision of benefits to participants and their
      beneficiaries. This is accomplished by active management of a diversified
      portfolio by fund managers, fund styles, asset types, risk characteristics
      and
      investment holdings.




Information
      about the expected cash flows for the U.S. pension plans follows:





Year (Thousands)
            
            Pension Benefits**Employer
                contributions**2008
            
            $
            3,660**Benefit
                Payments**2008
            
            $
            3,3822009
            
            
            4,6542010
            
            
            4,7942011
            
            
            5,0032012
            
            
            5,1382013 –
                2017
            
            
            30,781


93


For
      U.S.
      plans, the following table provides the components of net periodic pension
      costs
      of the plans for the years ended December 31, 2007, 2006 and 2005:





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005Service
                cost
            
            **$**
            **1,070**
            
            $
            2,459
            
            $
            2,954Interest
                cost
            
            
            **4,664**
            
            
            4,884
            
            
            4,714Expected
                return on assets
            
            
            **(4,994**
            **)**
            
            (4,375
            )
            
            (4,154
            )Prior
                service cost
            
            
            **248**
            
            
            303
            
            
            459Net
                amortization
            
            
            **351**
            
            
            842
            
            
            634Settlement
            
            
            **(122**
            **)**
            
            -
            
            
            -Curtailment
            
            
            **(265**
            **)**
            
            788
            
            
            818Net
                periodic pension cost
            
            **$**
            **952**
            
            $
            4,901
            
            $
            5,425





**Other
      Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive
      Income**





Year Ended December 31(Thousands)
            
            **2007**Curtailment
                effect
            
            **$**
            **265**Settlements
            
            
            **122**Current
                year actuarial gain
            
            
            **(2,410**
            **)**Amortization
                of actuarial loss
            
            
            **(351**
            **)**Amortization
                of prior service cost****
            
            
            **(248**
            **)**Total
                recognized in other comprehensive income
            
            **$**
            **(2,622**
            **)**Total
                recognized in net periodic pension cost and other comprehensive
                income
            
            **$**
            **(1,670**
            **)**





The
      estimated amounts that will be amortized from accumulated other comprehensive income
      into net periodic pension cost in 2008 are as follows:





Prior
                service cost
            
            **$**
            **242**Net
                actuarial loss
            
            
            **295**Total
                at December 31
            
            **$**
            **537**





For
      U.S.
      plans, the assumptions used in the measurement of net periodic pension cost
      are
      shown in the following table:





**2007**
            
            2006
            
            2005**Weighted
                average actuarial assumptions at December 31:**Discount
                rate
            
            
            **5.93**
            **%**
            
            5.60
            %
            
            5.75
            %Expected
                annual return on plan assets
            
            
            **8.00**
            **%**
            
            8.25
            %
            
            8.50
            %Rate
                of increase in compensation levels
            
            
            **4.00**
            **%**
            
            4.00
            %
            
            3.22-4.00
            %





The
      discount rates that the Company utilizes for its Qualified Plans to determine
      pension obligations are based on a review of long-term bonds that receive one
      of
      the two highest ratings given by a recognized rating agency. The expected rate
      of return on plan assets was determined by evaluating input from the Company’s
      actuaries, including their review of asset class return expectations as well
      as
      long-term inflation assumptions. Projected returns are based on broad equity
      and
      bond indices that the Company uses to benchmark its actual asset portfolio
      performance based on its portfolio mix of approximately 75% equity and 25%
      debt
      securities. The Company also takes into account the effect on its projected
      returns from any reasonably likely changes in its asset portfolio when
      applicable. While the Company’s historical 10-year compounded return of 5.65% is
      below 2007’s expected annual return on plan assets of 8.00%, the Company also
      strongly considered the fact that the 10 and 15 year average return on its
      benchmark portfolio was 7.03% and 9.53%, respectively.




94




For
      European plans, the change due to the AML and adoption of SFAS No. 158 at
      December 31, 2006 is as follows:





Balance
            
            
            
            BalancePrior to
            
            
            
            AfterSFAS 158
            
            SFAS 158
            
            SFAS 158(Thousands)
            
            Adjustments
            
            Adjustments
            
            AdjustmentsIntangible
                pension asset
            
            $
            78
            
            $
            (78
            )
            $
            -Accrued
                and minimum pension liability
            
            $
            (14,344
            )
            $
            (2,636
            )
            $
            (16,980
            )Accumulated
                other comprehensive income (loss), pre-tax
            
            $
            2,284
            
            $
            2,636
            
            $
            4,920Deferred
                tax assets
            
            
            766
            
            
            583
            
            
            1,349Accumulated
                other comprehensive income, net of tax
            
            $
            1,518
            
            $
            2,053
            
            $
            3,571





For
      European plans, the following tables provide a reconciliation of changes in
      the
      plans’ benefit obligations and fair value of assets over the two-year period
      ended December 31, 2007 and the funded status as of December 31 of both
      years:





(Thousands)
            
            **2007**
            
            2006**Change
                inProjectedBenefit
                Obligations**Projected
                benefit obligations at January 1
            
            **$**
            **36,822**
            
            $
            34,322Service
                cost
            
            
            **783**
            
            
            871Interest
                cost
            
            
            **1,885**
            
            
            1,560Employee
                contributions
            
            
            **192**
            
            
            176Actuarial
                gain
            
            
            **(4,312**
            **)**
            
            (1,519
            )Benefits
                paid
            
            
            **(1,519**
            **)**
            
            (1,185
            )Curtailment
            
            
            -
            
            
            (1,044
            )Foreign
                currency exchange rate changes
            
            
            **2,512**
            
            
            3,641Projected
                benefit obligations at December 31
            
            
            **36,363**
            
            
            36,822**Change
                in****Plan
                Assets**Fair
                value of plan assets at January 1
            
            
            **19,842**
            
            
            15,790Actual
                return on plan assets
            
            
            **840**
            
            
            1,300Employer
                contributions
            
            
            **2,374**
            
            
            2,182Employee
                contributions
            
            
            **192**
            
            
            176Benefits
                paid
            
            
            **(1,519**
            **)**
            
            (1,185
            )Foreign
                currency exchange rate changes
            
            
            **1,414**
            
            
            1,579Fair
                value of plan assets at December 31
            
            
            **23,143**
            
            
            19,842**Funded
                Status at December 31**
            
            **$**
            **(13,220**
            **)**
            $
            (16,980
            )**Amounts
                recognized in the Balance sheet**Current
                liability – Accrued benefit cost
            
            **$**
            **(541**
            **)**
            $
            (244
            )Noncurrent
                liability – Accrued benefit cost
            
            
            (**12,679**
            **)**
            
            (16,736
            )**Net
                amount recognized**
            
            **$**
            **(13,220**
            **)**
            $
            (16,980
            )




95





**Amounts
      recognized in Accumulated Other Comprehensive Income as of December 31 consist
      of:**





(Thousands)
            
            **2007**
            
            2006Accumulated
                net actuarial loss
            
            **$**
            **1,073**
            
            $
            4,751Accumulated
                transition obligation
            
            
            **139**
            
            
            169Net
                amount recognized, before tax effect
            
            **$**
            **1,212**
            
            $
            4,920





The
      2006
      curtailment is due to the reduction in workforce and future service years under
      the German plan as a result of the February 2006 divestiture of the
      Charcoal/Liquid business.





The
      accumulated benefit obligation at the end of 2007 and 2006 was $32.5 million
      and
      $33.1 million, respectively.





For
      European plans, the assumptions used to determine end of year benefit
      obligations are shown in the following table:





**2007**
            
            2006**Weighted
                average actuarial assumptions at December 31:**Discount
                Rate
            
            
            **5.68**
            **%**
            
            4.89
            %Rate
                of increase in compensation levels
            
            
            **4.29**
            **%**
            
            4.03
            %




96





The
      asset
      allocation for the Company’s European pension plans at the end of 2007 and 2006,
      and the target allocation for 2008, by asset category, follows:





Percent of Plan AssetsTarget Allocation
            
            at Year-EndAsset
                Category
            
            2008
            
            **2007**
            
            2006Equity
                Securities
            
            
            41.1
            %
            
            **41.7**
            **%**
            
            68.5
            %Debt
                Securities
            
            
            44.4
            
            
            **42.2**
            
            
            29.2Other
            
            
            14.5
            
            
            **16.1**
            
            
            2.3Total
            
            
            100.0
            %
            
            **100.0**
            %
            
            100.0
            %





At
      the
      end of 2007 and 2006, the projected benefit obligation, accumulated benefit
      obligation, and fair value of plan assets for European pension plans with a
      projected benefit obligation in excess of plan assets, and for pension plans
      with an accumulated benefit obligation in excess of plan assets, were as
      follows:





Projected Benefit Obligation
            
            Accumulated BenefitExceeds the Fair Value of
            
            Obligation Exceeds the FairPlan’s Assets
            
            Value of Plan’s Assets(Thousands)
            
            **2007**
            
            2006
            
            **2007**
            
            2006Projected
                benefit obligation
            
            **$**
            **36,363**
            
            $
            36,822
            
            **$**
            **30,393**
            
            $
            32,131Accumulated
                benefit obligation
            
            **$**
            **32,524**
            
            $
            33,127
            
            **$**
            **27,611**
            
            $
            29,267Fair
                value of plan assets
            
            **$**
            **23,143**
            
            $
            19,842
            
            **$**
            **17,562**
            
            $
            15,491





Information
      about the expected cash flows for the European pension plans
      follows:





Year (Thousands)
            
            Pension Benefits**Employer
                contributions**2008
            
            $
            2,547**Benefit
                Payments**2008
            
            $
            1,1892009
            
            
            1,4842010
            
            
            1,4732011
            
            
            1,8002012
            
            
            1,8632013 –
                2017
            
            
            8,218





Total
      benefits expected to be paid include both the Company’s share of the benefit
      cost and the participants’ share of the cost, which is funded by participant
      contributions to the plan.


97


For
      European plans, the following table provides the components of net periodic
      pension costs of the plans for the years ended December 31, 2007, 2006 and
      2005:





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005Service
                cost
            
            **$**
            **783**
            
            $
            871
            
            $
            864Interest
                cost
            
            
            **1,885**
            
            
            1,560
            
            
            1,583Expected
                return on assets
            
            
            **(1,405**
            **)**
            
            (1,128
            )
            
            (1,739
            )Net
                amortization
            
            
            **157**
            
            
            226
            
            
            820Net
                periodic pension cost
            
            **$**
            **1,420**
            
            $
            1,529
            
            $
            1,528





**Other
      Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive
      Income**





Year Ended December 31(Thousands)
            
            **2007**Current
                year actuarial gain
            
            **$**
            **(3,746**
            **)**Amortization
                of actuarial gain
            
            
            **(109**
            **)**Amortization
                of transition obligation
            
            
            **(48**
            **)**Foreign
                currency exchange****
            
            
            **196**Total
                recognized in other comprehensive income
            
            **$**
            **(3,707**
            **)**Total
                recognized in net periodic pension cost and other comprehensive
                income
            
            **$**
            **(2,287**
            **)**





The
      estimated amounts that will be amortized from accumulated other comprehensive income
      into net periodic pension cost in 2008 are as follows:





Net
                transition obligation
            
            **$**
            **51**Net
                actuarial loss
            
            
            **29**Total
                at December 31
            
            **$**
            **80**





For
      European plans, the assumptions used in the measurement of the net periodic
      pension cost are shown in the following table:





**2007**
            
            2006
            
            2005**Weighted
                average actuarial assumptions at December 31:**Discount
                rate
            
            
            **4.89**
            **%**
            
            4.45
            %
            
            4.98
            %Expected
                annual return on plan assets
            
            
            **6.45**
            **%**
            
            6.71
            %
            
            7.16
            %Rate
                of increase in compensation levels
            
            
            **3.90**
            **%**
            
            3.80
            %
            
            3.22
            %





The
      expected rate of return on plan assets was determined by evaluating input from
      the Company’s actuaries, including their review of asset class return
      expectations as well as long-term inflation assumptions. Projected returns
      are
      based on broad equity and bond indices that the Company uses to benchmark its
      actual asset portfolio performance. The Company also takes into account the
      effect on its projected returns from any reasonably likely changes in its asset
      portfolio when applicable. At December 31, 2007, the Company’s European
      portfolio contained approximately 27% less in equity securities compared to
      historical levels due to an increase in debt securities. The Company will
      continue to rebalance the portfolio during 2008 and has reduced the Plan’s 2008
      expected return on plan assets to 6.45%. The portfolio’s historical 10-year
      compounded rate of return is 7.27%.


