**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****[   ]**
              **Transition
                  report pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934**






FOR
      THE
      FISCAL YEAR ENDED DECEMBER 31, 2005




**Commission
      File No. 1-16263**




**MARINE
      PRODUCTS CORPORATION**




**Delaware**
              **(State
                of Incorporation**)
            **58-2572419**
              **(I.R.S.
                Employer Identification
                No.)**




**2170
      PIEDMONT ROAD, NE**


**ATLANTA,
      GEORGIA 30324**


**(404)
      321-7910**




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




*Title
                of each class*
              COMMON
                STOCK, $0.10 PAR VALUE
            *Name
                of each exchange on which registered*
              NEW
                YORK STOCK EXCHANGE




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


NONE




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. [
        ] Yes [X] No




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. [   ] Yes [X] No




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. [X]
      Yes [
  ] No




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. [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. (Check
      one):




Larger
      accelerated filer [   ]  Accelerated
      filer [X]  Non-accelerated
      filer [   ]




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes [   ] No [X]




The
      aggregate market value of Marine Products Corporation Common Stock held by
      non-affiliates on June 30, 2005, the last business day of the registrant’s most
      recent second fiscal quarter, was $186,474,675 based on the closing price on
      the
      New York Stock Exchange on June 30, 2005 of $14.55 per share.




Marine
      Products Corporation had 38,044,485 shares of Common Stock outstanding as of
      February 24, 2006.




Documents
      Incorporated by Reference




Portions
      of the Proxy Statement for the 2006 Annual Meeting of Stockholders of Marine
      Products Corporation are incorporated by reference into Part III, Items 10
      through 14 of this report.




1






**PART
      I**




References
      in this document to “we,” “our,” “us,” “Marine Products,” or “the Company” mean
      Marine Products Corporation (“MPC”) and its subsidiaries, Chaparral Boats, Inc.
      (“Chaparral”) and Robalo Acquisition Company LLC (“Robalo”), collectively or
      individually, except where the context indicates otherwise.




**Forward-Looking
      Statements**




Certain
      statements made in this report that are not historical facts are
“forward-looking statements” under the Private Securities Litigation Reform Act
      of 1995. Such forward-looking statements may include, without limitation,
      statements that relate to our business strategy, plans and objectives, and
      our
      beliefs and expectations regarding future demand for our products and services
      and other events and conditions that may influence our performance in the
      future.




The
      words
“may,” “should,” “will,” “expect,” “believe,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “project,” “estimate,” and similar expressions used in this
      document that do not relate to historical facts are intended to identify
      forward-looking statements. Such statements are based on certain assumptions
      and
      analyses made by our management in light of its experience and its perception
      of
      historical trends, current conditions, expected future developments and other
      factors it believes to be appropriate. The
      forward-looking statements include, without limitation, statements that we
      do
      not currently anticipate that any material expenditure will be required to
      continue to comply with existing environmental or safety regulations; our
      ability to execute stated business and financial strategies in the future to
      better manage our Company; management’s belief that the Company’s net sales and
      profits will not increase in 2006 at the same rate as in prior years;
      management’s belief that the Company may incur increased advertising and other
      selling, general and administrative expenses in the future; expectations about
      the amount of contributions to the defined benefit pension plan and capital
      expenditures during 2006 and the purpose of those capital expenditures; the
      adequacy of the Company’s capital resources; and the effect of various recent
      accounting pronouncements on the Company, its operating results and financial
      condition. These
      statements involve known and unknown risks, uncertainties and other factors
      which may cause the actual results, performance or achievements of Marine
      Products Corporation to be materially different from any future results,
      performance or achievements expressed or implied in such forward-looking
      statements. These risks involve the outcome of current and future litigation,
      the impact of interest rates, economic conditions, fuel costs and weather on
      our
      business, our dependence on a network of independent boat dealers, the
      possibility of defaults by our dealers in their obligations to third-party
      dealer floor plan lenders, and our reliance on third party suppliers. We caution
      you that such statements are only predictions and not guarantees of future
      performance and that actual results, developments and business decisions may
      differ from those envisioned by the forward-looking statements. See “Risk
      Factors” on page 9 for a discussion of factors that may cause actual results to
      differ from our projections.




**Item
      1. Business**




Marine
      Products manufactures fiberglass motorized boats distributed and marketed
      through its independent dealer network. Marine Products’ product offerings
      include Chaparral sterndrive and inboard pleasure boats and Robalo outboard
      sport fishing boats.




**Organization**




Marine
      Products is a Delaware corporation, incorporated on August 31, 2000, in
      connection with a spin-off from RPC, Inc. (NYSE: RES) (“RPC”). Effective
      February 28, 2001, RPC accomplished the spin-off by contributing 100 percent
      of
      the issued and outstanding stock of Chaparral to Marine Products, a newly formed
      wholly-owned subsidiary of RPC, and then distributing the common stock of Marine
      Products to RPC stockholders. As part of the transaction, RPC’s stockholders
      received 0.6 shares of Marine Products common stock for every one share of
      RPC
      common stock owned as of February 16, 2001, the record date for the spin-off,
      with fractional shares being settled in cash.




**Overview**




Marine
      Products designs, manufactures and sells recreational fiberglass powerboats
      in
      the sportboat, deckboat, cruiser, and sport fishing markets. The Company sells
      its products to a network of 148 domestic and 24 international independent
      authorized dealers. Marine Products’ mission is to enhance its customers’
boating experience by providing them with high quality, innovative powerboats.
      The Company intends to remain a leading manufacturer of recreational powerboats
      for sale to a broad range of consumers worldwide.




2






The
      Company manufactures Chaparral sterndrive and inboard-powered sportboats,
      deckboats, and cruisers. The most recent available industry statistics [source:
      Statistical Surveys, Inc. report dated September 30, 2005] indicate that
      Chaparral is the third largest manufacturer of 18 to 35 foot sterndrive boats
      in
      the United States. Chaparral was founded in 1965 in Ft. Lauderdale, Florida.
      Chaparral’s first boat was a 15-foot tri-hull design with a retail price of less
      than $1,000. Over time the Company grew by offering exceptional quality and
      consumer value. In 1976, Chaparral moved to Nashville, Georgia, where a
      manufacturing facility of a former boat manufacturing company was available
      for
      purchase. This provided Chaparral an opportunity to obtain additional
      manufacturing space and access to a trained work force. With over 40 years
      of
      boatbuilding experience, Chaparral continues to improve the design and
      manufacturing of its product offerings to meet the growing needs of
      discriminating recreational boaters.




Marine
      Products also manufactures and sells Robalo sport fishing boats, which are
      powered by outboard engines and designed primarily for salt-water sport fishing.
      Robalo was founded in 1969 and its first boat was a 19-foot center console
      salt-water fishing boat, among the first of this type of boat to have an
“unsinkable” hull. The Company’s ownership of Robalo results from the
      acquisition, in June 2001, of certain operating and intangible assets of Robalo,
      formerly a segment of the U.S. Marine division of Brunswick Corporation.




Since
      the
      acquisition by Marine Products, Robalo has expanded its product offerings to
      include a total of 11 models ranging from 19 to 29 feet in length. Net sales
      of
      Robalo products accounted for approximately nine percent of consolidated 2005
      net sales. The Company believes that Robalo’s share of the outboard sport
      fishing boat market is approximately one percent.




**Products**




Marine
      Products offers a comprehensive range of motorized recreational boats. Marine
      Products distinguishes itself by offering a wide range of products to the family
      recreational market and cruiser market through its Chaparral brand, and to
      the
      sport fishing market through its Robalo brand.




The
      following table provides a brief description of our product lines and their
      particular market focus:


**Product
                Line**
            **Number
                of**
              **Models**
            **Overall**
              **Length**
            **Approximate**
              **Retail**
              **Price
                Range**
            **Description**Chaparral
                -SSi
                Sportboats
            15
            18′-28′
            $20,000
                -$140,000
            Fiberglass
                bowriders and closed deck runabouts. Encompasses affordable, entry-level
                to mid-range and larger sportboats. Marketed as high value runabouts
                for
                family groups.Chaparral
                - Sunesta Deckboats
            6
            21′-28′
            $38,000
                -$82,000
            Fiberglass
                deck boats. Encompasses affordable, entry-level to mid-range deck
                boats.
                Marketed as high value family pleasure boats with the handling of
                a
                runabout, the style of a sportboat and the roominess of a cruiser.Chaparral
                - Signature Cruisers
            7
            24′-35′
            $60,000
                -$311,000
            Fiberglass,
                accommodation-focused cruisers. Marketed to experienced boat owners
                through trade magazines and boat show exhibitions.Robalo
                -Sport
                FishingBoats
            11
            19′-29′
            $30,000
                -$208,000
            Sport
                fishing boats for large freshwater lakes or saltwater use. Marketed
                to
                experienced fishermen.




**Manufacturing**




Marine
      Products’ manufacturing facilities are located in Nashville, Georgia and
      Valdosta, Georgia. Marine Products utilizes seven different plants to, among
      other things, manufacture interiors, design new models, create fiberglass hulls
      and decks, and assemble various end products. Quality control is conducted
      throughout the manufacturing process. Chaparral and Robalo are ISO 9001: 2000
      certified. ISO 9001: 2000 is an international designation of design,
      manufacturing, and customer service processes. ISO 9001: 2000 surpasses previous
      ISO designations. Management believes Chaparral is the third largest stern-drive
      boat manufacturing brand to hold the ISO 9001: 2000 certification. When fully
      assembled and inspected, the boats are loaded onto either company-owned trailers
      or third-party marine transport trailers for delivery to dealers.




3






The
      manufacturing process begins with the design of a product to meet dealer and
      customer needs. Plugs are constructed in the research and development phase
      from
      designs. Plugs are used to create a mold from which prototype boats can be
      built. Adjustments are made to the plug design until acceptable parameters
      are
      met. The final plug is used to create the necessary number of production molds.
      Molds are used to produce the fiberglass hulls and decks. Fiberglass components
      are made by applying the outside finish or gel coat to the mold, then numerous
      layers of fiberglass and resin are applied during the lamination process over
      the gel coat. After curing, the hulls and deck are removed from the molds and
      are trimmed and prepared for final assembly, which includes the installation
      of
      electrical and plumbing systems, engines, upholstery, accessories and graphics.




**Suppliers**




Marine
      Products’ two most significant components used in manufacturing its boats, based
      on cost, are engines and fiberglass. For each of these, there is currently
      an
      adequate supply available in the market. Marine Products has not experienced
      any
      material shortages in any of these products. Temporary shortages, when they
      do
      occur, usually involve manufacturers switching model mixes or introducing new
      product lines. Marine Products obtains most of its fiberglass from a leading
      domestic supplier. Marine Products believes that there are several alternative
      suppliers if this supplier fails to provide adequate quality or quantities
      at
      acceptable prices.