98




The
      non-current portion of $23.6 million and $35.3 million at December 31, 2007
      and
      2006, respectively, for the U.S. and European pension liabilities is included
      in
      other liabilities.





The
      Company also sponsors a defined contribution pension plan for certain U.S.
      employees that permits employee contributions of up to 50% of eligible
      compensation in accordance with Internal Revenue Service guidance. In September
      2006, the Company announced the freezing of its defined benefit pension plan
      for
      all U.S. salaried employees replacing it with a defined contribution plan.
      Under
      this defined contribution plan, the Company makes a fixed contribution of 2%
      of
      eligible employee compensation on a quarterly basis and matches contributions
      made by each participant in an amount equal to 100% of the employee contribution
      up to a maximum of 2% of employee compensation. In addition, each of these
      employees is eligible for an additional Company contribution of up to 4% of
      employee compensation based upon annual Company performance at the discretion
      of
      the Company’s Board of Directors. Employer matching contributions for
      non-represented employees vest after two years of service. For bargaining unit
      employees at the Catlettsburg, Kentucky facility, the Company contributes a
      maximum of $25.00 per month to the plan. For bargaining unit employees at the
      Columbus, Ohio facility, the Company began making contributions to the USW
      401(k) Plan of $1.15 per actual hour worked for eligible employees when their
      former Barnebey Sutcliffe Employee USWA Local 23.08 401(k) Plan was discontinued
      and their defined benefit pension plan was frozen effective April 30, 2007.
      The
      Company realized a $0.3 million curtailment gain as a result of freezing the
      aforementioned plan. Employer matching contributions for bargaining unit
      employees vest immediately. Total expenses related to the defined contribution
      plans for years ended December 31, 2007, 2006, and 2005 were $1.9 million,
      $0.4
      million, and $0.2 million, respectively.





As
      previously discussed, the Company adopted SFAS No. 158 on
      December 31, 2006 as required, and the related adjustments are reflected in
      these financial statements. The Company incorrectly presented the effect of
      this
      transition adjustment as part of 2006 comprehensive income on its Consolidated
      Statements of Income (Loss) and Comprehensive Income (Loss) for the fiscal
      year ended December 31, 2006. The Consolidated Statements of Income (Loss)
      and Comprehensive Income (Loss) have been restated to appropriately present
      2006 comprehensive income excluding the SFAS No. 158 transition
      adjustment. The impact of removing the SFAS No. 158 transition
      adjustment from the 2006 Consolidated Statements of Income (Loss) and
      Comprehensive Income (Loss) changed the reported comprehensive income (loss)
      from $(3,935,000) to $1,440,000.


99


**14.
      Provision (Benefit) for Income Taxes**





The
      components of the provision (benefit) for income taxes for continuing operations
      were as follows:





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005CurrentFederal
            
            **$**
            **1,138**
            
            $
            (1,090
            )
            $
            (2,167
            )State
                and local
            
            
            **(17**
            **)**
            
            19
            
            
            (7
            )Foreign
            
            
            **3,418**
            
            
            801
            
            
            304**4,539**
            
            
            (270
            )
            
            (1,870
            )DeferredFederal
            
            
            **706**
            
            
            (1,762
            )
            
            (8,800
            )State
                and local
            
            
            **292**
            
            
            (978
            )
            
            (1,027
            )Foreign
            
            
            **2,289**
            
            
            334
            
            
            1,713**3,287**
            
            
            (2,406
            )
            
            (8,114
            )Tax
                expense on repatriation
            
            
            -
            
            
            -
            
            
            296Provision
                (benefit) for income taxes for continuing operations
            
            **$**
            **7,826**
            
            $
            (2,676
            )
            $
            (9,688
            )





Income
      from continuing operations before income taxes and equity in income (loss)
      of
      equity investments includes income of $12.1 million for 2007, a loss of $1.1
      million for 2006, and income of $9.4 million for 2005 generated by operations
      outside the United States.





The
      difference between the U.S. federal statutory tax rate and the Company’s
      effective income tax rate for continuing operations is as follows:





Year Ended December 31**2007**
            
            2006
            
            2005U.S.
                federal statutory rate
            
            
            **35.0**
            **%**
            
            35.0
            %
            
            35.0
            %State
                income taxes, net of federal income tax benefit
            
            
            **1.2**
            
            
            5.2
            
            
            3.4Non-deductible
                goodwill impairment
            
            
            -
            
            
            (17.1
            )
            
            -Tax
                rate differential on foreign income
            
            
            **0.1**
            
            
            (5.9
            )
            
            0.7Extraterritorial
                income exclusion
            
            
            -
            
            
            4.8
            
            
            (0.2
            )Net
                foreign tax credits
            
            
            **4.9**
            
            
            (1.0
            )
            
            2.0Tax
                statute expiration
            
            
            **(6.7**
            **)**
            
            3.8
            
            
            11.1Change
                in uncertain tax positions
            
            
            **7.6**
            
            
            -
            
            
            -Change
                in tax rates
            
            
            **(5.2**
            **)**
            
            -
            
            
            -Other
                - net
            
            
            **(0.2**
            **)**
            
            (2.4
            )
            
            (2.2
            )Effective
                income tax rate for continuing operations
            
            
            **36.7**
            **%**
            
            22.4
            %
            
            49.8
            %




100





In
      2005,
      the Company repatriated certain foreign earnings under the American Jobs
      Creation Act of 2004 (the “AJCA”) that reduced the federal income tax rate for a
      one-year period to 5.25% on earnings distributed from non-U.S. based
      subsidiaries. The Company repatriated a total of $4.9 million from two of its
      wholly owned subsidiaries ($1.7 million from Calgon Carbon Canada, Inc. and
      $3.2
      million from Chemviron Carbon Ltd.). The current income tax expense included
      in
      the 2005 provision for this repatriation is $0.3 million. The Company has not
      changed its policy of permanent reinvestment under APB No. 23, “Accounting for
      Income Taxes - Special Areas,” as a result of this one-time repatriation of
      earnings.





The
      Company’s total provision (benefit) for income taxes is shown
      below:





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005Continuing
                operations
            
            **$**
            **7,826**
            
            $
            (2,676
            )
            $
            (9,688
            )Discontinued
                operations
            
            
            **(91**
            **)**
            
            2,814
            
            
            1,635Other
                comprehensive income
            
            
            **3,449**
            
            
            2,752
            
            
            (3,019
            )Cumulative
                effect of change in accounting principle
            
            
            **-**
            
            
            (2,739
            )
            
            -Total
                provision (benefit) for income taxes
            
            **$**
            **11,184**
            
            $
            151
            
            
            (11,072
            )





The
      Company has the following gross operating loss carryforwards and domestic tax
      credit carryforwards as of December 31, 2007:





Type
                (Thousands)
            
            Amount
            
            Expiration DateResearch
                and development and foreign tax credits
            
            $
            10,313
            
            
            2009-2022State
                tax credits
            
            
            767
            
            
            2027Federal
                alternative minimum tax credits
            
            
            428
            
            
            NoneOperating
                loss carryforwards - federal
            
            
            549
            
            
            2025Operating
                loss carryforwards - state*
            
            
            61,400
            
            
            2008-2026Operating
                loss carryforwards - foreign
            
            
            9,269
            
            
            None





*Of
      the
      total state operating loss carryforwards, 90% expire in 2018 or
      later.





The
      components of deferred taxes consist of the following:





December 31(Thousands)
            
            **2007**
            
            2006Deferred
                tax assetsForeign
                tax loss and credit carryforwards**
            
            **$**
            **-**
            
            $
            5,568U.S.
                net operating loss and credit carryforwards***
            
            
            **13,090**
            
            
            17,369Accruals
            
            
            **9,340**
            
            
            7,325Inventories
            
            
            **4,119**
            
            
            1,151Pensions
            
            
            **6,888**
            
            
            10,236Goodwill
                and other intangible assets
            
            
            **2,770**
            
            
            3,820Valuation
                allowance
            
            
            **(6,218**
            **)**
            
            (5,742
            )Total
                deferred tax assets
            
            
            **29,989**
            
            
            39,727Deferred
                tax liabilitiesProperty,
                plant and equipment
            
            **$**
            **10,136**
            
            $
            12,253U.S.
                liability on Belgian net deferred tax assets
            
            
            **1,224**
            
            
            836U.S.
                liability on German net deferred tax assets
            
            
            **2,575**
            
            
            1,030U.S.
                liability on deferred foreign income
            
            
            **1,572**
            
            
            820Cumulative
                translation adjustment on undistributed earnings
            
            
            **178**
            
            
            481Total
                deferred tax liabilities
            
            
            **15,685**
            
            
            15,420Net
                deferred tax asset
            
            **$**
            **14,304**
            
            $
            24,307





**FIN
      48
      liabilities of approximately $2.3 million fully offset the foreign net operating
      losses and credit carryforwards in 2007.


***
      FIN
      48 liabilities of approximately $1.1 million offset the U.S. net operating
      loss
      and credit carryforwards in 2007.


101


A
      valuation allowance is established when it is more likely than not that a
      portion of the deferred tax assets will not be realized. The valuation allowance
      is adjusted based on the changing facts and circumstances, such as the expected
      expiration of an operating loss carryforward.





The
      Company’s valuation allowance consists of the following:





Thousands
            
            U.S. Foreign
              Tax Credits
            
            State
              Operating
              Loss
              Carryforwards
            
            Foreign
              Operating
              Loss
              Carryforwards
            
            Total
              Valuation
              AllowanceBalance
                as of January 1, 2006
            
            $
            1,337
            
            $
            589
            
            $
            1,456
            
            $
            3,382Increase
                due to uncertainty in realization of tax benefits
            
            
            2,140
            
            
            19
            
            
            -
            
            
            2,159Effect
                of exchange rate changes
            
            
            -
            
            
            -
            
            
            201
            
            
            201Balance
                as of December 31, 2006
            
            
            3,477
            
            
            608
            
            
            1,657
            
            
            5,742Increase
                due to uncertainty in realization of tax benefits
            
            
            2,441
            
            
            -
            
            
            -
            
            
            2,441Decrease
                due to expired net operating loss carryforwards
            
            
            -
            
            
            (37
            )
            
            (1,657
            )
            
            (1,694
            )Decrease
                due to utilization of state net operating loss carryforwards
            
            
            -
            
            
            (271
            )
            
            -
            
            
            (271
            )Balance
                as of December 31, 2007
            
            $
            5,918
            
            $
            300
            
            $
            -
            
            $
            6,218




102





The
      increase in the valuation allowance in 2007 relates primarily to the Company’s
      assertion that it will more likely than not be unable to utilize foreign tax
      credits to offset 2007 income generated in Germany and Japan.





As
      of
      December 31, 2007, the Company has recognized a net tax benefit of $13.1 million
      for foreign and domestic operating loss and credit carryforwards. Approximately
      80% of the net benefit relates to federal operating loss carryforwards, which
      do
      not begin to expire until 2025; state operating loss carryforwards, of which
      90%
      will not expire until 2018 or later; foreign tax credits, and the federal
      alternative minimum tax credits. The remaining 20% of the net tax benefit
      relates to foreign operating loss carryforwards, which generally have unlimited
      carryforward periods but may be subject to limitations based on specific types
      of income. The Company believes that it is more likely than not that its future
      taxable income in the relevant tax jurisdictions will be sufficient to enable
      the realization of these tax benefits in excess of the valuation allowance.





The
      Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes - an interpretation of FASB Statement No. 109, “Accounting for
      Income Taxes” (“FIN 48”), effective January 1, 2007. 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 tax returns. As a result, 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. The following is a reconciliation of the unrecognized
      income tax benefits:





ThousandsBalance
                at January 1, 2007
            
            $
            9,477Gross
                increases for tax positions of prior years
            
            
            124Gross
                decreases for tax positions of prior years
            
            
            (1,187
            )Gross
                increases for tax positions of current years
            
            
            4,476Lapse
                of statute of limitations
            
            
            (937
            )Balance
                at December 31, 2007
            
            $
            11,953





As
      of
      December 31, 2007, approximately $10.0 million of the $12.0 million of
      unrecognized tax benefits would reduce the Company’s effective tax rate if
      recognized. Total uncertain tax positions recorded in accrued pension and other
      liabilities were approximately $9.2 million for the year ended December 31,
      2007.





The
      Company recognizes accrued interest and penalties related to unrecognized tax
      benefits in income tax expense. In its initial adoption of FIN 48, the Company
      recognized approximately $0.5 million of interest and penalties. During 2007,
      the Company recognized approximately $0.1 million of interest and penalties.
      As
      of December 31, 2007, the amount accrued for the payment of interest and
      penalties is approximately $0.6 million.





At
      this
      time, the Company believes that it is reasonably possible that approximately
      $0.7 million of the estimated unrecognized tax benefits as of December 31,
      2007
      will be recognized within the next twelve months based on the expiration of
      statutory review periods.


103





As
      of
      December 31, 2007, the following tax years remain subject to examination for
      the
      major jurisdictions where the Company conducts business:





Jurisdiction
            
            YearsUnited
                States
            
            
            2004
                - 2007Kentucky
            
            
            2003
                - 2007Pennsylvania
            
            
            2002
                - 2007Belgium
            
            
            2004
                - 2007Germany
            
            
            2003
                - 2007Canada
            
            
            2003
                - 2007





**15.
      Accumulated Other Comprehensive Income (Loss)**





AccumulatedCurrency
            
            Pension
            
            
            
            OtherTranslation
            
            Benefit
            
            
            
            ComprehensiveAdjustment
            
            Adjustments
            
            Other
            
            Income
                (Loss)Balance,
                January 1, 2005
            
            $
            19,434
            
            $
            (2,965
            )
            $
            (216
            )
            $
            16,253Net
                Change
            
            
            (4,799
            )
            
            (4,856
            )
            
            (156
            )
            
            (9,811
            )Balance,
                December 31, 2005
            
            
            14,635
            
            
            (7,821
            )
            
            (372
            )
            
            6,442Net
                Change
            
            
            4,644
            
            
            (585
            )
            
            (196
            )
            
            3,863Balance,
                December 31, 2006
            
            
            19,279
            
            
            (8,406
            )
            
            (568
            )
            
            10,305Net
                Change
            
            
            2,557
            
            
            3,648
            
            
            498
            
            
            6,703**Balance,
                December 31, 2007**
            
            **$**
            **21,836**
            
            **$**
            **(4,758**
            **)**
            **$**
            **(70**
            **)**
            **$**
            **17,008**




104





Foreign
      currency translation adjustments exclude income tax expense (benefit) for the
      earnings of the Company’s non-U.S. subsidiaries as management believes these
      earnings will be reinvested for an indefinite period of time. Determination
      of
      the amount of unrecognized deferred U.S. income tax liability on these
      unremitted earnings is not practicable.





The
      income tax effect included in accumulated other comprehensive income (loss)
      for
      other non-U.S. subsidiaries was $0.2 million at December 31, 2007, 2006, and
      2005, respectively. The income tax benefit associated with SFAS No. 158
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans” included in accumulated other comprehensive income was $2.7 million and
      $4.5 million at December 31, 2007 and 2006, respectively, and the income tax
      benefit associated with the additional minimum pension liability at December
      31,
      2005 was $4.7 million.


105





**16.
      Supplemental Cash Flow Information**





(Thousands)
            
            **2007**
            
            2006
            
            2005**Cash
                paid during the year for:**Interest
                (net of amounts capitalized)
            
            **$**
            **5,336**
            
            $
            4,560
            
            $
            5,074Income
                taxes-net
            
            **$**
            **1,811**
            
            $
            665
            
            $
            362




106


**17.
      Derivative Instruments**





The
      Company accounts for its derivative instruments under SFAS No. 133, 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’s corporate and foreign subsidiaries use forward exchange contracts to
      limit the exposure of exchange rate fluctuations on certain foreign currency
      receivables, payables, and other known and forecasted transactional exposures
      for periods consistent with the expected cash flow of the underlying
      transactions. The contracts generally mature within one year and are designed
      to
      limit exposure to exchange rate fluctuations. The Company uses cash flow hedges
      to limit the exposure to changes in natural gas prices. The contracts generally
      mature within one to thirty-six months.





At
      December 31, 2007, the Company had sixteen derivative instruments outstanding
      of
      which one was a foreign currency swap, nine were foreign currency forward
      exchange contracts, and six were cash flow hedges for forecasted purchases
      of
      natural gas. The Company applied hedge accounting treatment for the foreign
      currency swap and the six cash flow hedges for forecasted natural gas purchases.
      The Company did not apply hedge accounting treatment for the foreign currency
      forward exchange contracts and recorded an immaterial gain in other income.
      At
      December 31, 2006, the Company had fourteen derivative instruments outstanding
      of which one was a foreign currency swap, ten were foreign currency forward
      exchange contracts, and three were cash flow hedges for forecasted natural
      gas
      purchases. The Company applied hedge accounting treatment for the foreign
      currency swap and the three cash flow hedges for forecasted natural gas
      purchases. The Company did not apply hedge accounting treatment for the foreign
      currency forward exchange contracts and recorded an immaterial gain in other
      income.





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 changes in the fair value of the effective hedge portion
      of the foreign currency swap of $(0.1) million and $0.4 million, respectively,
      for the years ended December 31, 2007 and 2006, was recorded in other
      comprehensive income (loss). The balance of the effective hedge portion of
      the
      foreign currency swap recorded in other long-term liabilities was $0.8 million
      and $0.9 million, respectively, as of December 31, 2007 and 2006. The change
      in
      fair value of the cash flow hedges for the forecasted natural gas purchases
      recorded in other comprehensive income (loss) was $(0.4) million and $0.6
      million, net of tax, respectively, as of December 31, 2007 and 2006,
      respectively. The balance of the cash flow hedges for forecasted natural gas
      purchases recorded in other long-term liabilities was $0.3 million and $1.0
      million, respectively, as of December 31, 2007 and 2006.


107





No
      component of the derivative gains or losses has been excluded from the
      assessment of hedge effectiveness. For the years ended December 31, 2007 and
      2006, the net gain or loss recognized due to the amount of hedge ineffectiveness
      was not material.





Management’s
      policy for managing foreign currency risk is to use derivatives to hedge up
      to
      75% of the forecasted intercompany sales to its European subsidiaries. The
      hedges involving foreign currency derivative instruments do not span a period
      greater than one year from the contract inception date. Management uses various
      hedging instruments including, but not limited to foreign currency forward
      contracts, foreign currency option contracts and foreign currency swaps.
      Management’s policy for managing natural gas exposure is to use derivatives to
      hedge from 25% to 100% of the forecasted natural gas requirements. These cash
      flow hedges span up to thirty-six months from the contract inception date.
      Hedge
      effectiveness is measured on a quarterly basis and any portion of
      ineffectiveness is recorded directly to the Company’s
      earnings.


108





**18** **.
      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 for
      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. A jury returned
      a
      verdict in favor of the Company and against the defendants in the amount of
      $10.0 million on January 26, 2007 which has not been recorded in operations
      as
      of December 31, 2007. After the Court denied all post-trial motions, including
      the defendants’ motion for a new trial and the Company’s motion for the award of
      prejudgment interest, all parties appealed to the United States Circuit Court
      of
      Appeals for the Third Circuit. The parties settled the case in January 2008
      when
      the defendants agreed to pay the Company $9.25 million. This sum was received
      in
      February 2008.





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 Waterlink’s 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 December 31, 2006. The reduction of the liability
      was recorded as a reduction of selling, general and administrative expenses
      on
      the Company’s condensed consolidated statement of operations and retained
      earnings for the year ended December 31, 2006. The Company has not incurred
      any
      environmental remediation expense for the year ended December 31, 2007 and
      has
      incurred a total of $0.2 million of environmental remediation expense to date.
      It is reasonably possible that a change in the estimate of this obligation
      will
      occur as remediation preparation and remediation activity commences over the
      upcoming months. The ultimate remediation costs are dependent upon, among other
      things, the requirements of any state or federal environmental agencies, the
      remediation methods employed, the final scope of work being determined, and
      the
      extent and types of contamination which will not be fully determined until
      experience is gained through remediation and related activities. The accrued
      amounts are expected to be paid out over the course of several years once work
      has commenced. The Company has yet to make a determination that it will proceed
      with remediation efforts in 2008.


109





Following
      protracted litigation in multiple jurisdictions, the U.S. Court of Appeals
      for
      the Federal Circuit held that the Company’s process patents for the use of
      ultraviolet light to prevent infection from Cryptosporidium and Giardia in
      drinking water (the “UV patents”) are invalid in the United States. On March 3,
      2008, the Supreme Court of Canada held that the Company’s Canadian UV patents
      are invalid. The Company did not appeal the ruling in the United States and
      the
      Canadian ruling concluded the litigation. 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 the Company’s UV patents. In 2007, a
      German trial court found that a competitor infringed the Company’s UV patents
      with respect to medium pressure ultraviolet light, but did not infringe with
      respect to low pressure ultraviolet light. The Company appealed the decision
      relating to low pressure light, however, the competitor did not appeal. Oral
      argument is scheduled in this case for September 2008. The validity of the
      German UV patents, as distinguished from issues of infringement which were
      decided in the trial court, is the subject of pending administrative proceedings
      in Germany. The outcome of these cases has impaired the Company’s ability to
      capitalize on substantial future revenues from the licensing of its UV patents.