Marine
      Products does not manufacture the engines installed in its boats. Engines are
      generally specified by the dealers at the time of ordering, usually on the
      basis
      of anticipated customer preferences or actual customer orders. Sterndrive
      engines for the Chaparral brand are purchased through the American Boatbuilders
      Association (“ABA”), which has entered into engine supply arrangements with
      Mercury Marine and Volvo Penta, the two currently existing suppliers of
      sterndrive engines. These arrangements contain incentives and discount
      provisions, which may reduce the cost of the engines purchased, if specified
      purchase volumes are met during specified periods of time. Although no minimum
      purchases are required, Marine Products expects to continue purchasing
      sterndrive engines through the ABA on a voluntary basis in order to receive
      volume-based purchase discounts. Marine Products does not have a long-term
      supply contract with the ABA. Marine Products has engine supply contracts for
      its Robalo product line with Honda and Yamaha. These engine supply arrangements
      were not negotiated through the ABA. In the event of a sudden interruption
      in
      the supply of engines from these suppliers, our sales and profitability could
      be
      negatively impacted. See “Growth Strategies” below.




Marine
      Products uses other raw materials in its manufacturing processes. Among these
      are stainless steel and resins made from feedstocks. During 2005 the price
      of
      these raw materials increased significantly. See “Inflation” below.




**Sales
      and Distribution**




Sales
      are
      made through approximately 136 Chaparral dealers and 34 Robalo dealers located
      in markets throughout the United States. Twenty-two of these dealers sell both
      brands. Dealers market directly to consumers at boat show exhibitions and in
      the
      dealers’ showrooms. Marine Products also has 24 international dealers. Most of
      our dealers inventory and sell boat brands manufactured by other companies,
      including some that compete directly with our brands. The territories served
      by
      any dealer are not exclusive to the dealer; however, Marine Products uses
      discretion in establishing relationships with new dealers in an effort to
      protect the mutual interests of the existing dealers and the Company. Marine
      Products’ seven independent field sales representatives call upon existing
      dealers and develop new dealer relationships. The field sales representatives
      are directed by a National Sales Coordinator, who is responsible for developing
      a full dealer distribution network for the Company’s products. The marketing of
      boats to retail customers is primarily the responsibility of the dealer. Marine
      Products supports dealer marketing efforts by supplementing local advertising,
      sales and marketing follow up in boating magazines, and participation in
      selected regional, national, and international boat show exhibitions. No single
      dealer accounts for more than 10 percent of sales.




Marine
      Products continues to seek new dealers in many areas throughout the U.S.,
      Europe, South America, Asia, Russia and the Middle East. In general, Marine
      Products requires payment in full before it will ship a boat overseas.
      Consequently, there is no credit risk associated with its international sales
      or
      risk related to foreign currency fluctuation. Marine Products believes
      international sales could produce additional sales growth. Due in part to U.S.
      dollar weakness, sales to international dealers increased in 2005 compared
      to
      2004 and was approximately 15 percent of total sales.




Marine
      Products’ sales orders are indicators of strong interest from its dealers.
      Historically, dealers have in most cases taken delivery of all their orders.
      The
      Company attempts to ensure that its dealers do not accept an excessive amount
      of
      inventory by monitoring their inventory levels. Knowledge of inventory levels
      at
      the individual dealers facilitates production scheduling with very short lead
      times in order to maintain flexibility, in the event that adjustments need
      to be
      made to dealer shipments. In the past, Marine Products has been able to resell
      any boat for which the order has been cancelled. To date, order delays have
      not
      had a material effect on Marine Products.




4






Most
      of
      Marine Products’ domestic shipments are made pursuant to “floor plan financing”
programs in which Marine Products’ subsidiaries participate on behalf of their
      dealers with two major third-party financing institutions. Under these
      arrangements, a dealer establishes lines of credit with one or more of these
      third-party lenders for the purchase of boat inventory for sales to retail
      customers in their show room or during boat show exhibitions. When a dealer
      purchases and takes delivery of a boat pursuant to a floor plan financing
      arrangement, it draws against its line of credit and the lender pays the invoice
      cost of the boat directly to Marine Products, generally, within 10 business
      days. When the dealer in turn sells the boat to a retail customer, the dealer
      repays the lender, thereby restoring its available credit line. Each dealer’s
      floor plan credit facilities are secured by the dealer’s inventory, letters of
      credit, and perhaps other personal and real property. Most dealers maintain
      financing arrangements with more than one lender. In connection with the
      dealer’s floor plan financing arrangements with qualified lenders, Marine
      Products or its subsidiaries have agreed to repurchase any of its boats, up
      to
      specified limits, which the lender repossesses from a dealer and returns to
      Marine Products in a “like new” condition. In the event that a dealer defaults
      under a credit line, the lender may then invoke the manufacturers’ repurchase
      agreement with respect to that dealer. In that event, all repurchase agreements
      of all manufacturers supplying a defaulting dealer are generally invoked
      regardless of the boat or boats with respect to which the dealer has defaulted.
      As of December 31, 2005, Marine Products’ aggregate obligation to repurchase
      boats under these floor plan financing programs described above was
      approximately $4.0 million. Unlike Marine Products’ obligation to repurchase
      boats repossessed by lenders, Marine Products is under no obligation to
      repurchase boats directly from dealers. Marine Products does not sponsor
      financing programs to the consumer; any consumer financing promotions for
      Chaparral or Robalo boats would be the responsibility of the dealer.




Marine
      Products’ dealer sales incentive programs are variously designed to promote
      early replenishment of the stock in dealer inventories depleted throughout
      the
      prime spring and summer selling seasons, promote the sales of older models
      in
      dealer inventory and particular models during specified periods. These programs
      help to stabilize Marine Products’ manufacturing between the peak and off-peak
      periods, and promote sales of certain models. For the 2006 model year (which
      commenced July 1, 2005), Marine Products offered its dealers several sales
      incentive programs based on dollar volumes and timing of dealer purchases.
      Programs offered include sales discounts, inventory reduction rebates, and
      payment of floor plan financing interest charged by qualified floor plan
      providers to dealers generally through April 1, 2006. After the interest payment
      programs end, interest costs revert to the dealer at rates set by the lender.
      A
      dealer makes periodic curtailment payments (principal payments) on outstanding
      obligations against its dealer inventory as set forth in the floor plan
      financing agreements between the dealer and their particular lender.




These
      various sales incentives and promotions have resulted in relatively level
      month-to-month production and sales. Similar sales incentive and promotion
      programs have been in effect during the past several years, and Marine Products
      expects to continue to offer these types of programs in the future.




The
      sales
      order backlog was approximately 1,900 boats with estimated net sales of
      approximately $81 million as of December 31, 2005. This represents an
      approximate 15 week backlog based on recent production levels. As of December
      31, 2004, the sales order backlog was approximately 2,023 boats with estimated
      net sales of approximately $75 million. The Company typically does not
      manufacture a significant number of boats for its own inventory mainly by
      monitoring various criteria discussed earlier in order to retain the flexibility
      to manufacture boats in response to recent indicators of demand. The Company
      occasionally manufactures boats for its own inventory because the number of
      boats required for immediate shipment is not always the most efficient number
      of
      boats to produce in a given production schedule.




**Research
      and Development**




Essentially
      the same technologies and processes are used to produce fiberglass boats by
      all
      boat manufacturers. The most common method is open-face molding. This is usually
      a labor-intensive, manual process whereby employees hand spray and apply
      fiberglass and resin in layers on open molds to create boat hulls, decks and
      other smaller fiberglass components. This process can result in inconsistencies
      in the size and weight of parts, which may lead to higher warranty costs. A
      single open-face mold is typically capable of producing approximately three
      hulls per week.




Chaparral
      has been a leading innovator in the recreational boating industry. One of
      Chaparral’s most innovative designs is the full-length “Extended V-Plane”
running surface. Typically, sterndrive boats have a several foot gap on the
      bottom rear of the hull where the engine enters the water. With Chaparral’s
      design, the running surface extends the full length to the rear of the boat.
      The
      benefit of this innovation is more deck space, better planing performance and
      a
      more comfortable ride. All of Chaparral’s models have the “Extended V-Plane”
running surface. Although the basic hull designs are similar, the Company
      introduces a variety of new models each year and periodically replaces, updates
      or discontinues existing models.




5






Robalo’s
      hulls utilize the Hydro Lift TM hull
      design. This variable dead rise hull design provides a smooth ride in rough
      conditions. It increases the maximum speed obtainable by a given engine
      horsepower and weight of the boat. Robalo’s current models utilize the Hydro
      Lift TM design
      and we plan to continue to provide this design on Robalo models.




In
      support of its new product development efforts, Marine Products incurred
      research and development costs of $1.9 million in 2005, $1.7 million in 2004
      and
      $1.1 million in 2003.





**Industry
      Overview**




For
      2005,
      the recreational boating industry accounted for less than one percent of the
      United States gross domestic product. The recreational marine market is a mature
      market, with 2004 (latest data available to us) retail expenditures of
      approximately $33 billion spent on new and used boats, motors and engines,
      trailers, accessories and other associated costs as estimated by the National
      Marine Manufacturers Association (“NMMA”). Also according to the NMMA, the most
      recent data available indicate that sales to dealers of traditional powerboats
      increased seven percent during the nine months ended September 30, 2005 compared
      to the same period in the prior year. Pleasure boats compete for consumers’ free
      time with all other leisure activities, from computers and video games to other
      outdoor sports. One of the greatest obstacles to continued growth for the
      recreational boating industry is consumers’ diminishing leisure time.




The
      NMMA
      conducts various surveys of pleasure boat industry trends, and the most recent
      surveys indicate that 69 million people in the United States participate in
      recreational boating. There are currently over 17 million boats owned in the
      United States, including outboard, inboard, sterndrive, sailboats, personal
      watercraft, and miscellaneous (canoes, rowboats, etc.). Marine Products competes
      in the sterndrive and inboard boating category with its three lines of Chaparral
      boats, and in the outboard boating category with its Robalo sport fishing boats.
      More than 90 percent of the Company’s models are sterndrive boats.




Industry
      sales of sterndrive boats in the United States during 2005 totaling 58,161
      (source: Info-Link Technologies, Inc.), accounted for approximately 42 percent
      of the total new fiberglass powerboats sold that were between 18 and 35 feet
      in
      hull length. Sales of sterndrive boats had an estimated total retail value
      of
      $2.9 billion, or an average retail price per boat of approximately $50,000.
      Management believes that the five largest states for boat sales are California,
      Michigan, Florida, Minnesota and Texas. Marine Products has dealers in each
      of
      these states.