In
      January 2007, the Company received a Notice of Violation (“NOV”) from the United
      States Environmental Protection Agency, Region 4 (“EPA”) alleging multiple
      violations of the Federal Resource Conservation and Recovery Act and
      corresponding EPA and Kentucky Department of Environmental Protection (“KYDEP”)
      hazardous waste management rules and regulations. The alleged violations are
      based on information provided by the Company during and after a Multi Media
      Compliance Evaluation inspection of the Company’s Big Sandy Plant, located in
      Catlettsburg, Kentucky, conducted by the EPA and the KYDEP in September 2005,
      and concern the hazardous waste spent activated carbon regeneration facility
      located at the Big Sandy Plant. The Company submitted its initial written
      response to the NOV in June 2007. In August 2007, the EPA notified the Company
      that it believes there are significant RCRA violations that are unresolved
      by
      the information in the Company’s submittals. The Company met with EPA in
      December 2007 to discuss alleged violations. The EPA indicated at the meeting
      that it would evaluate its enforcement options and expects to contact the
      Company within the next several months to explore a resolution. The EPA can
      take
      formal enforcement action to require the Company to remediate alleged violations
      which could involve the assessment of substantial civil penalties as well.
      The
      Company is awaiting further response from the EPA and cannot predict with any
      certainty the probable outcome of this matter or range of potential loss, if
      any.


110





In
      June
      2007, the Company received a Notice Letter from the New York State Department
      of
      Environmental Conservation (“NYSDEC”) stating that the NYSDEC has determined
      that the Company 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 the Company 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, estimated to cost between approximately $11 million and $14 million,
      which would be shared among the PRPs. The Company has not determined what
      portion of the costs associated with the remedial program it would be obligated
      to bear and the Company cannot predict with any certainty the outcome of this
      matter or range of potential loss. The Notice Letter also demands payment of
      all
      monies that the NYSDEC has already expended for investigation and remediation
      of
      the Site, but does not specify the amount that the NYSDEC has expended.





In
      July
      2007, the Company received an 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 submitted a response to the NOV and the
      KYDEP’s comments in December 2007. The KYDEP has not indicated whether or not it
      will take formal enforcement action, and has not specified a monetary amount
      of
      civil penalties it might pursue in any such action, if any. On October 18,
      2007,
      the Company received an NOV from the EPA related to this permit application
      and
      submitted a revised application to both the KYDEP and the EPA within the
      mandated timeframe. At this time the Company cannot predict with any certainty
      the outcome of this matter or range of loss, if any.





The
      Company owns a 49% interest in a joint venture, Calgon Mitsubishi Chemical
      Corporation, which was formed on October 1, 2002. At December 31, 2007, Calgon
      Mitsubishi Chemical Corporation had $6.0 million in borrowings from an affiliate
      of the majority owner of the joint venture. The Company has agreed with the
      joint venture and the lender that, upon request by the lender, the Company
      will
      execute a guarantee for up to 49% of such borrowings. At December 31, 2007,
      the
      lender had not requested, and the Company has not provided, such guarantee.





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


111


**19.
      Basic and Diluted Net Income (Loss) from Continuing Operations Per Common
      Share**





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


For the Year Ended(Dollars in thousands, except per share amounts)
              
              **2007**
              
              2006
              
              2005Income
                  (loss) from continuing operations available to common
                  shareholders
              
              **$**
              **15,453**
              
              $
              (9,012
              )
              $
              (10,507
              )Weighted
                  Average Shares OutstandingBasic****
              
              
              **39,788,063**
              
              
              39,926,572
              
              
              39,615,117Effect
                  of Dilutive Securities
              
              
              **10,769,218**
              
              
              -
              
              
              -Diluted
              
              
              **50,557,281**
              
              
              39,926,572
              
              
              39,615,117Basic
                  net income (loss) from continuing operations per common
                  share
              
              **$**
              **.39**
              
              **$**
              (.23
              )
              $
              (.27
              )Diluted
                  net income (loss) from continuing operations per common
                  share
              
              **$**
              **.31**
              
              **$**
              (.23
              )
              $
              (.27
              )





For
      the
      years ended December 31, 2007, 2006, and 2005, there were 8,100, 1,832,513,
      and
      1,045,479 options that were excluded from the dilutive calculations as the
      effect would have been antidilutive.





The
      Company’s obligation under its 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). The 2007 average stock price was $10.93, which was higher
      than the conversion price of $5.10 therefore 9,535,512 shares were included
      in
      the dilutive share calculation. The 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.


112





**"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





Included in
            
            Share DilutionStock
            
            Conversion
            
            Price
            
            Share
            
            Per $1.00 SharePrice
            
            Price
            
            Difference
            
            Count
            
            Price Difference$
            5.10
            
            $
            5.10
            
            $
            0.00
            
            
            -
            
            
            -$
            5.60
            
            $
            5.10
            
            $
            0.50
            
            
            1,313,023
            
            
            2,626,046$
            6.10
            
            $
            5.10
            
            $
            1.00
            
            
            2,410,798
            
            
            2,410,798$
            7.10
            
            $
            5.10
            
            $
            2.00
            
            
            4,142,500
            
            
            2,071,250$
            8.10
            
            $
            5.10
            
            $
            3.00
            
            
            5,446,621
            
            
            1,815,540$
            9.10
            
            $
            5.10
            
            $
            4.00
            
            
            6,464,122
            
            
            1,616,031$
            10.10
            
            $
            5.10
            
            $
            5.00
            
            
            7,280,137
            
            
            1,456,027$
            11.10
            
            $
            5.10
            
            $
            6.00
            
            
            7,949,123
            
            
            1,324,854$
            12.10
            
            $
            5.10
            
            $
            7.00
            
            
            8,507,533
            
            
            1,215,362$
            13.10
            
            $
            5.10
            
            $
            8.00
            
            
            8,980,689
            
            
            1,122,586$
            14.10
            
            $
            5.10
            
            $
            9.00
            
            
            9,386,731
            
            
            1,042,970$
            15.10
            
            $
            5.10
            
            $
            10.00
            
            
            9,738,993
            
            
            973,899$
            16.10
            
            $
            5.10
            
            $
            11.00
            
            
            10,047,495
            
            
            913,409$
            17.10
            
            $
            5.10
            
            $
            12.00
            
            
            10,319,915
            
            
            859,993$
            18.10
            
            $
            5.10
            
            $
            13.00
            
            
            10,562,234
            
            
            812,480$
            19.10
            
            $
            5.10
            
            $
            14.00
            
            
            10,779,178
            
            
            769,941$
            20.10
            
            $
            5.10
            
            $
            15.00
            
            
            10,974,537
            
            
            731,636




113


**20** **.
      SEGMENT INFORMATION**




The
      Company’s management has identified three segments based on product line and
      associated services. Those segments include Activated Carbon and Service,
      Equipment, and Consumer. The Company’s chief operating decision maker, its chief
      executive officer, receives and reviews financial information in this format.
      The Activated Carbon and Service segment manufactures granular activated carbon
      for use in applications to remove organic compounds from liquids, gases, water,
      and air. This segment also consists of services related to activated carbon
      including reactivation of spent carbon and the leasing, monitoring, and
      maintenance of carbon fills at customer sites. The service portion of this
      segment also includes services related to the Company’s ion exchange
      technologies for treatment of groundwater and process streams. The Equipment
      segment provides solutions to customers’ 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 continuing
      operations:





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005**Net
                sales**Activated
                Carbon and Service
            
            **$**
            **295,608**
            
            $
            265,279
            
            $
            241,934Equipment
            
            
            **41,328**
            
            
            37,884
            
            
            36,867Consumer
            
            
            **14,188**
            
            
            12,959
            
            
            12,034Consolidated
                net sales
            
            **$**
            **351,124**
            
            $
            316,122
            
            $
            290,835





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005**Income
                (loss) from continuing operations before amortization, impairment,
                and
                restructuring charges**Activated
                Carbon and Service
            
            **$**
            **28,038**
            
            $
            8,482
            
            $
            (1,584
            )Equipment
            
            
            **(1,715**
            **)**
            
            (5,748
            )
            
            (6,217
            )Consumer
            
            
            **2,029**
            
            
            1,347
            
            
            (883
            )**$**
            **28,352**
            
            $
            4,081
            
            $
            (8,684
            )**Reconciling
                items:**Goodwill
                impairment charge
            
            
            -
            
            
            (6,940
            )
            
            -Gulf
                Coast impairment charge
            
            
            -
            
            
            -
            
            
            (2,158
            )Restructuring
                charges
            
            
            **-**
            
            
            (7
            )
            
            (412
            )Amortization
            
            
            **(1,796**
            **)**
            
            (1,744
            )
            
            (1,906
            )Interest
                income
            
            
            **1,695**
            
            
            822
            
            
            719Interest
                expense
            
            
            **(5,508**
            **)**
            
            (5,977
            )
            
            (4,891
            )Other
                expense—net
            
            
            **(1,441**
            **)**
            
            (2,209
            )
            
            (2,138
            )Consolidated
                income (loss) before income taxes and equity in income (loss) of
                equity
                investments
            
            **$**
            **21,302**
            
            $
            (11,974
            )
            $
            (19,470
            )





114





Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005**Depreciation**Activated
                Carbon and Service
            
            **$**
            **14,542**
            
            $
            16,220
            
            $
            17,593Equipment
            
            
            **628**
            
            
            687
            
            
            962Consumer
            
            
            **282**
            
            
            282
            
            
            581**$**
            **15,452**
            
            $
            17,189
            
            $
            19,136Amortization
            
            
            **1,796**
            
            
            1,744
            
            
            1,906Consolidated
                depreciation and amortization
            
            **$**
            **17,248**
            
            $
            18,933
            
            $
            21,042





December
                31(Thousands)
            
            **2007**
            
            2006
            
            2005**Total
                assets**Activated
                Carbon and Service
            
            **$**
            **302,432**
            
            $
            277,134
            
            $
            267,408Equipment
            
            
            **32,046**
            
            
            34,031
            
            
            44,607Consumer
            
            
            **13,662**
            
            
            11,199
            
            
            14,513Total
                assets from continuing operations
            
            **$**
            **348,140**
            
            $
            322,364
            
            $
            326,528Assets
                held for sale
            
            
            **-**
            
            
            -
            
            
            21,340Consolidated
                total assets
            
            **$**
            **348,140**
            
            $
            322,364
            
            $
            347,868





Year
                Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005**Property,
                plant and equipment expenditures**Activated
                Carbon and Service
            
            **$**
            **10,947**
            
            $
            11,728
            
            $
            14,608Equipment
            
            
            **684**
            
            
            1,127
            
            
            1,120Consumer
            
            
            **158**
            
            
            -
            
            
            9Property,
                plant and equipment expenditures from continuing
                operations
            
            **$**
            **11,789**
            
            $
            12,855
            
            $
            15,737Assets
                held for sale
            
            
            -
            
            
            -
            
            
            259Consolidated
                property, plant and equipment expenditures
            
            **$**
            **11,789**
            
            $
            12,855
            
            $
            15,996




115




**Net
      Sales by Product:**




Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005Carbon
                products
            
            **$**
            **267,934**
            
            $
            241,974
            
            $
            217,504Capital
                equipment
            
            
            **31,601**
            
            
            28,119
            
            
            29,533Equipment
                leasing
            
            
            **13,943**
            
            
            14,789
            
            
            14,805Carbon
                cloth products
            
            
            **11,262**
            
            
            8,639
            
            
            8,240Spare
                parts
            
            
            **9,727**
            
            
            9,765
            
            
            7,334Home
                consumer products
            
            
            **2,926**
            
            
            4,320
            
            
            3,794Other
                services
            
            
            **13,731**
            
            
            8,516
            
            
            9,625Total
                sales
            
            **$**
            **351,124**
            
            $
            316,122
            
            $
            290,835


116


GEOGRAPHIC
      INFORMATION




Year Ended December 31(Thousands)
            
            **2007**
            
            2006
            
            2005**Net
                sales**United
                States
            
            **$**
            **192,843**
            
            $
            175,649
            
            $
            167,329United
                Kingdom
            
            
            **28,569**
            
            
            26,121
            
            
            23,577Germany
            
            
            **17,056**
            
            
            16,039
            
            
            17,121France
            
            
            **13,953**
            
            
            11,249
            
            
            11,423Canada
            
            
            **13,312**
            
            
            10,439
            
            
            10,105Japan
            
            
            **10,304**
            
            
            9,689
            
            
            4,485Belgium
            
            
            **8,738**
            ****
            
            7,860
            
            
            6,970Spain
            
            
            **5,565**
            
            
            5,600
            
            
            2,809Netherlands
            
            
            **5,192**
            
            
            3,813
            
            
            5,230Switzerland
            
            
            **4,492**
            
            
            3,985
            
            
            4,894Mexico
            
            
            **4,285**
            
            
            5,047
            
            
            4,273Other
            
            
            **46,815**
            
            
            40,631
            
            
            32,619Consolidated
                net sales
            
            **$**
            **351,124**
            
            $
            316,122
            
            $
            290,835





Net
      sales
      are attributable to countries based on location of customer.





December 31(Thousands)
            
            **2007**
            
            2006
            
            2005**Long-lived
                assets**United
                States
            
            **$**
            **95,142**
            
            $
            103,256
            
            $
            113,213Belgium
            
            
            **25,343**
            
            
            21,216
            
            
            16,665United
                Kingdom
            
            
            **11,684**
            
            
            12,096
            
            
            11,309Japan
            
            
            **9,148**
            
            
            6,783
            
            
            7,034China
            
            
            **7,209**
            
            
            7,129
            
            
            7,327Canada
            
            
            **3,454**
            ****
            ****
            2,873
            
            
            8,010Germany
            
            
            **61**
            
            
            59
            
            
            21France
            
            
            **2**
            
            
            15
            
            
            5**152,043**
            
            
            153,427
            
            
            163,584Deferred
                taxes
            
            
            **6,419**
            
            
            20,225
            
            
            18,684Consolidated
                long-lived assets
            
            **$**
            **158,462**
            
            $
            173,652
            
            $
            182,268




117


**21.
      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 $9.6 million, $9.4 million, and $4.4 million for the years
      ended 2007, 2006, and 2005, respectively. Receivables from equity investees
      amounted to $2.4 million and $1.8 million at December 31, 2007 and 2006,
      respectively. The Company's equity investees are included in the Activated
      Carbon and Service Segment.


118


**22.
      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


Year ended December 31, 2007





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedNet
                sales
            
            $
            306,866
            
            $
            46,782
            
            $
            49,069
            
            $
            (51,593
            )
            $
            351,124Cost
                of products sold
            
            
            219,088
            
            
            35,439
            
            
            39,339
            
            
            (51,593
            )
            
            242,273Depreciation
                and amortization
            
            
            13,885
            
            
            1,098
            
            
            2,265
            
            
            -
            
            
            17,248Selling,
                general and administrative expenses
            
            
            52,792
            
            
            4,925
            
            
            3,631
            
            
            -
            
            
            61,348Research
                and development expense
            
            
            3,317
            
            
            382
            
            
            -
            
            
            -
            
            
            3,699Interest
                (income) expense – net
            
            
            20,723
            
            
            (15,985
            )
            
            (925
            )
            
            -
            
            
            3,813Other
                (income) expense - net
            
            
            1,298
            
            
            1,351
            
            
            (1,208
            )
            
            -
            
            
            1,441Provision
                for income taxes
            
            
            4,216
            
            
            1,184
            
            
            2,426
            
            
            -
            
            
            7,826Results
                of affiliates’ operations
            
            
            23,695
            
            
            41
            
            
            -
            
            
            (23,736
            )
            
            -Equity
                in income (loss) of equity investments
            
            
            -
            
            
            -
            
            
            1,980
            
            
            (3
            )
            
            1,977Income
                (loss) from continuing operations
            
            
            15,242
            
            
            18,429
            
            
            5,521
            
            
            (23,739
            )
            
            15,453Income
                (loss) from discontinued operations
            
            
            45
            
            
            (211
            )
            
            -
            
            
            -
            
            
            (166
            )Net
                income (loss)
            
            $
            15,287
            
            $
            18,218
            
            $
            5,521
            
            $
            (23,739
            )
            $
            15,287


119




Condensed
      Consolidating Statements of Operations


Year
      ended December 31, 2006





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedNet
                sales
            
            $
            278,914
            
            $
            43,106
            
            $
            41,986
            
            $
            (47,884
            )
            $
            316,122Cost
                of products sold
            
            
            214,570
            
            
            35,711
            
            
            34,276
            
            
            (47,884
            )
            
            236,673Depreciation
                and amortization
            
            
            15,708
            
            
            1,123
            
            
            2,102
            
            
            -
            
            
            18,933Selling,
                general and administrative expenses
            
            
            46,754
            
            
            3,558
            
            
            3,619
            
            
            -
            
            
            53,931Research
                and development expense
            
            
            3,890
            
            
            358
            
            
            -
            
            
            -
            
            
            4,248Restructuring/impairment
                charges
            
            
            1,097
            
            
            -
            
            
            5,850
            
            
            -
            
            
            6,947Interest
                (income) expense - net
            
            
            20,579
            
            
            (14,684
            )
            
            (740
            )
            
            -
            
            
            5,155Other
                (income) expense - net
            
            
            1,707
            
            
            1,254
            
            
            (752
            )
            
            -
            
            
            2,209Benefit
                for income taxes
            
            
            (2,271
            )
            
            (191
            )
            
            (214
            )
            
            -
            
            
            (2,676
            )Results
                of affiliates’ operations
            
            
            15,306
            
            
            (635
            )
            
            -
            
            
            (14,671
            )
            
            -Equity
                in income of equity investments
            
            
            -
            
            
            -
            
            
            283
            
            
            3
            
            
            286Income
                (loss) from continuing operations
            
            
            (7,814
            )
            
            15,342
            
            
            (1,872
            )
            
            (14,668
            )
            
            (9,012
            )Income
                (loss) from discontinued operations
            
            
            16
            
            
            (79
            )
            
            2,265
            
            
            (988
            )
            
            1,214Net
                income (loss)
            
            $
            (7,798
            )
            $
            15,263
            
            $
            393
            
            $
            (15,656
            )
            $
            (7,798
            )




Condensed
      Consolidating Statements of Operations


Year
      ended December 31, 2005





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedNet
                sales
            
            $
            257,863
            
            $
            41,735
            
            $
            35,469
            
            $
            (44,232
            )
            $
            290,835Cost
                of products sold
            
            
            195,218
            
            
            33,431
            
            
            30,913
            
            
            (44,232
            )
            
            215,330Depreciation
                and amortization
            
            
            19,041
            
            
            1,639
            
            
            362
            
            
            -
            
            
            21,042Selling,
                general and administrative expenses
            
            
            52,610
            
            
            4,867
            
            
            3,070
            
            
            -
            
            
            60,547Research
                and development expense
            
            
            4,153
            
            
            353
            
            
            -
            
            
            -
            
            
            4,506Restructuring/impairment
                charges
            
            
            2,570
            
            
            -
            
            
            -
            
            
            -
            
            
            2,570Interest
                (income) expense - net
            
            
            16,418
            
            
            (12,101
            )
            
            (145
            )
            
            -
            
            
            4,172Other
                expense - net
            
            
            663
            
            
            527
            
            
            948
            
            
            -
            
            
            2,138Provision
                (benefit) for income taxes
            
            
            (10,016
            )
            
            68
            
            
            260
            
            
            -
            
            
            (9,688
            )Results
                of affiliates’ operations
            
            
            14,698
            
            
            2,278
            
            
            -
            
            
            (16,976
            )
            
            -Equity
                in loss of equity investments
            
            
            -
            
            
            -
            
            
            (725
            )
            
            -
            
            
            (725
            )Income
                (loss) from continuing operations
            
            
            (8,096
            )
            
            15,229
            
            
            (664
            )
            
            (16,976
            )
            
            (10,507
            )Income
                from discontinued operations
            
            
            680
            
            
            438
            
            
            1,973
            
            
            -
            
            
            3,091Net
                income (loss)
            
            $
            (7,416
            )
            $
            15,667
            
            $
            1,309
            
            $
            (16,976
            )
            $
            (7,416
            )


120





Condensed
      Consolidating Balance Sheets


December
      31, 2007





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedCash
                and Cash Equivalents
            
            $
            20,802
            
            $
            3,683
            
            $
            25,930
            
            $
            (20,111
            )
            $
            30,304Receivables
            
            
            47,184
            
            
            15,259
            
            
            5,004
            
            
            (9,899
            )
            
            57,548Inventories
            
            
            67,501
            
            
            8,221
            
            
            5,525
            
            
            33
            
            
            81,280Other
                current assets
            
            
            18,015
            
            
            1,334
            
            
            1,197
            
            
            -
            
            
            20,546Total
                current assets
            
            
            153,502
            
            
            28,497
            
            
            37,656
            
            
            (29,977
            )
            
            189,678Intercompany
                accounts receivable
            
            
            57,071
            
            
            175,462
            
            
            2,138
            
            
            (234,671
            )
            
            -Property,
                plant, and equipment, net
            
            
            90,435
            
            
            7,263
            
            
            7,814
            
            
            -
            
            
            105,512Intangibles
            
            
            4,586
            
            
            3,174
            
            
            -
            
            
            -
            
            
            7,760Goodwill
            
            
            16,674
            
            
            8,337
            
            
            2,834
            
            
            -
            
            
            27,845Equity
                investments
            
            
            246,633
            
            
            102,187
            
            
            9,151
            
            
            (349,378
            )
            
            8,593Other
                assets
            
            
            4,908
            
            
            1,313
            
            
            2,531
            
            
            -
            
            
            8,752Total
                assets
            
            $
            573,809
            
            $
            326,233
            
            $
            62,124
            
            $
            (614,026
            )
            $
            348,140Short-term
                debt
            
            $
            -
            
            $
            -
            
            $
            1,504
            
            $
            -
            
            $
            1,504Current
                portion of long-term debt
            
            
            62,507
            
            
            -
            
            
            -
            
            
            -
            
            
            62,507Accounts
                payable
            
            
            33,424
            
            
            19,914
            
            
            3,417
            
            
            (13,592
            )
            
            43,163Other
                current liabilities
            
            
            33,219
            
            
            299
            
            
            2,592
            
            
            (23,523
            )
            
            12,587Total
                current liabilities
            
            
            129,150
            
            
            20,213
            
            
            7,513
            
            
            (37,115
            )
            
            119,761Intercompany
                accounts payable
            
            
            168,342
            
            
            48,144
            
            
            11,079
            
            
            (227,565
            )
            
            -Long-term
                debt
            
            
            12,925
            
            
            -
            
            
            -
            
            
            -
            
            
            12,925Other
                non-current liabilities
            
            
            91,143
            
            
            8,782
            
            
            11,350
            
            
            (68,070
            )
            
            43,205Shareholders'
                equity
            
            
            172,249
            
            
            249,094
            
            
            32,182
            
            
            (281,276
            )
            
            172,249Total
                liabilities and shareholders' equity
            
            $
            573,809
            
            $
            326,233
            
            $
            62,124
            
            $
            (614,026
            )
            $
            348,140




121




Condensed
      Consolidating Balance Sheets


December
      31, 2006





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedCash
                and 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