The
      U.S.
      domestic recreational boating industry includes sales in the segments of new
      and
      used boats, motors and engines, trailers, and other boat accessories. New
      fiberglass boat market segment with hull lengths of 18 to 35 feet, represented
      $6.3 billion in retail sales during 2005. This is the market segment in which
      Marine Products competes. The table below reflects the estimated sales within
      this segment by category for 2005 and 2004, ranked by 2005 retail sales (source:
      Info-Link Technologies, Inc.):




**2005**
            **2004****Boats**
            **Sales
                ($ B)**
            **Boats**
            **Sales
                ($ B)**Sterndrive
                Boats
            58,161
            $
                2.9
            58,823
            $
                2.8Outboard
                Boats
            62,469
            2.3
            62,499
            2.0Inboard
                Boats
            13,995
            1.0
            13,237
            0.9Jet
                Boats
            4,169
            0.1
            3,559
            0.1TOTAL
            138,794
            $
                6.3
            138,118
            $
                5.8




Chaparral’s
      products are categorized as sterndrive and inboard boats and Robalo’s products
      are categorized as outboard boats.




The
      recreational boat manufacturing market remains highly fragmented. With the
      exception of Brunswick Corporation and Genmar Holdings, Inc., which have
      acquired a number of recreational boat manufacturing operations, there has
      been
      very little consolidation in the industry. We estimate that the boat
      manufacturing industry includes over 150 sterndrive manufacturers and over
      600
      outboard boat manufacturers, largely small, privately held companies with
      varying degrees of professional management and manufacturing skill. According
      to
      estimates provided by Statistical Surveys, Inc., during the nine months ended
      September 30, 2005 (latest information available), the top five sterndrive
      manufacturers have a market share of approximately 53 percent. Chaparral’s
      market share during the period was 8.18 percent, which represents a decline
      of
      0.18 percentage points compared to the same period in 2004. This decline is
      attributable to Chaparral’s declining
      market
      share of boats that are 18 to 20 feet in length, although its market share
      in
      boats that are 21 to 35 feet in length increased during the same period. We
      attribute this decline in overall market share to Chaparral’s strategy
      of
      designing, building, and selling larger boats which carry higher average selling
      prices, as well as the strategy of certain




6
 
   other
        manufacturers who are designing smaller boats which are manufactured in offshore
        manufacturing facilities and sold in the domestic market at a lower price,
        thereby increasing the overall market share of these
        manufacturers.




Several
      factors influence sales trends in the recreational boating industry, including
      general economic growth, consumer confidence, household incomes, weather, tax
      laws, demographics and consumers’ leisure time. Interest rates and fuel prices
      can have a direct impact on boat sales, as well as various trends at the local,
      regional and national level. Competition from other leisure and recreational
      activities, such as vacation properties and travel, can also affect sales of
      recreational boats.




Management
      believes Marine Products is well positioned to take advantage of the following
      conditions, which continue to characterize the industry:




•  
      labor-intensive manufacturing processes that remain largely unautomated;




•  
      increasingly strict environmental standards derived from governmental
      regulations and customer sensitivities;




•  
      a lack of focus on coordinated customer service and support by dealers and
      manufacturers; and




•  
      a high degree of fragmentation and competition among the more than 150
      sterndrive recreational boat manufacturers.




**Growth
      Strategies**




Recreational
      boating is a mature industry. According to Info-Link Technologies,
      Inc., sales of sterndrive boats were comparable in 2003 and 2005, with a
      slight increase experienced  in 2004. During this time, Marine Products
      has experienced a compound annual growth rate of approximately eight
      percent in the number of boats sold. Marine Products has grown its boat sales
      and net sales primarily through increasing market share and by expanding the
      number of models and product lines. Chaparral has grown its sterndrive market
      share in the 18 to 35 feet length category from 4.75 percent in fiscal 1996
      to
      8.18 percent during the nine months ended September 2005 (the most recent
      information provided to us by Statistical Surveys, Inc.). The Company continues
      to expand its product offerings in the outboard boat market, the largest boat
      market not previously served by the Company’s products, and by improvement of
      existing models and expansion into larger boats within its sterndrive and
      inboard offerings.




Marine
      Products’ operating strategy emphasizes innovative designs and manufacturing
      processes, by producing a high quality product while lowering manufacturing
      costs through increased efficiencies in our facilities. In addition, we seek
      opportunities to leverage our buying power through economies of scale.
      Management believes its membership in the ABA positions Marine Products as
      a
      significant third party customer of major suppliers of sterndrive engines.
      Marine Products’ Chaparral subsidiary is a founding member of the ABA, which
      collectively represents 13 independent boat manufacturers that have formed
      a
      buying group to pool their purchasing power in order to gain improved pricing
      on
      engines, fiberglass, resin and many other components. Marine Products intends
      to
      continue seeking the most advantageous purchasing arrangements from its
      suppliers.




Our
      marketing strategy seeks to increase market share by enabling Marine Products
      to
      expand its presence by building dedicated sales, marketing and distribution
      systems. Marine Products has a distribution network of approximately 172 dealers
      located throughout the United States and internationally. Our strategy is to
      increase selectively the quantity of our dealers, and work to improve the
      quality and effectiveness of our entire dealer network. Marine Products seeks
      to
      capitalize on its strong dealer network by educating its dealers on the sales
      and servicing of our products and helping them provide more comprehensive
      customer service, with the goal of increasing customer satisfaction, customer
      retention and future sales. Marine Products provides promotional and incentive
      programs to help its dealers increase product sales. Marine Products intends
      to
      continue to strengthen its dealer network and build brand loyalty with both
      dealers and customers.




As
      part
      of Marine Products’ overall strategy, Marine Products will also consider making
      strategic acquisitions in order to complement existing product lines, expand
      its
      geographic presence in the marketplace and strengthen its capabilities.




**Competition**




The
      recreational boat industry is highly fragmented, resulting in intense
      competition for customers, dealers and boat show exhibition space. There is
      significant competition both within markets we currently serve and in new
      markets that we may enter. Marine Products’ brands compete with several large
      national or regional manufacturers that have substantial financial, marketing
      and other resources. However, we believe that our corporate infrastructure
      and
      marketing and sales capabilities, in addition to our cost structure and our
      nationwide presence, enable us to compete effectively against these




7
 
   companies.
        In each of our markets, Marine Products competes on the basis of responsiveness
        to customer needs, the quality and range of models offered, and the competitive
        pricing of those models. Additionally, Marine Products faces general competition
        from all other recreational businesses seeking to attract consumers’ leisure
        time and discretionary spending dollars.




According
      to Statistical Surveys, Inc., the following is a list of the top ten (largest
      to
      smallest) sterndrive boat manufacturers in the United States based on unit
      sales
      for the nine months ended September 30, 2005 (the most current information
      available to us). Several of these manufacturers are part of larger integrated
      boat building companies and are marked with asterisks. According to Info-Link
      Technologies, Inc., the companies set forth below represent approximately 71
      percent of all United States retail sterndrive boat registrations during the
      twelve months ended December 31, 2005.




1.
            Sea
                Ray*


2.
            Bayliner*


3.
            Chaparral


4.
            Crownline


5.
            Four
                Winns **


6.
            Glastron
                **


7.
            Stingray


8.
            Larson**


9.
            Cobalt


10.
            Rinker




The
      outboard engine powered market has a large breadth and depth, accounting for
      almost 45 percent of all boats sold. Robalo’s share of the outboard sport
      fishing boat market during the nine months ended September 30, 2005 was
      approximately one percent. Primary competitors for Robalo include Sea-Pro,*
      Grady-White, Mako, Boston Whaler* and Hydra Sports**.




*
            a
                subsidiary of Brunswick Corporation**
            a
                subsidiary of Genmar Holdings, Inc.




**Environmental
      and Regulatory Matters**




Certain
      materials used in boat manufacturing, including the resins used to make the
      decks and hulls, are toxic, flammable, corrosive, or reactive and are classified
      by the federal and state governments as “hazardous materials.” Control of these
      substances is regulated by the Environmental Protection Agency (“EPA”) and state
      pollution control agencies, which require reports and inspect facilities to
      monitor compliance with their regulations. The Occupational Safety and Health
      Administration (“OSHA”) standards limit the amount of emissions to which an
      employee may be exposed without the need for respiratory protection or upgraded
      plant ventilation. Marine Products’ manufacturing facilities are regularly
      inspected by OSHA and by state and local inspection agencies and departments.
      Marine Products believes that its facilities comply in all material aspects
      with
      these regulations. Although capital expenditures related to compliance with
      environmental laws are expected to increase during the coming years, we do
      not
      currently anticipate that any material expenditure will be required to continue
      to comply with existing environmental or safety regulations in connection with
      its existing manufacturing facilities.




Recreational
      powerboats sold in the United States must be manufactured to meet the standards
      of certification required by the United States Coast Guard. In addition, boats
      manufactured for sale in the European Community must be certified to meet the
      European Community’s imported manufactured products standards. These
      certifications specify standards for the design and construction of powerboats.
      All boats sold by Marine Products meet these standards. In addition, safety
      of
      recreational boats is subject to federal regulation under the Boat Safety Act
      of
      1971. The Boat Safety Act requires boat manufacturers to recall products for
      replacement of parts or components that have demonstrated defects affecting
      safety. While Marine Products has instituted recalls for defective component
      parts produced by other manufacturers, there has never been a safety related
      recall resulting from Marine Products’ design or manufacturing process. None of
      the recalls has had a material adverse effect on Marine Products.




**Employees**




As
      of
      December 31, 2005, Marine Products had approximately 1,100 employees, of whom
      six were management and 46 administrative. None of Marine Products’ employees is
      party to a collective bargaining agreement. Marine Products’ entire workforce is
      currently employed in the United States and Marine Products believes that its
      relations with its employees are good.




8






**Proprietary
      Matters**




Marine
      Products owns a number of trademarks and trade names that it believes are
      important to its business. Except for the Chaparral, Robalo and Wahoo!
      trademarks, however, Marine Products is not dependent upon any single trademark
      or trade name or group of trademarks or trade names. The Chaparral, Robalo
      and
      Wahoo! trademarks are currently registered in the United States. The current
      duration for such registration ranges from seven to 15 years but each
      registration may be renewed an unlimited number of times.




Several
      of Chaparral’s designs are protected under the U.S. Copyright Office’s Vessel
      Hull Design Protection Act. This law grants an owner of an original vessel
      hull
      design certain exclusive rights. Protection is offered for hull designs that
      are
      made available to the public for purchase provided that the application is
      made
      within two years of the hull design being made public. As of December 31, 2005,
      there were 14 Chaparral hull designs registered under the Vessel Hull Design
      Protection Act. There were no Robalo hull designs registered as of December
      31,
      2005.