122





Condensed
      Consolidating Statements of Cash Flows





Year
      ended December 31, 2007




Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedNet
                cash provided by (used in) operating activities
            
            $
            7,511
            
            $
            18,090
            
            $
            4,116
            
            $
            (304
            )
            $
            29,413Investing
                activities:Property,
                plant and equipment expenditures
            
            
            (10,408
            )
            
            (1,045
            )
            
            (336
            )
            
            -
            
            
            (11,789
            )Investment
                from (in) affiliates
            
            
            -
            
            
            (136
            )
            
            136
            
            
            -
            
            
            -Other
            
            
            318
            
            
            -
            
            
            195
            
            
            -
            
            
            513Net
                cash used in investing activities
            
            
            (10,090
            )
            
            (1,181
            )
            
            (5
            )
            
            -
            
            
            (11,276
            )Financing
                activities:Net
                borrowings (repayments)
            
            
            4,579
            
            
            -
            
            
            1,498
            
            
            (4,573
            )
            
            1,504Intercompany
                and equity transactions
            
            
            19,135
            
            
            (18,493
            )
            
            (1,536
            )
            
            894
            
            
            -Other
            
            
            3,845
            
            
            -
            
            
            -
            
            
            -
            
            
            3,845Net
                cash provided by (used in) financing activities
            
            
            27,559
            
            
            (18,493
            )
            
            (38
            )
            
            (3,679
            )
            
            5,349Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (4,178
            )
            
            2,760
            
            
            2,301
            
            
            304
            
            
            1,187Increase
                (decrease) in cash and cash equivalents
            
            
            20,802
            
            
            1,176
            
            
            6,374
            
            
            (3,679
            )
            
            24,673Cash
                and cash equivalents, beginning of year
            
            
            -
            
            
            2,507
            
            
            19,556
            
            
            (16,432
            )
            
            5,631Cash
                and cash equivalents, end of year
            
            $
            20,802
            
            $
            3,683
            
            $
            25,930
            
            $
            (20,111
            )
            $
            30,304




123





Condensed
      Consolidating Statements of Cash Flows





Year
      ended December 31, 2006





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedNet
                cash (used in) provided by operating activities
            
            $
            (19,366
            )
            $
            16,235
            
            $
            (1,865
            )
            $
            (789
            )
            $
            (5,785
            )Investing
                activities:Proceeds
                from insurance settlement for property and equipment
            
            
            4,595
            
            
            -
            
            
            -
            
            
            -
            
            
            4,595Proceeds
                from divestitures
            
            
            830
            
            
            -
            
            
            20,435
            
            
            -
            
            
            21,265Property,
                plant and equipment expenditures
            
            
            (12,005
            )
            
            (223
            )
            
            (627
            )
            
            -
            
            
            (12,855
            )Investment
                from (in) affiliates
            
            
            11,217
            
            
            (1,284
            )
            
            (9,933
            )
            
            -
            
            
            -Other
            
            
            1,203
            
            
            -
            
            
            2
            
            
            -
            
            
            1,205Net
                cash provided by (used in) investing activities
            
            
            5,840
            
            
            (1,507
            )
            
            9,877
            
            
            -
            
            
            14,210Financing
                activities:Net
                borrowings (repayments)
            
            
            (4,069
            )
            
            (607
            )
            
            5
            
            
            (4,418
            )
            
            (9,089
            )Intercompany
                and equity transactions
            
            
            13,588
            
            
            (16,719
            )
            
            4,025
            
            
            (894
            )
            
            -Other
            
            
            356
            
            
            30
            
            
            -
            
            
            (30
            )
            
            356Net
                cash provided by (used in) financing activities
            
            
            9,875
            
            
            (17,296
            )
            
            4,030
            
            
            (5,342
            )
            
            (8,733
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            602
            
            
            1,394
            
            
            (2,322
            )
            
            819
            
            
            493(Decrease)
                increase in cash and cash equivalents
            
            
            (3,049
            )
            
            (1,174
            )
            
            9,720
            
            
            (5,312
            )
            
            185Cash
                and cash equivalents, beginning of year
            
            
            3,049
            
            
            3,681
            
            
            9,836
            
            
            (11,120
            )
            
            5,446Cash
                and cash equivalents, end of year
            
            $
            -
            
            $
            2,507
            
            $
            19,556
            
            $
            (16,432
            )
            $
            5,631




Condensed
      Consolidating Statements of Cash Flows





Year
      ended December 31, 2005





Issuer
            
            Guarantor
              Subsidiaries
            
            Non-Guarantor
              Subsidiaries
            
            Consolidating and
              Eliminating
              Entries
            
            ConsolidatedNet
                cash (used in) provided by operating activities
            
            $
            (1,640
            )
            $
            15,712
            
            $
            (3,504
            )
            $
            2,272
            
            $
            12,840Investing
                activities:Property,
                plant and equipment expenditures
            
            
            (10,873
            )
            
            (91
            )
            
            (1,272
            )
            
            (3,760
            )
            
            (15,996
            )Investment
                from (in) affiliates
            
            
            -
            
            
            1,108
            
            
            (1,108
            )
            
            -
            
            
            -Other
            
            
            114
            
            
            378
            
            
            8
            
            
            -
            
            
            500Net
                cash (used in) provided by investing activities
            
            
            (10,759
            )
            
            1,395
            
            
            (2,372
            )
            
            (3,760
            )
            
            (15,496
            )Financing
                activities:Net
                borrowings (repayments)
            
            
            (7,788
            )
            
            530
            
            
            1
            
            
            6,582
            
            
            (675
            )Intercompany
                and equity transactions
            
            
            7,190
            
            
            (19,038
            )
            
            8,294
            
            
            (1
            )
            
            (3,555
            )Other
            
            
            3,050
            
            
            (154
            )
            
            154
            
            
            -
            
            
            3,050Net
                cash provided by (used in) financing activities
            
            
            2,452
            
            
            (18,662
            )
            
            8,449
            
            
            6,581
            
            
            (1,180
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            1,753
            
            
            (1,688
            )
            
            (1,052
            )
            
            1,489
            
            
            502(Decrease)
                increase in cash and cash equivalents
            
            
            (8,194
            )
            
            (3,243
            )
            
            1,521
            
            
            6,582
            
            
            (3,334
            )Cash
                and cash equivalents, beginning of year
            
            
            11,243
            
            
            6,924
            
            
            8,315
            
            
            (17,702
            )
            
            8,780Cash
                and cash equivalents, end of year
            
            $
            3,049
            
            $
            3,681
            
            $
            9,836
            
            $
            (11,120
            )
            $
            5,446




124


QUARTERLY
      FINANCIAL DATA—UNAUDITED





**2007**
            ****
            2006
            ********
            ****
            **1st**
            
            **2nd**
            ****
            **3rd**
            ****
            **4th**
            ****
            1st
            
            2nd
            
            3rd
            
            4th
            ****(Thousands except per share data)
            ****
            **Quarter**
            ****
            **Quarter**
            ****
            **Quarter**
            ****
            **Quarter**
            ****
            Quarter
            
            Quarter
            
            Quarter
            
            Quarter
            ****Net
                sales
            ****
            **$**
            **83,030**
            ****
            **$**
            **88,428**
            ****
            **$**
            **84,861**
            ****
            **$**
            **94,805**
            ****
            $
            76,579
            
            $
            80,510
            
            $
            79,680
            
            $
            79,353Gross
                profit from continuing operations
            ****
            **$**
            **24,606**
            ****
            **$**
            **28,872**
            ****
            **$**
            **27,219**
            ****
            **$**
            **28,154**
            ****
            $
            19,168
            
            $
            20,548
            
            $
            20,783
            
            $
            18,952Net
                income (loss) from continuing
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Operations
            ****
            **$**
            **2,034**
            ****
            **$**
            **4,462**
            ****
            **$**
            **5,044**
            ****
            **$**
            **3,913**
            ****
            $
            (2,989
            )
            $
            2,139
            
            $
            (496
            )
            $
            (7,666
            )Income
                (loss) from discontinued operations
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            **$**
            **(96**
            **)**
            **$**
            **(70**
            **)**
            $
            1,575
            
            $
            297
            
            $
            38
            
            $
            (696
            )Net
                income (loss)
            ****
            **$**
            **2,034**
            ****
            **$**
            **4,462**
            ****
            **$**
            **4,948**
            ****
            **$**
            **3,843**
            ****
            $
            (1,414
            )
            $
            2,436
            
            $
            (458
            )
            $
            (8,362
            )**Common
                Stock Data:**
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Basic:
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Income
                (loss) from continuing
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****operations
                per common share
            ****
            **$**
            **0.05**
            ****
            **$**
            **0.11**
            ****
            **$**
            **0.12**
            ****
            **$**
            **0.10**
            ****
            $
            (0.08
            )
            $
            0.05
            
            $
            (0.01
            )
            $
            (0.19
            )Income
                (loss) from discontinued
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****operations
                per common share
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            **$**
            0.04
            
            $
            0.01
            
            $
            -
            
            $
            (0.02
            )Net
                income (loss) per common share
            ****
            **$**
            **0.05**
            ****
            **$**
            **0.11**
            ****
            **$**
            **0.12**
            ****
            $
            **0.10**
            
            $
            (0.04
            )
            $
            0.06
            
            $
            (0.01
            )
            $
            (0.21
            )Diluted:
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Income
                (loss) from continuing
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****operations
                per common share
            ****
            **$**
            **0.05**
            ****
            **$**
            **0.09**
            ****
            **$**
            **0.10**
            ****
            **$**
            **0.08**
            ****
            $
            (0.08
            )
            $
            0.05
            
            $
            (0.01
            )
            $
            (0.19
            )Income
                (loss) from discontinued
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****operations
                per common share
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            **$**
            **-**
            ****
            $
            0.04
            
            $
            0.01
            
            $
            -
            
            $
            (0.02
            )Net
                income (loss) per common share
            ****
            **$**
            **0.05**
            ****
            **$**
            **0.09**
            ****
            **$**
            **0.10**
            ****
            $
            **0.08**
            ****
            $
            (0.04
            )
            $
            0.06
            
            $
            (0.01
            )
            $
            (0.21
            )****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Average
                common shares outstanding
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Basic
            ****
            ****
            **40,225**
            ****
            ****
            **40,291**
            ****
            ****
            **40,357**
            ****
            ****
            **39,959**
            ****
            ****
            39,855
            
            
            39,876
            
            
            39,882
            
            
            40,092Diluted
            ****
            ****
            **42,661**
            ****
            ****
            **47,745**
            ****
            ****
            **50,358**
            ****
            ****
            **51,102**
            ****
            ****
            39,855
            
            
            40,077
            
            
            39,882
            
            
            40,092
            ****





The
      financial information for all periods presented has been reclassified to reflect
      discontinued operations. See Note 4 to the Consolidated Financial Statements
      for
      further information.


125






**Item
      9.** ***Changes
      in and Disagreements with Accountants on Accounting and Financial Disclosure:***





Not
      Applicable.





**Item
      9A.** ***Controls
      and Procedures:***





**Evaluation
      of Disclosure Controls and Procedures**


The
      Company maintains controls and procedures designed to ensure that it is able
      to
      collect the information it is required to disclose in the reports it files
      with
      the SEC, and to process, summarize, and disclose this information within the
      time periods specified in the rules of the SEC. Our management, under the
      supervision and with the participation of the Company’s Chief Executive Officer
      and Chief Financial Officer, has evaluated the effectiveness of the design
      and
      operation of the Company’s “disclosure controls and procedures”, as such term is
      defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”), as of the end of the period covered by this
      annual report.




Based
      on
      this evaluation, the Company’s management has concluded that the Company’s
      disclosure controls and procedures were effective as of the end of the period
      covered by this annual report.





**Management’s
      Annual Report on Internal Control over Financial Reporting**


Management’s
      Annual Report on Internal Control over Financial Reporting is contained in
“Item
      8. Financial Statements and Supplementary Data - Report of Management -
      Responsibility for Preparation of the Financial Statements and Establishing
      and
      Maintaining Adequate Internal Control Over Financial Reporting.”





**Attestation
      Report of the Independent Registered Public Accounting Firm**


The
      attestation report of the Independent Registered Public Accounting Firm is
      contained in “Item 8. Financial Statements and Supplementary Data - Internal
      Controls - Report of Independent Registered Public Accounting
      Firm.”





**Changes
      in Internal Control**


There
      have been no changes to our internal control over financial reporting that
      occurred that have materially affected, or are reasonably likely to materially
      affect, our internal control over financial reporting.




**Item
      9B.** ***Other
      Information:***





None.


126





**PART
      III**





**Item
      10.** ***Directors,
      Executive Officers, and Corporate Governance of the Registrant:***





Information
      concerning the directors and executive officers of the Corporation required
      by
      this item is incorporated by reference to the material appearing under the
      headings “Board of Directors and Committees of the Board,” “Election of
      Directors,” “Corporate Governance” and “Section 16(a) Beneficial Ownership
      Reporting Compliance” in the Company's Proxy Statement for the 2008 Annual
      Meeting of its Shareholders.





The
      Company’s Code of Ethical Business Conduct Supplement for Chief Executive and
      Senior Financial Officers is set forth in Exhibit 14.1 hereto.




**Item
      11.** ***Executive
      Compensation:***





Information
      required by this item is incorporated by reference to the material appearing
      under the headings “Executive and Director Compensation” in the Company's Proxy
      Statement for the 2008 Annual Meeting of its Shareholders. The information
      contained in the “Compensation Committee Report” is specifically not
      incorporated herein by reference.


127


**Item
      12.** ***Security
      Ownership of Certain Beneficial Owners and Management and Related Shareholder
      Matters:***





**The
      following table sets forth information as of December 31, 2007 concerning common
      stock issuable under the Company’s equity compensation
      plans.**




Equity
      Compensation Plan Information




Plan category
            
            Number of
              securities to be
              issued upon
              exercise of
              outstanding
              options, warrants
              and rights
              (a)
            
            Weighted-average
              exercise price of
              outstanding
              options, warrants
              and rights
              (b)
            
            Number of
              securities
              remaining
              available for future
              issuance under
              equity
              compensation
              plans (excluding
              securities reflected
              in column (a))
              (c)Equity
                compensation plans approved by security holders
            
            
            2,039,392
            
            $
            6.84
            
            
            1,956,868Equity
                compensation plans not approved by security holders
            
            
            -
            
            
            -
            
            
            49,490
            (1)Total
            
            
            2,039,392
            
            $
            6.84
            
            
            2,006,358





*(1)
      On December 31, 2007 there were 49,490 shares available for issuance under
      the
      Company’s 1997 Directors’ Fee Plan, as last amended in 2005. The Plan provides
      non-employee directors of the Company with payment alternatives for retainer
      fees by being able to elect to receive Common Stock of the Company instead
      of
      cash for such fees. Under the plan, directors have the alternative to elect
      their retainer fees in a current payment of shares of Common Stock of the
      Company, or to defer payment of such fees into a Common Stock account. Shares
      which are deferred are credited to a deferred stock compensation other liability
      account maintained by the Company. On each date when director fees are otherwise
      payable to a director who has made a stock deferral election, his or her stock
      deferral account will be credited with a number of shares equal to the cash
      amount of the director’s fees payable divided by the fair market value of one
      share of the Common Stock on the date on which the fees are payable. Dividends
      or other distributions payable on Common Stock are similarly credited to the
      deferred stock account of a director on the date when such dividends or
      distributions are payable. The deferred stock compensation accounts are payable
      to the directors in accordance with their stock deferral elections and are
      typically paid either in a lump sum or in annual installments after the
      retirement or other termination of service of the director from the Company’s
      Board of Directors.*





The
      additional information required by this item is incorporated by reference to
      the
      material appearing under the heading “Security Ownership of Management and
      Certain Beneficial Owners” in the Company's Proxy Statement for the 2008 Annual
      Meeting of its Shareholders.




128





**Item
      13.** ***Certain
      Relationships, Related Transactions, and Director
      Independence:***




Information
      required by this item is incorporated by reference to the material appearing
      under the headings “Election of Directors” and “Corporate Governance” in the
      Company's Proxy Statement for the 2008 Annual Meeting of its
      Shareholders.


129


**Item
      14.** ***Principal
      Accounting Fees and Services:***





Information
      required by this item is incorporated by reference to the material appearing
      under the heading “Independent Auditors- Certain Fees” in the Company’s Proxy
      Statement for the 2008 Annual Meeting of its Shareholders.





**PART
      IV**





**Item
      15.** ***Exhibits
      and Financial Statement Schedules:***





A.
      Financial Statements and Reports of Independent Registered Public Accounting
      Firm (see Part II, Item 8 of this Form 10-K).





The
      following information is filed as part of this Form 10-K:





PageReport
                of Management
            
            
            57Internal
                Controls- Report of Independent Registered Public Accounting
                Firm
            
            
            58Financial
                Statements - Report of Independent Registered Public Accounting
                Firms
            
            
            59-60Consolidated
                Statements of Income (Loss) and Comprehensive Income (Loss) for the
                Years
                Ended December 31, 2007, 2006 and 2005
            
            
            61Consolidated
                Balance Sheets as of December 31, 2007 and 2006
            
            
            62Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2007, 2006
                and
                2005
            
            
            63Consolidated
                Statements of Shareholders’ Equity for Years Ended December 31, 2007, 2006
                and 2005
            
            
            64Notes
                to the Consolidated Financial Statements
            
            
            65




130





B.
            Financial
                Statements Schedule for the years ended December 31, 2007, 2006 and
                2005.




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Shareholders of Calgon
      Carbon Corporation


Pittsburgh,
      Pennsylvania





We
      have
      audited the consolidated financial statements of Calgon Carbon Corporation
      and
      subsidiaries (the “Company”) as of December 31, 2007 and 2006, and for each
      of the three years in the period ended December 31, 2007, and the Company’s
      internal control over financial reporting as of December 31, 2007, and have
      issued our reports thereon dated March 14, 2008 (which report on the financial
      statements expresses an unqualified opinion and includes an explanatory
      paragraph regarding the Company’s adoption of new accounting standards); such
      consolidated financial statements and reports are included herein. We did not
      audit the financial statements of Chemviron Carbon Ltd. and subsidiaries
      (“Chemviron UK”) (a subsidiary) for the year ended December 31, 2005, which
      statements reflect total revenues constituting 12 percent of consolidated total
      revenues for the year ended December 31, 2005. Such financial statements
      were audited by other auditors whose report has been furnished to us, and our
      opinion, insofar as it relates to the amounts included for Chemviron UK, is
      based solely on the report of such other auditors. Our audits and the report
      of
      other auditors also included the consolidated financial statement schedule
      of
      the Company listed in Item 15. This consolidated financial statement
      schedule is the responsibility of the Company’s management. Our responsibility
      is to express an opinion based on our audits. In our opinion, based on our
      audits and the report of other auditors, such consolidated financial statement
      schedule, when considered in relation to the basic consolidated financial
      statements taken as a whole, presents fairly, in all material respects, the
      information set forth therein.





Deloitte
      & Touche LLP


Pittsburgh,
      Pennsylvania


March
      14,
      2008


131





The
      following should be read in conjunction with the previously referenced financial
      statements:




Schedule
      II


Valuation
      and Qualifying Accounts




Balance at
            
            Additions
            
            Deductions
            
            BalanceBeginning
            
            Charged to Costs
            
            Returns and
            
            at EndDescription
            
            of Year
            
            and Expenses
            
            Write-Offs
            
            of YearYear
                ended December 31, 2007Allowance
                for doubtful accounts
            
            $
            1,981
            
            $
            1,239
            
            $
            (386
            )
            $
            2,834Year
                ended December 31, 2006Allowance
                for doubtful accounts
            
            
            2,172
            
            
            902
            
            
            (1,093
            )
            
            1,981Year
                ended December 31, 2005Allowance
                for doubtful accounts
            
            
            2,902
            
            
            510
            
            
            (1,240
            )
            
            2,172




Balance at
            
            Additions
            
            Deductions
            
            BalanceBeginning
            
            Charged to Costs
            
            Returns and
            
            at EndDescription
            
            of Year
            
            and Expenses
            
            Write-offs
            
            of YearYear
                ended December 31, 2007Income
                tax valuation allowance
            
            $
            5,742
            
            $
            2,441
            
            $
            (1,965
            )
            $
            6,218Year
                ended December 31, 2006Income
                tax valuation allowance
            
            
            3,382
            
            
            2,360
            
            
            -
            
            
            5,742Year
                ended December 31, 2005Income
                tax valuation allowance
            
            
            3,539
            
            
            188
            
            
            (345
            )
            
            3,382




132


C.
              ExhibitsPage3.1
              Amended
                  Certificate of Incorporation
              (a)3.2
              Amended
                  By-laws of the Registrant
              (b)4.1
              Amended
                  Rights Agreement, dated as of January 27, 2005
              (c)4.2
              Indenture,
                  dated August 18, 2006
              (d)4.3
              Registration
                  Rights Agreement, dated August 18, 2006
              (e)10.1*
              Calgon
                  Carbon Corporation Stock Option Plan, as Amended
              (f)10.2*
              1999
                  Non-Employee Directors’ Phantom Stock Unit Plan, as
                  Amended
              (g)10.3*
              1993
                  Non-Employee, Directors’ Stock Option Plan, as Amended
              (h)10.4*
              1997
                  Directors’ Fee Plan
              (i)10.5*
              Employment
                  agreement between Calgon Carbon Corporation and executive officers.
                  The
                  form of employment agreement has been entered into with the following
                  executive officer, C. H. S. (Kees) Majoor
              (j)10.6
              Calgon
                  Carbon Corporation Senior Credit Facility
              (k)10.7
              Amendment
                  No. 1 to Calgon Carbon Corporation Senior Credit Facility
              (l)10.8
              Purchase
                  Agreement among Waterlink, Inc. and Barnebey Sutcliffe Corporation
                  and
                Calgon
                  Carbon Corporation
              (m)10.9*
              Employment
                  agreement between Calgon Carbon Corporation and executive officers.
                  The
                  form of employment agreement has been entered into with the following
                  executive officers, Leroy M. Ball, Gail A. Gerono, Robert P. O’Brien, and
                  Dennis M. Sheedy
              (n)10.10*
              Employment
                  agreement between Calgon Carbon Corporation and John S.
                  Stanik
              (o)10.11
              First
                  Amendment to Credit Agreement, as amended on February 5,
                  2007
              (p)14.1
              Code
                  of Ethical Business Conduct Supplement for Chief Executive and
                  Senior
                  Financial Officers
              (q)21.0
              The
                  wholly owned subsidiaries of the Company at December 31, 2007 are
                  Chemviron Carbon GmbH, a German corporation; Calgon Carbon Canada,
                  Inc., a
                  Canadian corporation; Chemviron Carbon Ltd., a United Kingdom corporation;
                  Calgon Carbon Investments Inc., a Delaware corporation; Solarchem
                  Environmental Systems Inc., a Nevada corporation; Charcoal Cloth
                  (International) Limited, a United Kingdom corporation; Charcoal
                  Cloth
                  Limited, a United Kingdom corporation; Waterlink UK Holdings Ltd.,
                  a
                  United Kingdom corporation, Sutcliffe Croftshaw Ltd., a United
                  Kingdom
                  corporation; Sutcliffe Speakman Ltd., a United Kingdom corporation;
                  Sutcliffe Speakman Carbons Ltd., a United Kingdom corporation;
                  Lakeland
                  Processing Ltd., a United Kingdom corporation; Sutcliffe Speakmanco
                  5
                  Ltd., a United Kingdom corporation; Advanced Separation Technologies
                  Incorporated, a Florida corporation and Calgon Carbon (Tianjin)
                  Co., Ltd.,
                  a Chinese corporation; Datong Carbon Corporation, a Chinese corporation
                  and Calgon Carbon Asia Ltd., a Singapore corporation. In addition,
                  the
                  Company owns 49% of Calgon Mitsubishi Chemical Corporation, a Japanese
                  corporation and 20% of Calgon Carbon (Thailand) Ltd., a Thailand
                  corporation
              Filed herewith23.1
              Consent
                  of Independent Registered Public Accounting Firm
              Filed herewith23.2
              Consent
                  of Independent Registered Public Accounting Firm
              Filed herewith31.1
              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