**Seasonality**




Marine
      Products’ quarterly operating results are affected by weather and general
      economic conditions. Quarterly operating results for the second quarter have
      historically recorded the highest sales volume for the year. The results for
      any
      quarter are not necessarily indicative of results to be expected in any future
      period.




**Inflation**




Recently,
      the Company has experienced an increase in certain material and component costs.
      The Company responded to this increase in costs by instituting price increases
      to its dealers effective January 1, 2005, and instituting an additional price
      increase for the 2006 model year which began on July 1, 2005. These price
      increases did not fully absorb the increased material costs during 2005 and
      therefore negatively impacted the gross margin percent. We anticipate, with
      continued high commodity prices, energy prices and petroleum based products
      that
      the price of materials will continue to increase. If the prices of these raw
      materials and components continue to increase, or the prices of other factors
      of
      production increase, Marine Products will attempt to increase its product prices
      to offset its increased costs. No assurance can be given, however, that the
      Company will be able to adequately increase its product prices in response
      to
      inflation or estimate the impact on future sales of increasing our product
      prices.




New
      boat
      buyers typically finance their purchases. Higher inflation typically results
      in
      higher interest rates that could translate into an increased cost of boat
      ownership. Prospective buyers may choose to delay their purchases or buy a
      less
      expensive boat. The recent increases in interest rates may have had a negative
      impact on our 2005 sales, and if interest rates remain at current levels or
      increase further, our future sales and profits may be negatively
      impacted.




**Availability
      of Filings**




Marine
      Products makes available free of charge on its website,
      www.marineproductscorp.com, the annual report on Form 10-K, quarterly reports
      on
      Form 10-Q, current reports on Form 8-K, and all amendments to those reports
      on
      the same day as they are filed with the Securities and Exchange Commission.




**Item
      1A. Risk Factors**




*Economic
      Conditions and Consumer Confidence Levels Affect Marine Products’ Sales because
      Marine Products’ Products are Purchased with Discretionary Income*




During
      an
      economic recession or when an economic recession is perceived as a threat,
      Marine Products will be adversely affected as consumers have less discretionary
      income or are more apt to save their discretionary income rather than spend
      it.
      During times of global political uncertainty, such as the current threats in
      the
      Middle East, Marine Products will be negatively affected to the extent consumers
      delay large discretionary purchases pending the resolution of those
      uncertainties.




*Interest
      Rates and Fuel Prices Affect Marine Products’ Sales*




The
      Company’s products are often financed by our dealers and the retail boat
      consumers. Higher interest rates increase the borrowing costs and, accordingly,
      the cost of doing business for dealers and the cost of boat purchases for
      consumers. Fuel costs can represent a large portion of the costs to operate
      our
      products. Therefore, higher interest rates and fuel costs can adversely affect
      consumers’ decisions relating to recreational boating purchases.




9






*Marine
      Products’ Dependence On Its Network Of Independent Boat Dealers May Affect Its
      Growth Plans And Sales*




Virtually
      all of Marine Products’ sales are derived from its network of independent boat
      dealers. Marine Products has no long-term agreements with these dealers.
      Competition for dealers among recreational powerboat manufacturers continues
      to
      increase based on the quality of available products, the price and value of
      the
      products, and attention to customer service. We face intense competition from
      other recreational powerboat manufacturers in attracting and retaining
      independent boat dealers. The number of independent boat dealers supporting
      the
      Chaparral and Robalo trade names and the quality of their marketing and
      servicing efforts are essential to Marine Products’ ability to generate sales. A
      deterioration in the number or quality of Marine Products’ network of
      independent boat dealers would have a material adverse effect on its boat sales.
      Marine Products’ inability to attract new dealers and retain those dealers, or
      its inability to increase sales with existing dealers, could substantially
      impair its ability to execute its growth plans.




Although
      Marine Products’ management believes that the quality of its products and
      services in the recreational boating market should permit it to maintain its
      relationship with its dealers and its market position, there can be no assurance
      that Marine Products will be able to sustain its current sales levels. In
      addition, independent dealers in the recreational boating industry have
      experienced significant consolidation in recent years, which could result in
      the
      loss of one or more of Marine Products’ dealers in the future if the surviving
      entity in any such consolidation purchases similar products from a Marine
      Products competitor. See “Growth Strategies” above.




*Marine
      Products’ Sales Are Affected By Weather Conditions*




Marine
      Products’ business is subject to weather patterns that may adversely affect its
      sales. For example, drought conditions, or merely reduced rainfall levels,
      or
      excessive rain, may close area boating locations or render boating dangerous
      or
      inconvenient, thereby curtailing customer demand for our products. In addition,
      unseasonably cool weather and prolonged winter conditions may lead to a shorter
      selling season in some locations. Hurricanes and other storms could cause
      disruptions of our operations or damage to our boat inventories and docking
      facilities, as was the case during the 2005 hurricane season when several
      boating markets were adversely affected.




*Marine
      Products Has Potential Liability for Personal Injury and Property Damage Claims*




The
      products we sell or service may expose Marine Products to potential liabilities
      for personal injury or property damage claims relating to the use of those
      products. Historically, the resolution of product liability claims has not
      materially affected Marine Products’ business. Marine Products maintains product
      liability insurance that it believes to be adequate. However, there can be
      no
      assurance that Marine Products will not experience legal claims in excess of
      its
      insurance coverage or that claims will be covered by insurance. Furthermore,
      any
      significant claims against Marine Products could result in negative publicity,
      which could cause Marine Products’ sales to decline.




*Because
      Marine Products Relies On Third Party Suppliers, Marine Products May Be Unable
      To Obtain Adequate Raw Materials and Components*




Marine
      Products is dependent on third party suppliers to provide raw materials and
      components essential to the construction of its various powerboats. Especially
      critical are the availability and cost of marine engines and commodity raw
      materials used in the manufacture of Marine Products’ boats. While Marine
      Products’ management believes that supplier relationships currently in place are
      sufficient to provide the materials necessary to meet present production
      demands, there can be no assurance that these relationships will continue or
      that the quantity or quality of materials available from these suppliers will
      be
      sufficient to meet Marine Products’ future needs, irrespective of whether Marine
      Products successfully implements its growth and acquisition strategies.
      Disruptions in current supplier relationships or the inability of Marine
      Products to continue to purchase construction materials in sufficient quantities
      and of sufficient quality at acceptable prices to meet ongoing production
      schedules could cause a decrease in sales or a sharp increase in the cost of
      goods sold. Additionally, because of this dependence, the volatility in
      commodity raw materials or current or future price increases in construction
      materials or the inability of Marine Products’ management to purchase
      construction materials required to complete its growth and acquisition
      strategies could cause a reduction in Marine Products’ profit margins or reduce
      the number of powerboats Marine Products may be able to produce for sale.




*Marine
      Products May Be Unable To Identify, Complete or Successfully Integrate
      Acquisitions*




Marine
      Products intends to pursue acquisitions and form strategic alliances that will
      enable Marine Products to acquire complementary skills and capabilities, offer
      new products, expand its customer base, and obtain other competitive advantages.
      There can be no assurance, however, that Marine Products will be able to
      successfully identify suitable acquisition candidates or strategic partners,
      obtain financing on satisfactory terms, complete acquisitions or strategic
      alliances, integrate acquired operations into its existing operations, or expand
      into new markets. Once integrated, acquired operations may not achieve
      anticipated levels of sales or profitability, or otherwise perform as expected.
      Acquisitions also involve special risks, including risks associated with
      unanticipated problems, liabilities and contingencies, diversion of




10
 
   management
        resources, and possible adverse effects on earnings and earnings per share
        resulting from increased interest costs, the issuance of additional securities,
        and difficulties related to the integration of the acquired business. The
        failure to integrate acquisitions successfully may divert management’s attention
        from Marine Products’ existing operations and may damage Marine Products’
relationships with its key customers and suppliers.




*Marine
      Products’ Success Will Depend On Its Key Personnel, and The Loss Of Any Key
      Personnel May Affect Its Powerboat Sales*




Marine
      Products’ success will depend to a significant extent on the continued service
      of key management personnel. The loss or interruption of the services of any
      senior management personnel or the inability to attract and retain other
      qualified management, sales, marketing and technical employees could disrupt
      Marine Products’ operations and cause a decrease in its sales and profit
      margins.




*Marine
      Products’ Ability to Attract and Retain Qualified Employees Is Crucial To Its
      Results of Operations and Future Growth*




Marine
      Products relies on the existence of an available hourly workforce to manufacture
      its products. As with many businesses, we are challenged to find qualified
      employees. There are no assurances that Marine Products will be able to attract
      and retain qualified employees to meet current and/or future growth needs.




*If
      Marine Products Is Unable to Comply With Environmental and Other Regulatory
      Requirements, Its Business May Be Exposed to Liability and Fines*




Marine
      Products’ operations are subject to extensive regulation, supervision, and
      licensing under various federal, state, and local statutes, ordinances, and
      regulations. While Marine Products believes that it maintains all requisite
      licenses and permits and is in compliance with all applicable federal, state
      and
      local regulations, there can be no assurance that Marine Products will be able
      to continue to maintain all requisite licenses and permits. The failure to
      satisfy these and other regulatory requirements could cause Marine Products
      to
      incur fines or penalties or could increase the cost of operations. The adoption
      of additional laws, rules and regulations could also increase Marine Products’
costs.




As
      with
      boat construction in general, our manufacturing processes involve the use,
      handling, storage and contracting for recycling or disposal of hazardous or
      toxic substances or wastes. Accordingly, we are subject to regulations regarding
      these substances, and the misuse or mishandling of such substances could expose
      Marine Products to liability or fines.




Additionally,
      certain states have required or are considering requiring a license in order
      to
      operate a recreational boat. While such licensing requirements are not expected
      to be unduly restrictive, regulations may discourage potential first-time
      buyers, thereby reducing future sales.




*Marine
      Products’ S* *tock
      Price Has Been Volatile*




Historically,
      the market price of common stock of companies engaged in the boat manufacturing
      industry has been highly volatile. Likewise, the market price of our common
      stock has varied significantly in the past. In addition, the availability of
      Marine Products common stock to the investing public is limited to the extent
      that shares are not sold by the executive officers, directors and their
      affiliates, which could negatively impact the trading price of Marine Products’
common stock, increase volatility and affect the ability of minority
      stockholders to sell their shares. Future sales by executive officers, directors
      and their affiliates of all or a substantial portion of their shares could
      also
      negatively affect the trading price of Marine Products’ common
      stock.




*Marine
      Products’ Management Has a Substantial Ownership Interest; Public Stockholders
      May Have No Effective Voice In Marine Products’ Management*




The
      Company has elected the “Controlled Corporation” exemption under Rule 303A of
      the New York Stock Exchange (“NYSE”) Company Guide. The Company is a “Controlled
      Corporation” because a group that includes the Company’s Chairman of the Board,
      R. Randall Rollins and his brother, Gary W. Rollins, who is also a director
      of
      the Company, and certain companies under their control, controls in excess
      of
      fifty percent of the Company’s voting power. As a “Controlled Corporation”, the
      Company need not comply with certain NYSE rules including those requiring a
      majority of independent directors.




Marine
      Products’ executive officers, directors and their affiliates hold directly or
      through indirect beneficial ownership, in the aggregate, approximately 67
      percent of Marine Products’ outstanding shares of common stock. As a result,
      these stockholders effectively control the operations of Marine Products,
      including the election of directors and approval of significant corporate
      transactions such as acquisitions. This concentration of ownership could also
      have the effect of delaying or preventing a third party from acquiring control
      of Marine Products at a premium.




11







*Provisions
      in Marine Products’ Certificate of Incorporation and Bylaws May Inhibit a
      Takeover of Marine Products*




Marine
      Products’ certificate of incorporation, bylaws and other documents contain
      provisions including advance notice requirements for shareholder proposals
      and
      staggered terms of office for the Board of Directors. These provisions may
      make
      a tender offer, change in control or takeover attempt that is opposed by Marine
      Products’ Board of Directors more difficult or expensive.




**Item
      1B. Unresolved Staff Comments**




None.




**Item
      2. Properties**




Marine
      Products’ corporate offices are located in Atlanta, Georgia. These offices are
      currently shared with RPC and are leased. The monthly rent paid is allocated
      between Marine Products and RPC. Under this arrangement, Marine Products pays
      approximately $3,800 per month in rent. Marine Products may cancel this
      arrangement at any time after giving a 30 day notice.




Chaparral
      owns and maintains approximately 1,065,500 square feet of space utilized for
      manufacturing, research and development, warehouse, and sales office and
      operations in Nashville, Georgia. In addition, the Company leases 83,000 square
      feet of manufacturing space at the Robalo facility in Valdosta, Georgia, under
      a
      long-term arrangement expiring in 2014. Marine Products’ total square footage
      under roof is allocated as follows: manufacturing — 795,000, research and
      development — 67,500, warehousing — 201,000, office and other — 85,000.




**Item
      3. Legal Proceedings**




Marine
      Products is involved in litigation from time to time in the ordinary course
      of
      its business. Marine Products does not believe that the ultimate outcome of
      such
      litigation will have a material adverse effect on its liquidity, financial
      condition or results of operations.




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




There
      were no matters submitted to a vote of security holders during the fourth
      quarter of 2005.




**Item
      4A. Executive Officers of the Registrant**




Each
      of
      the executive officers of Marine Products was elected by the Board of Directors
      to serve until the Board of Directors’ meeting immediately following the next
      annual meeting of stockholders or until his or her earlier removal by the Board
      of Directors or his or her resignation. The following table lists the executive
      officers of Marine Products and their ages, offices, and date first elected
      to
      office.




**Name
                and Office with Registrant**
            **Age**
            **Date
                First Elected**
              **to
                Present Office**R.
                Randall Rollins (1)
            74
            2/28/01Chairman
                of the BoardRichard
                A. Hubbell (2)
            61
            2/28/01President
                andChief
                Executive OfficerJames
                A. Lane, Jr. (3)
            63
            2/28/01Executive
                Vice President andPresident
                of Chaparral Boats, Inc.Linda
                H. Graham (4)
            69
            2/28/01Vice
                President andSecretaryBen
                M. Palmer (5)
            45
            2/28/01Vice
                President,Chief
                Financial Officer and Treasurer




12






(1)
            R.
                Randall Rollins began working for Rollins, Inc. in 1949. At the time
                of
                the spin-off of RPC from Rollins, in 1984, Mr. Rollins was elected
                Chairman of the Board and Chief Executive Officer of RPC. He remains
                Chairman of RPC and held the position of Chief Executive Officer
                of RPC
                until April 22, 2003. He has served as Chairman of the Board of Marine
                Products since February 2001 and Chairman of the Board of Rollins,
                Inc.
                (consumer services) since October 1991. He is also a director of
                Dover
                Downs Gaming and Entertainment, Inc. and Dover Motorsports, Inc.
                He served
                as a director of SunTrust Banks, Inc. and SunTrust Banks of Georgia
                until
                April 2004.




(2)
            Richard
                A. Hubbell has been the President and Chief Executive Officer of
                Marine
                Products since it was spun-off in February 2001. He has also been
                the
                President of RPC since 1987 and its Chief Executive Officer since
                April
                22, 2003. Mr. Hubbell serves on the Board of Directors for both of
                these
                companies.




(3)
            James
                A. Lane, Jr., has held the position of President of Chaparral Boats
                (formerly a subsidiary of RPC) since 1976. Mr. Lane has been Executive
                Vice President and Director of Marine Products since it was spun
                off in
                2001. He is also a director of RPC and has served in that capacity
                since
                1987.




(4)
            Linda
                H. Graham has been Vice President and Secretary of Marine Products
                since
                it was spun-off in 2001, and Vice President and Secretary of RPC
                since
                1987. Ms. Graham serves on the Board of Directors for both of these
                companies.




(5)
            Ben
                M. Palmer has been Vice President, Chief Financial Officer and Treasurer
                of Marine Products since it was spun-off in 2001 and has served the
                same
                roles at RPC since 1996.







13







**PART
      II**




**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities**




During
      the second quarter of 2005, the Company transferred the listing of its common
      shares for trading to the New York Stock Exchange under ticker symbol “MPX”. All
      share and dividends per share data disclosed below have been restated for the
      three-for-two stock split effective March 10, 2005. At February 24, 2006, there
      were 38,044,485 shares of common stock outstanding.




At
      the
      close of business on February 24, 2006, there were approximately 4,300 holders
      of record of common stock. The high and low prices of Marine Products’ common
      stock and dividends paid for each quarter in the years ended December 31, 2005
      and 2004 were as follows:




**2005**
            **2004****Quarter**
            **High**
            **Low**
            **Dividends**
            **High**
            **Low**
            **Dividends**First
            $
                21.40
            $
                15.94
            $0.040
            $
                10.00
            $
                8.07
            $0.027Second
            17.52
            11.90
            0.040
            13.13
            9.15
            0.027Third
            15.10
            10.55
            0.040
            12.57
            10.20
            0.027Fourth
            $
                12.80
            $9.25
            $0.040
            $
                19.31
            $11.57
            $0.027





The
      Company has paid cash dividends since the second quarter of 2002. At the January
      25, 2005 Board of Directors’ Meeting, the Board approved an increase in the cash
      dividend, from $0.027 to $0.04. At the January 24, 2006 Board of Directors’
Meeting, the Board approved an increase in the cash dividend, from $0.04 to
      $0.05. The Company expects to continue to pay cash dividends to common
      stockholders, subject to the earnings and financial condition of the Company
      and
      other relevant factors.







*Issuer
      Purchases of Equity Securities*




Shares
      repurchased in the fourth quarter of 2005 are outlined below.







**Period**
            **Total****Number
                of**
              **Shares
                (or****Units)
                Purchased**
            
            
            **Average
                Price**
              **Paid
                Per**
              **Share
                (or Unit)**
            
            **Total
                number of Shares (or Units) Purchased as Part of**
              **Publicly
                Announced Plans or Programs**
            
            **Maximum
                Number**
              **(or
                Approximate Dollar Value)**
              **of
                Shares (or Units) that May Yet****be
                Purchased Under the Plans or Programs**October
                1, 2005 to October 31, 2005
            43,730
            
            $
            10.38
            
            43,730
            
            2,772,367November
                1, 2005 to November 30, 2005
            49,583
            
            
            9.97
            
            49,583
            
            2,722,784December
                1, 2005 to December 31, 2005
            16,318
            
            
            10.03
            
            16,318
            
            2,706,466Totals
            109,631
            
            $
            10.14
            
            109,631
            
            2,706,466




The
      Company’s Board of Directors announced stock buyback programs on April 25, 2001
      authorizing the repurchase of 2,250,000 shares in the open market and on
      September 14, 2005 authorizing the repurchase of an additional 3,000,000 shares.
      A total of 2,543,534 shares have been repurchased pursuant to these programs
      through December 31, 2005. The programs have no predetermined expiration dates.




14





**Item
      6. Selected Financial Data**




The
      following table summarizes certain selected combined financial data of Marine
      Products and Chaparral including data for periods prior to the February 28,
      2001
      spin-off from RPC, Inc. The historical information may not be indicative of
      Marine Products’ future results of operations. The information set forth below
      should be read in conjunction with “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations” and the Consolidated Financial
      Statements and the notes thereto included elsewhere in this document.




All
      earnings per share, shares outstanding and dividends per share have been
      restated for the three-for-two stock split effective March 10, 2005 and for
      the
      three-for-two stock split effective March 10, 2004.




**Years
                Ended December 31,****(In
                thousands, except share, per share and employee data)****2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001****Statement
                of Income Data:**Net
                sales
            
            $
            272,057
            
            $
            252,418
            
            $
            193,980
            
            $
            162,682
            
            $
            134,689Cost
                of goods sold
            
            
            202,936
            
            
            186,832
            
            
            143,663
            
            
            125,282
            
            
            105,344Gross
                profit
            
            
            69,121
            
            
            65,586
            
            
            50,317
            
            
            37,400
            
            
            29,345Selling,
                general and administrative expenses
            
            
            33,557
            
            
            29,810
            
            
            23,015
            
            
            18,018
            
            
            16,223Operating
                income
            
            
            35,564
            
            
            35,776
            
            
            27,302
            
            
            19,382
            
            
            13,122Interest
                income
            
            
            1,330
            
            
            590
            
            
            501
            
            
            600
            
            
            689Income
                before income taxes
            
            
            36,894
            
            
            36,366
            
            
            27,803
            
            
            19,982
            
            
            13,811Income
                tax provision
            
            
            10,671
            
            
            12,623
            
            
            9,731
            
            
            7,593
            
            
            5,248**Net
                income**
            
            $
            26,223
            
            $
            23,743
            
            $
            18,072
            
            $
            12,389
            
            $
            8,563**Earnings
                per share:****(a)**Basic
            
            $
            0.69
            
            $
            0.62
            
            $
            0.47
            
            $
            0.32
            
            $
            0.23Diluted
            
            $
            0.65
            
            $
            0.58
            
            $
            0.45
            
            $
            0.31
            
            $
            0.22**Dividends
                paid per share**
            
            $
            0.16
            
            $
            0.11
            
            $
            0.07
            
            $
            0.03
            
            $
            0.03**Other
                Financial and Operating Data:**Gross
                profit margin percent
            
            
            25.4
            %
            
            26.0
            %
            
            25.9
            %
            
            23.0
            %
            
            21.8
            %Operating
                margin percent
            
            
            13.1
            %
            
            14.2
            %
            
            14.1
            %
            
            11.9
            %
            
            9.7
            %Net
                cash provided by operating activities
            
            $
            19,366
            
            $
            29,405
            
            $
            17,828
            
            $
            11,696
            
            $
            10,231Net
                cash (used for) provided by investing activities
            
            
            (2,023
            )
            
            (1,924
            )
            
            (4,432
            )
            
            2,860
            
            
            (5,919
            )Net
                cash used for financing activities
            
            
            26,356
            
            
            7,110
            
            
            4,432
            
            
            2,229
            
            
            456Capital
                expenditures
            
            $
            1,118
            
            $
            2,838
            
            $
            3,707
            
            $
            3,800
            
            $
            5,456Employees
                at end of year
            
            
            1,065
            
            
            1,187
            
            
            975
            
            
            867
            
            
            758Factory
                and administrative space at end of year (square ft.)
            