*Note:*
            *The
                Registrant hereby undertakes to furnish, upon request of the Commission,
                copies of all instruments defining the rights of holders of long-term
                debt
                of the Registrant and its consolidated subsidiaries. The total amount
                of
                securities authorized thereunder does not exceed 10% of the total
                assets
                of the Registrant and its subsidiaries on a consolidated basis.**(a)*
            *Incorporated
                herein by reference to Exhibit 3.1 to the Company's report on Form
                10-K
                filed for the fiscal year ended December 31,
                1990.*




133





*(b)*
            *Incorporated
                herein by reference to Exhibit 3.2 to the Company's report on Form
                8-K
                dated January 28, 2005.**(c)*
            *Incorporated
                herein by reference to Exhibit 4.1 of the Company’s report on Form 8-K
                dated January 28, 2005.**(d)*
            *Incorporated
                herein by reference to Exhibit 4.1 to the Company’s report on Form 8-K
                dated August 18, 2006.**(e)*
            *Incorporated
                herein by reference to Exhibit 4.2 to the Company’s report on Form 8-K
                dated August 18, 2006.**(f)*
            *Incorporated
                herein by reference to Exhibit 10.1 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(g)*
            *Incorporated
                herein by reference to Exhibit 10.2 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(h)*
            *Incorporated
                herein by reference to Exhibit 10.3 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(i)*
            *Incorporated
                herein by reference to Exhibit 10.4 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(j)*
            *Incorporated
                herein by reference to Exhibit 10.2 to the Company’s report on Form 10-Q
                filed for the fiscal quarter ended March 31, 2005**(k)*
            *Incorporated
                herein by reference to Exhibit 10.1 to the Company’s report on Form 8-K
                dated January 31, 2006.**(l)*
            *Incorporated
                herein by reference to Exhibit 10.7 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(m)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2003.**(n)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2006.**(o)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2006.**(p)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2006.**(q)*
            *Incorporated
                herein by reference to Exhibit 14.1 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2003.***Management contract or compensatory plan, contract or arrangement
                required to be filed by Item 601(b)(10)(iii) of Regulation
                S-K.*




134




**Signatures**





Pursuant
      to the requirements of Section 13 or 15(d) 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 CorporationBy
            /s/
                JOHN S. STANIKJohn
                S. StanikChairman,
                President and Chief Executive OfficerMarch
                17, 2008





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities on the dates indicated.




******Signature**
              
              **Title**
              
              **Date**/s/
                  JOHN S. STANIK
              
              Chairman,
                  President and Chief Executive Officer
              
              March
                  17, 2008**John
                  S. Stanik**/s/
                  LEROY M. BALL
              
              Chief
                  Financial Officer (and Principal Accounting Officer)
              
              March
                  17, 2008**Leroy
                  M. Ball**/s/
                  ROBERT W. CRUICKSHANK
              
              Director
              
              March
                  17, 2008**Robert
                  W. Cruickshank**/S/
                  RANDALL S. DEARTH
              
              Director
              
              March
                  17, 2008**Randall
                  S. Dearth**/s/
                  WILLIAM R. NEWLIN
              
              Director
              
              March
                  17, 2008**William
                  R. Newlin**/s/
                  JULIE S. ROBERTS
              
              Director
              
              March
                  17, 2008**Julie
                  S. Roberts**/s/
                  TIMOTHY G. RUPERT
              
              Director
              
              March
                  17, 2008**Timothy
                  G. Rupert**/s/SETH
                  E. SCHOFIELD
              
              Director
              
              March
                  17, 2008**Seth
                  E. Schofield**/s/
                  JOHN P. SURMA
              
              Director
              
              March
                  17, 2008**John
                  P. Surma**/s/
                  ROBERT L. YOHE
              
              Director
              
              March
                  17, 2008**Robert
                  L. Yohe**




135




EXHIBIT
      INDEX


Exhibit
                  Number
              
              Description
              
              Method
                  of FilingPage3.1
              
              Amended
                  Certificate of Incorporation
              (a)3.2
              
              Amended
                  By-laws of the Registrant
              (b)4.1
              
              Amended
                  Rights Agreement, dated as of January 27, 2005
              (c)4.2
              
              Indenture,
                  dated August 18, 2006
              (d)4.3
              
              Registration
                  Rights Agreement, dated August 18, 2006
              (e)10.1*
              
              Calgon
                  Carbon Corporation Stock Option Plan, as Amended
              (f)10.2*
              
              1999
                  Non-Employee Directors’ Phantom Stock Unit Plan, as
                  Amended
              (g)10.3*
              
              1993
                  Non-Employee, Directors’ Stock Option Plan, as Amended
              (h)10.4*
              
              1997
                  Directors’ Fee Plan
              
              (i)10.5*
              
              Employment
                  agreement between Calgon Carbon Corporation and executive officers.
                  The
                  form of employment agreement has been entered into with the following
                  executive officer, C. H. S. (Kees) Majoor
              (j)10.6
              
              Calgon
                  Carbon Corporation Senior Credit Facility
              (k)10.7
              
              Amendment
                  No. 1 to Calgon Carbon Corporation Senior Credit Facility
              (l)10.8
              
              Purchase
                  Agreement among Waterlink, Inc. and Barnebey Sutcliffe Corporation
                  and
                Calgon
                  Carbon Corporation
              (m)10.9*
              
              Employment
                  agreement between Calgon Carbon Corporation and executive officers.
                  The
                  form of employment agreement has been entered into with the following
                  executive officers, Leroy M. Ball, Gail A. Gerono, Robert P. O’Brien, and
                  Dennis M. Sheedy
              (n)10.10*
              
              Employment
                  agreement between Calgon Carbon Corporation and John S.
                  Stanik
              (o)10.11
              
              First
                  Amendment to Credit Agreement, as amended on February 5,
                  2007
              (p)14.1
              
              Code
                  of Ethical Business Conduct Supplement for Chief Executive and
                  Senior
                  Financial Officers
              (q)21.0
              
              The
                  wholly owned subsidiaries of the Company at December 31, 2007 are
                  Chemviron Carbon GmbH, a German corporation; Calgon Carbon Canada,
                  Inc., a
                  Canadian corporation; Chemviron Carbon Ltd., a United Kingdom corporation;
                  Calgon Carbon Investments Inc., a Delaware corporation; Solarchem
                  Environmental Systems Inc., a Nevada corporation; Charcoal Cloth
                  (International) Limited, a United Kingdom corporation; Charcoal
                  Cloth
                  Limited, a United Kingdom corporation; Waterlink UK Holdings Ltd.,
                  a
                  United Kingdom corporation, Sutcliffe Croftshaw Ltd., a United
                  Kingdom
                  corporation; Sutcliffe Speakman Ltd., a United Kingdom corporation;
                  Sutcliffe Speakman Carbons Ltd., a United Kingdom corporation;
                  Lakeland
                  Processing Ltd., a United Kingdom corporation; Sutcliffe Speakmanco
                  5
                  Ltd., a United Kingdom corporation; Advanced Separation Technologies
                  Incorporated, a Florida corporation and Calgon Carbon (Tianjin)
                  Co., Ltd.,
                  a Chinese corporation; Datong Carbon Corporation, a Chinese corporation
                  and Calgon Carbon Asia Ltd., a Singapore corporation. In addition,
                  the
                  Company owns 49% of Calgon Mitsubishi Chemical Corporation, a Japanese
                  corporation and 20% of Calgon Carbon (Thailand) Ltd., a Thailand
                  corporation
              Filed herewith23.1
              
              Consent
                  of Independent Registered Public Accounting Firm
              Filed herewith23.2
              
              Consent
                  of Independent Registered Public Accounting Firm
              Filed herewith31.1
              
              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





*Note:*
            *The
                Registrant hereby undertakes to furnish, upon request of the Commission,
                copies of all instruments defining the rights of holders of long-term
                debt
                of the Registrant and its consolidated subsidiaries. The total amount
                of
                securities authorized thereunder does not exceed 10% of the total
                assets
                of the Registrant and its subsidiaries on a consolidated basis.**(a)*
            *Incorporated
                herein by reference to Exhibit 3.1 to the Company's report on Form
                10-K
                filed for the fiscal year ended December 31,
                1990.*




136





*(b)*
            *Incorporated
                herein by reference to Exhibit 3.2 to the Company's report on Form
                8-K
                dated January 28, 2005.**(c)*
            *Incorporated
                herein by reference to Exhibit 4.1 of the Company’s report on Form 8-K
                dated January 28, 2005.**(d)*
            *Incorporated
                herein by reference to Exhibit 4.1 to the Company’s report on Form 8-K
                dated August 18, 2006.**(e)*
            *Incorporated
                herein by reference to Exhibit 4.2 to the Company’s report on Form 8-K
                dated August 18, 2006.**(f)*
            *Incorporated
                herein by reference to Exhibit 10.1 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(g)*
            *Incorporated
                herein by reference to Exhibit 10.2 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(h)*
            *Incorporated
                herein by reference to Exhibit 10.3 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(i)*
            *Incorporated
                herein by reference to Exhibit 10.4 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(j)*
            *Incorporated
                herein by reference to Exhibit 10.2 to the Company’s report on Form 10-Q
                filed for the fiscal quarter ended March 31, 2005**(k)*
            *Incorporated
                herein by reference to Exhibit 10.1 to the Company’s report on Form 8-K
                dated January 31, 2006.**(l)*
            *Incorporated
                herein by reference to Exhibit 10.7 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2005.**(m)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2003.**(n)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2006.**(o)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2006.**(p)*
            *Incorporated
                herein by reference to Exhibit 10.9 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2006.**(q)*
            *Incorporated
                herein by reference to Exhibit 14.1 to the Company’s report on Form 10-K
                filed for the fiscal year ended December 31, 2003.***Management contract or compensatory plan, contract or arrangement
                required to be filed by Item 601(b)(10)(iii) of Regulation
                S-K.*




137