            
            1,149
            
            
            1,146
            
            
            1,128
            
            
            898
            
            
            898**Balance
                Sheet Data at end of year:**Cash
                and cash equivalents
            
            $
            37,602
            
            $
            46,615
            
            $
            26,244
            
            $
            17,280
            
            $
            4,953Marketable
                securities — current
            
            
            1,323
            
            
            132
            
            
            1,402
            
            
            1,929
            
            
            5,478Marketable
                securities — non-current
            
            
            5,893
            
            
            6,202
            
            
            5,930
            
            
            4,865
            
            
            7,781Inventories
            
            
            26,856
            
            
            25,869
            
            
            21,770
            
            
            20,685
            
            
            14,478Working
                capital
            
            
            61,341
            
            
            61,989
            
            
            45,984
            
            
            33,390
            
            
            20,311Property,
                plant and equipment, net
            
            
            17,252
            
            
            18,362
            
            
            17,761
            
            
            16,216
            
            
            14,230Total
                assets
            
            
            108,805
            
            
            109,734
            
            
            86,314
            
            
            71,063
            
            
            56,513Total
                stockholders’ equity
            
            $
            87,688
            
            $
            87,372
            
            $
            69,966
            
            $
            56,833
            
            $
            46,345




(a)   Earnings
      per share for the year 2001 has been computed based on the outstanding shares
      as
      of the spin-off date adjusted for subsequent stock splits. These numbers have
      not been audited.




15







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




The
      following discussion is based upon and should be read in conjunction with
“Selected Financial Data”and “Financial Statements and Supplementary Data.” See
      also “Forward-Looking Statements” on page 2.







**Overview**




Marine
      Products Corporation, through our wholly-owned subsidiaries Chaparral and
      Robalo, is a leading manufacturer of recreational fiberglass powerboats. Our
      sales and profits are generated by selling the products that we manufacture
      to a
      network of independent dealers who in turn sell the products to retail
      customers. These dealers are located throughout the continental United States
      and in several international markets. Most of these dealers finance their
      inventory through third-party floorplan lenders, who pay Marine Products upon
      delivery of the products to the dealers.




We
      manage
      our company by focusing on the execution of the following business and financial
      strategies:





·
            Manufacturing
                high-quality, stylish, and innovative powerboats for our dealers
                and
                retail customers,


·
            Providing
                to our independent dealer network appropriate incentives, training,
                and
                other support to enhance their success and their customers’
                satisfaction, thereby facilitating their continued relationship with
                us,


·
            Managing
                our production and dealer order backlog to maximize profitability
                and
                reduce risk in the event of a downturn in sales of our
                products,


·
            Maintaining
                a flexible, variable cost structure which can be reduced quickly
                in the
                event of an industry downturn,


·
            Focusing
                on the competitive nature of the boating business and designing our
                products and strategies in order to grow and maintain profitable
                market
                share,


·
            Maximizing
                shareholder return by optimizing the balance of cash invested in
                the
                Company’s
                productive
                assets, the payment of dividends to shareholders, and the repurchase
                of
                its common stock on the open
                market,


·
            Aligning
                the interests of our management and
                shareholders.




In
      implementing these strategies and attempting to optimize our financial returns,
      management closely monitors dealer orders and inventories, the production mix
      of
      its various models, and indications of near term demand such as consumer
      confidence, interest rates, dealer orders placed at our annual dealer
      conferences, and retail attendance and orders at annual winter boat show
      exhibitions. We also consider trends related to certain key financial and other
      data, including our market share, unit sales of our products, average selling
      price per boat, and gross profit margins, among others, as indicators of the
      success of our strategies. Marine Products’ financial
      results
      are affected by consumer confidence — because pleasure boating is a
      discretionary expenditure, interest rates — because many retail customers
      finance the purchase of their boats, and other socioeconomic and environmental
      factors such as availability of leisure time, consumer preferences, demographics
      and the weather.




Industry
      trends during 2005 were highlighted by higher wholesale and retail powerboat
      sales, although unit sales declined slightly, due to continued low interest
      rates, an improving domestic economy, and the continuation of the shift in
      consumer preferences towards safe recreational activities that take place close
      to home. We believe that these sales increases moderated late in the third
      quarter and during the fourth quarter.  The severe hurricanes in the
      Gulf of Mexico caused extensive damage to many geographical areas that are
      popular for boating, sharp increases in the price of gasoline, and
      impacted consumer confidence and discouraged consumers from boating. The
      stronger industry conditions were reflected in Marine Products’ financial
      results
      during 2005, although we reduced production during the fourth quarter in order
      to maintain dealer inventories and backlog at appropriate levels and reduce
      risk
      in the event of a continued demand uncertainty in the industry. Early in 2006,
      we increased our production in response to attendance and sales at the winter
      boat show season that was stronger than we originally anticipated.




The
      results of our strategies and the improved industry conditions in early 2005
      are
      reflected in our 2005 financial results and operating statistics. We generated
      record net sales and profits in 2005. Net sales of $272.0 million increased
      7.8
      percent compared to the prior year. Net sales increased due to a 6.9 percent
      increase in the average gross selling price per boat, and an increase in parts
      and accessories sales partially offset by a decrease in the number of boats
      sold. Average selling price per boat increased in each of our four boat lines.
      Gross profit as a percentage of net sales was 25.4 percent, lower than in the
      prior year. Our gross profit margin declined in 2005, unlike the improvements
      realized during several prior years. Although we continued to execute our
      strategies of building larger, more profitable models and managing our
      production for optimum efficiency, these improvements were offset primarily
      by
      increases in the costs of certain raw materials in 2005 and manufacturing
      inefficiencies that resulted from lower production volumes during the
      fourth quarter.





16






We
      monitor our market share in the 18 to 35 foot sterndrive category as one
      indicator of the success of our strategies and the market’s acceptance
      of
      our products. For the nine months ended September 30, 2005 (latest data
      available to us), Chaparral’s market
      share in
      the 18 to 35 foot sterndrive category was 8.18 percent, a decline from our
      market share in the same category for the twelve months ended December 31,
      2004
      of 8.27 percent. This decline was concentrated in the smaller 18 to 20 foot
      size
      boats in our market. We believe this was the result of two factors: the
      execution of our stated strategy of selling larger, more profitable boats,
      and
      the strategy of certain of our competitors, who have built and sold a large
      number of entry-level smaller boats which are constructed in offshore
      manufacturing plants with lower cost labor. Although we will continue to monitor
      our market share and believe it to be important, we also believe that maximizing
      profitability takes precedence over growing our market share.





**Outlook**




Management
      believes that net sales and profits will not increase in 2006 at the same rate
      realized in prior years due to the sales decline in the fourth quarter of 2005
      and the uncertain near term outlook at the beginning of 2006. This belief is
      based on, among other things, reports of attendance and sales during the winter
      2006 retail boat show exhibition season, which began in December 2005. Both
      media reports of attendance and our sales results from these shows have been
      approximately equal to, or slightly higher than, the prior year. Boat show
      attendance has historically been positively correlated with retail boat sales
      later in the selling season because consumers attend shows due to their interest
      in recreational boating and make initial purchasing decisions at a boat show
      exhibition. However, there can be no assurance that this relationship will
      continue in 2006 or subsequent years. Pleasure boating is a discretionary
      consumer activity, and can be negatively impacted by increasing interest rates,
      rising fuel costs, and declines in consumer confidence due to a weakening
      economy or other factors; therefore, an increase in interest rates or a decline
      in consumer confidence could have a serious and immediate negative impact on
      net
      sales and profits. Although the general economy remains strong, in early 2006
      we
      believe that the hurricanes that occurred in late 2005 have negatively impacted
      consumer sentiment regarding pleasure boating, due to continued media coverage
      regarding the long term destruction in the Gulf Coast and predictions of a
      bad
      hurricane season in 2006. We believe that these factors make consumers uncertain
      about the infrastructure that supports recreational boating and the future
      availability and price of fuel although concerns about the price and
      availability of fuel are not as serious in early 2006 as they were in the fourth
      quarter of 2005. Over the past several years, Marine Products as well as other
      manufacturers have been improving their customer service capabilities, marketing
      strategies and sales promotions in order to attract more consumers to
      recreational boating as well as improve consumers’ boating experiences.
      Management believes that these efforts may result in increased advertising
      and
      other selling, general and administrative expenses in the future.




Our
      ability to maintain or improve our net sales and profits in 2006 will depend
      on
      a number of factors, including interest rates, fuel costs, consumer confidence,
      the continued acceptance of our products in the recreational boating market,
      our
      ability to compete in the competitive pleasure boating industry, and the costs
      of certain of our raw materials.





**Results
      of Operations**




All
      share
      data have been retroactively adjusted for the stock split effective March 10,
      2005 and the stock split effective March 10, 2004.


**** ****


**($’s
                in thousands)**
            **2005**
            **2004**
            **2003**Total
                number of boats sold
            7,292
            7,310
            6,265Average
                gross selling price per boat
            $37.3
            $34.9
            $
                31.4Net
                sales
            $272,057
            $252,418
            $193,980Percentage
                of cost of goods sold to net sales
            74.6
                %
            74.0
                %
            74.1
                %Percentage
                of selling, general and administrative expenseto
                net sales
            12.3%
            11.8%
            11.9%Operating
                income
            $35,564
            $35,776
            $27,302Warranty
                expense
            $
                4,929
            $
                4,789
            $
                3,646




17






*Year
      Ended December 31, 2005 Compared To Year Ended December 31,
      2004*





*Net
      Sales.* Marine
      Products’ net sales increased by $19.6 million or 7.8 percent in 2005 compared
      to 2004. The increase was due to a 6.9 percent increase in the average gross
      selling price per boat, and an increase in parts and accessories sales offset
      by
      a slight decrease in the number of boats sold. The increase in average gross
      selling price per boat was due to higher sales of larger boats, in addition
      to
      overall price increases that were implemented for the 2006 model year, which
      began in July 2005, as well as a price increase of approximately one percent
      that took effect in January 2005 to offset the higher cost of materials. The
      increase in parts and accessories sales was a result of high demand for
      accessories ordered on base model boats and the higher numbers of boats sold
      in
      prior years that are still in operation and require routine maintenance and
      repair.




*Cost
      of Goods Sold.* Cost
      of
      goods sold increased 8.6 percent in 2005 compared to 2004, slightly higher
      than
      the increase in net sales. As a percentage of net sales, cost of goods increased
      slightly in 2005 compared to 2004, primarily
      due to increases in the cost of certain materials and components. Also
      contributing to the increase was higher transportation costs, primarily fuel,
      in
      2005 compared to 2004.




*Selling,
      General and Administrative Expenses.*  Selling,
      general and administrative expenses increased 12.6 percent in 2005 compared
      to
      2004. The increase in selling, general and administrative expenses resulted
      from
      costs that vary with increased sales and profitability, such as incentive
      compensation, sales commissions and warranty expense, in addition to increased
      costs associated with public company compliance. Also contributing to the
      increase were the costs associated with listing the Company shares for trading
      on the New York Stock Exchange.




Marine
      Products provides a five year transferable hull structural warranty on Chaparral
      products against defects in material and workmanship and a 10 year transferable
      structural hull warranty on Robalo products. A one year warranty on components
      is provided as well. The engine manufacturer warrants engines included in the
      boats. Warranty expense increased in 2005 due to increased sales and was 1.8
      percent of net sales in 2005 and 1.9 percent of net sales in 2004. The expenses
      decreased as a percentage of sales due to quality improvement initiatives
      coupled with a focus on claims management processes.




*Interest
      Income.* Interest
      income was $1.3 million in 2005 compared to $0.6 million in 2004. Marine
      Products generates interest income from investment of its available cash
      primarily in overnight and marketable securities. The increase in interest
      income resulted primarily from higher percentage yields, consistent with recent
      increases in short-term interest rates, partially offset by lower investable
      cash balances.




*Income
      Tax Provision.* The
      lower
      effective tax rate in 2005 of 28.9 percent compalred to 34.7 percent in 2004
      resulted from the benefit of the new manufacturing deduction created by the
      American Jobs Creation Act of 2004 and a contingency adjustment. The decrease
      was also attributable to certain reductions in the tax provision resulting
      from
      the effect of these strategies reflected on prior year returns filed during
      2005
      and a tax benefit from a reduction in certain state tax liabilities.




*Year
      Ended December 31, 2004 Compared To Year Ended December 31, 2003*




*Net
      Sales.* Marine
      Products’ net sales increased by $58.4 million or 30.1 percent in 2004 compared
      to 2003. The increase was due to a 16.7 percent increase in the number of boats
      sold, an 11.1 percent increase in the average gross selling price per boat,
      and
      an increase in parts and accessories sales. The increase in the number of boats
      sold was realized in the Chaparral sportboat and deckboat lines, but included
      increased boat sales in all product lines. The increase in average gross selling
      price occurred among all product lines as well, but was highest in the Chaparral
      sportboat line, which sold more large sportboats than in 2003, in addition
      to
      the overall price increases implemented for the 2005 model year that began
      in
      July 2004. In addition, the Company eliminated the lower-priced SS sportboat
      in
      2004. Increased sales of larger Robalo sport fishing boats and Chaparral
      cruisers were also responsible for the average gross selling price increase
      during 2004. The increase in parts and accessories sales was a result of the
      increasing numbers of boats sold in prior years that are still in operation
      and
      require routine maintenance and repair.




*Cost
      of Goods Sold.* Cost
      of
      goods sold increased 30.0 percent in 2004 compared to 2003, consistent with
      the
      increase in net sales. As a percentage of net sales, cost of goods decreased
      slightly from 2003 to 2004, because of leverage gained from higher production
      volumes and an overall shift in model mix to larger boats which typically
      generate higher gross margins. This was partially offset by a significant
      increase in selected raw material costs, including stainless steel and resin
      costs from 2003 to 2004.




*Selling,
      General and Administrative Expenses.*  Selling,
      general and administrative expenses increased 29.5 percent in 2004 compared
      to
      2003. The increase in selling, general and administrative expenses resulted
      from
      costs that vary with increased sales and profitability, such as incentive
      compensation, sales commissions and warranty expense, in addition to increased
      costs associated with public company compliance. As a percentage of net sales,
      these expenses did not vary materially.




18






Marine
      Products provides a five year transferable hull structural warranty on Chaparral
      products against defects in material and workmanship and a 10 year transferable
      structural hull warranty on Robalo products. A one year warranty on components
      is provided as well. The engine manufacturer warrants engines included in the
      boats. Warranty expense was 1.9 percent of net sales in 2004 and 2003. Warranty
      expense increased in 2004 due to increased sales.




*Interest
      Income.* Interest
      income was $0.6 million in 2004 compared to $0.5 million in 2003. Marine
      Products generates interest income from investment of its available cash
      primarily in overnight and marketable securities. The increase in interest
      income resulted primarily from higher investment returns in 2004 together with
      a
      higher balance of investable funds.




*Income
      Tax Provision.* The
      effective tax rate was slightly lower at 34.7 percent in 2004 compared to 35.0
      percent in 2003. The income tax provision of $12.6 million was 29.7 percent
      higher than the income tax provision in 2003 as a result of higher income before
      income taxes.




**Liquidity
      and Capital Resources**




*Cash
      and Cash Flows*




The
      Company’s cash and cash equivalents were $37.6 million at December 31, 2005,
      $46.6 million at December 31, 2004 and $26.2 million at December 31,
      2003.




The
      following table sets forth the historical cash flows for the twelve months
      ended
      December 31:




**(in
                thousands)**
            **2005**
            **2004**
            **2003**Net
                cash provided by operating activities
            $19,366
            $29,405
            $17,828Net
                cash used for investing activities
            2,023
            1,924
            4,432Net
                cash used for financing activities
            $26,356
            $7,110
            $4,432




2005




Cash
      provided by operating activities decreased by $10.0 million in 2005 compared
      to
      2004. Higher operating income in 2005 was offset by increased working capital
      requirements primarily due to an increase in accounts receivable and decreases
      in accounts payable, both resulting from timing differences.




Cash
      used
      for investing activities was comparable in 2005 and 2004 at approximately $2.0
      million. The $1.7 million decrease in capital expenditures was offset by $0.9
      million net purchases of marketable securities. Capital expenditures in 2004
      included higher costs than in 2005 to expand manufacturing
      facilities.




Cash
      used
      for financing activities increased $19.2 million in 2005 compared to 2004
      primarily due to an increase of $17.7 million in cash amounts used to purchase
      the Company’s common stock in the open market, and an increase from $0.027 to
      $0.04 in quarterly dividends declared per common share.




2004




Cash
      provided by operating activities increased during 2004 by $11.6 million compared
      to 2003. The increase was due to higher operating income in 2004 compared to
      2003, together with lower working capital requirements in 2004 primarily due
      to
      a decrease in accounts receivable together with increases in accounts payable,
      caused by timing differences.




Cash
      used
      for investing activities decreased $2.5 million compared to 2003. This change
      was caused by a $1 million net decrease in marketable securities in 2004
      compared to 2003 due to a large number of current marketable securities coming
      due in December 2004 that were not reinvested until early 2005. Capital
      expenditures decreased slightly to $2.8 million in 2004 compared to $3.7 million
      in 2003. In 2004, the capital expenditures were primarily for additions to
      certain manufacturing plants and purchase of operating equipment. In 2003,
      the
      largest capital expenditures related to the completion of construction of the
      administrative building at Chaparral’s Nashville, Georgia headquarters which was
      begun in 2003, the purchase of operating equipment, and the purchase of
      additional buildings for warehouse storage space.




Cash
      used
      for financing activities increased $2.7 million in 2004 compared to 2003. The
      increase resulted from higher cash amounts used to purchase the Company’s common
      stock in the open market, and an increase in dividends resulting from the
      Company’s decision during the first quarter of 2004 to increase its quarterly
      dividend from $0.018 per share to $0.027 per share.




19






*Cash
      Requirements*




Management
      expects that capital expenditures during 2006 will be approximately $4.0
      million, and are projected to include investment towards enhancements to certain
      manufacturing plants and the addition of a parts warehouse.




We
      expect
      that additional contributions to the defined benefit pension plan of
      approximately $0.3 million will be required in 2006 to achieve the Company’s
      funding objective.




At
      the
      January 24, 2006 Board of Directors’ meeting, the Board approved an increase in
      the cash dividend per common share from $0.04 to $0.05. Based
      on
      the shares outstanding on December 31, 2005, the aggregate annual dividends
      expected to be paid would be approximately $7.5 million. The
      Company expects to continue to pay cash dividends to common stockholders,
      subject to the earnings and financial condition of the Company and other
      relevant factors.




The
      Company has an agreement with two employees, which provides for a monthly
      payment to each of the employees equal to 10 percent of profits (defined as
      pretax income before goodwill amortization and certain allocated corporate
      expenses).




The
      Company has purchased a total of 2,543,534 shares
      in the open market and as of December 31, 2005, can purchase 2,706,466
      additional shares under the programs. Refer
      to
      Issuer Purchases of Equity Securities on page 14 for details regarding shares
      purchased in the fourth quarter of 2005.




The
      Company believes that the liquidity provided by its existing cash and cash
      equivalents, overall capitalization and cash expected to be generated from
      operations will provide sufficient capital to meet its requirements for at
      least
      the next twelve months




**Contractual
      Obligations**




The
      following table summarizes the Company’s contractual obligations as of December
      31, 2005:




**Payments
                due by period****Contractual
                Obligations**
            **Total**
            **Less**
              **than
                1**
              **year**
            **1-3**
              **years**
            **3-5**
              **years**
            **More**
              **than
                5 years**Long-term
                debt
            $—
            $—
            $—
            $—
            $—Capital
                lease obligation
            150,000
            —
            —
            —
            150,000Operating
                leases (1)
            129,131
            37,007
            90,708
            1,416
            —Purchase
                obligations (2)
            —
            —
            —
            —
            —Other
                long-term liabilities (3)
            300,000
            300,000
            —
            —
            —Total
            $579,131
            $337,007
            $90,708
            $1,416
            $150,000







(1)
            Operating
                leases represent agreements for various office equipment.


(2)
            As
                part of the normal course of business the Company enters into purchase
                commitments to manage its various operating needs. However, the Company
                does not have any obligations that are non-cancelable or subject
                to a
                penalty if canceled.


(3)
            Includes
                expected cash payments for long-term liabilities reflected on the
                balance
                sheet where the timing of the payment is known. These amounts include
                primarily known pension plan funding obligations. These amounts exclude
                pension obligations with uncertain funding requirements and deferred
                compensation liabilities.




**Off
      Balance Sheet Arrangements**




To
      assist
      dealers in obtaining financing for the purchase of its boats for inventory,
      the
      Company has entered into agreements with various dealers and selected
      third-party lenders to guarantee varying amounts of qualifying dealers’ debt
      obligations. The Company’s obligation under these guarantees may become
      effective in the case of default by one or more dealers. The agreements provide
      for the lender to return all repossessed boats in “like new” condition to the
      Company, in exchange for the Company’s assumption of specified percentages of
      the dealers’ unpaid debt obligation on those boats. The maximum contractual
      obligation and the amount outstanding under these agreements, which expire
      in
      2006 and 2007, was $4.0 million as of December 31, 2005. The Company has
      recorded the estimated fair value of this guarantee; at December 31, 2005,
      this
      amount is immaterial and did not change from the prior year.




During
      the fourth quarter of 2005, a dealer defaulted on its debt obligation to a
      floor
      plan lender related to approximately $5 million of boat inventory. Subsequent
      to
      year-end, the Company assisted the lender in coordinating the redistribution of these boats among existing and replacement
      dealers.
      Management estimates that the ultimate cost to the Company for these
      transactions and the impact on sales will be immaterial.




20




**Related
      Party Transactions**




In
      conjunction with its spin-off from RPC in 2001, the Company and RPC entered
      into
      various agreements that define the companies’ relationship after the spin-off.




The
      Transition Support Services Agreement provides for RPC to provide certain
      services, including financial reporting and income tax administration,
      acquisition assistance, etc., to Marine Products until the agreement is
      terminated by either party. Marine Products reimbursed RPC for its estimated
      allocable share of administrative costs incurred for services rendered on behalf
      of Marine Products totaling $616,000 in 2005, $546,000 in 2004 and $496,000
      in
      2003. The Company’s directors are also directors of RPC and all of the executive
      officers with the exception of Mr. Lane are employees of both the Company and
      RPC. The Company paid $171,000 in 2003 to a division of RPC for the purchase,
      installation and service of overhead cranes.




The
      Employee Benefits Agreement provides for, among other things, the Company’s
      employees to continue participating subsequent to the spin-off in two RPC
      sponsored benefit plans, specifically, the defined contribution 401(k) plan
      and
      the defined benefit retirement income plan.




The
      Tax
      Sharing and Indemnification Agreement provides for, among other things, the
      treatment of income tax matters for periods through the date of the spin-off
      and
      responsibility for any adjustments as a result of audit by any taxing authority.
      The general terms provide for the indemnification for any tax detriment incurred
      by one party caused by the other party’s action. In accordance with the
      agreement, RPC transferred approximately $19,000 in 2004 to the Company related
      to tax settlements.




**Critical
      Accounting Policies**




The
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States, which require significant
      judgment by management in selecting the appropriate assumptions for calculating
      accounting estimates. These judgments are based on our historical experience,
      terms of existing contracts, trends in the industry, and information available
      from other outside sources, as appropriate. Senior management has discussed
      the
      development, selection and disclosure of its critical accounting estimates
      with
      the Audit Committee of our Board of Directors. The Company believes that, of
      its
      significant accounting policies, the following may involve a higher degree
      of
      judgment and complexity.




Sales
      recognition - The Company sells its boats through its network of independent
      dealers. Sales orders used to plan production are firm indications of interest
      from dealers and are cancelable at any time, although very few orders are
      cancelled after they have been placed. The Company recognizes sales when all
      the
      following conditions are met: (1) a fully executed sales agreement exists,
      (2)
      the price of the boat is established, (3) the dealer takes delivery of the
      boat,
      and (4) collectibility of the sales price is reasonably assured.




Sales
      incentives and discounts - The Company records incentives as a reduction of
      sales. Using historical trends, adjusted for current changes, the Company
      estimates the amount of incentives that will be paid in the future on boats
      sold
      and accrues an estimated liability. The Company offers various incentives that
      promote sales to dealers, and to a lesser extent, retail customers. These
      incentives are designed to encourage timely replenishment of dealer inventories
      after peak selling seasons, stabilize manufacturing volumes throughout the
      year,
      and improve production model mix. The dealer incentive programs are a
      combination of annual volume commitment discounts, and additional discounts
      at
      time of invoice for those dealers who do not finance their inventory through
      specified floor plan financing agreements. The annual dealer volume discounts
      are based on July 1 through June 30 model year purchases. In addition, the
      Company offers at various times other time-specific or model-specific
      incentives. The retail incentive programs have historically been used during
      off-peak selling seasons in addition to the winter boat exhibition shows.




The
      factors that complicate the calculation of the cost of these incentives are
      the
      ability to forecast sales of the Company and individual dealers, the volume
      and
      timing of inventory financed by specific dealers, identification of which boats
      have been sold subject to an incentive, and the estimated lag time between
      sales
      and payment of incentives. Settlement of the incentives generally occurs from
      three to twelve months after the sale. The Company regularly analyzes the
      historical incentive trends and makes adjustments to recorded liabilities for
      changes in trends and terms of incentive programs. Total incentives as a
      percentage of gross sales were 13.0 percent in 2005, 12.9 percent in 2004 and
      12.5 percent in 2003. A 0.25 percentage point change in incentives as a
      percentage of gross sales during 2005 would have increased or decreased net
      sales, gross margin and operating income by approximately $0.8 million.




21






Warranty
      costs -The Company records as part of selling, general and administrative
      expense an experience based estimate of the future warranty costs to be incurred
      when sales are recognized. The Company evaluates its warranty obligation on
      a
      model year basis. The Company provides warranties against manufacturing defects
      for various components of the boats, primarily the fiberglass deck and hull,
      with warranty periods extending up to 10 years. Warranty costs, if any, on
      other
      components of the boats are absorbed by the original component manufacturer.
      Warranty costs can vary depending upon the size and number of components in
      the
      boats sold, the pre-sale warranty claims, and the desired level of customer
      service. While we focus on high quality manufacturing programs and processes,
      including actively monitoring the quality of our component suppliers and
      managing the dealer and customer service warranty experience and reimbursements,
      our estimated warranty obligation is based upon the warranty terms and our
      enforcement of those terms, defects, repair costs, and the volume and mix of
      boat sales. The estimate of warranty costs is regularly analyzed and is adjusted
      based on the actual claims that occur. Warranty expense as a percentage of
      net
      sales was 1.8 percent in 2005, 1.9 percent for 2004 and 1.9 percent in 2003.
      Warranty expense as a percentage of net sales has decreased in 2005 compared
      to
      2004 because of the benefit the Company expects to realize from recent quality
      improvement initiatives coupled with a focus on claims management processes.
      A
      0.10 percentage point increase in the estimated warranty expense as a percentage
      of net sales during 2005 would have increased selling, general and
      administrative expenses and reduced operating income by approximately $0.3
      million.




*Income
      taxes* —
The
      effective income tax rates were 28.9 percent in 2005, 34.7 percent in 2004,
      and
      35.0 percent in 2003. Our effective tax rates vary due to changes in estimates
      of our future taxable income, fluctuations in the tax jurisdictions in which
      our
      earnings and deductions are realized, and favorable or unfavorable adjustments
      to our estimated tax liabilities related to proposed or probable assessments.
      As
      a result, our effective tax rate may fluctuate significantly on a quarterly
      or
      annual basis.




We
      establish a valuation allowance against the carrying value of deferred tax
      assets when we determine that it is more likely than not that the asset will
      not
      be realized through future taxable income. Such amounts are charged to earnings
      in the period in which we make such determination. Likewise, if we later
      determine that it is more likely than not that the net deferred tax assets
      would
      be realized, we would reverse the applicable portion of the previously provided
      valuation allowance. We have considered future market growth, forecasted
      earnings, future taxable income, the mix of earnings in the jurisdictions in
      which we operate, and prudent and feasible tax planning strategies in
      determining the need for a valuation allowance.




We
      calculate our current and deferred tax provision based on estimates and
      assumptions that could differ from the actual results reflected in income tax
      returns filed during the subsequent year. Adjustments based on filed returns
      are
      recorded when identified, which is generally in the third quarter of the
      subsequent year for U.S. federal and state provisions. Deferred tax liabilities
      and assets are determined based on the differences between the financial and
      tax
      bases of assets and liabilities using enacted tax rates in effect in the year
      the differences are expected to reverse.




The
      amount of income taxes we pay is subject to ongoing audits by federal, state
      and
      foreign tax authorities, which often result in proposed assessments. Our
      estimate for the potential outcome for any uncertain tax issue is highly
      judgmental. We believe we have adequately provided for any reasonably
      foreseeable outcome related to these matters. However, our future results may
      include favorable or unfavorable adjustments to our estimated tax liabilities
      in
      the period the assessments are made or resolved or when statutes of limitation
      on potential assessments expire. Additionally, the jurisdictions in which our
      earnings or deductions are realized may differ from our current estimates.




**Impact
      of Recent Accounting Pronouncements** ****




In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs—An
      Amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends
      the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify
      the accounting for abnormal amounts of idle facility expense, freight, handling
      costs, and wasted material (spoilage). Among other provisions, the new rule
      requires that items such as idle facility expense, excessive spoilage, double
      freight, and rehandling costs be recognized as current-period charges regardless
      of whether they meet the criterion of “so abnormal” as stated in ARB
      No. 43. Additionally, SFAS 151 requires that the allocation of fixed
      production overheads to the costs of conversion be based on the normal capacity
      of the production facilities. SFAS 151 is effective for fiscal years
      beginning after June 15, 2005. The Company plans to adopt SFAS 151 in the
      first quarter of fiscal 2006, beginning on January 1, 2006. Adoption of
      SFAS 151 is not expected to have a material impact on the Company’s
      consolidated results of operations and financial condition.






22
 
  In
          December 2004, the FASB issued SFAS No. 123 (revised 2004),
“Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123,
“Accounting for Stock-Based Compensation,” (“SFAS 123”) and supersedes APB
          Opinion No. 25, “Accounting
          for Stock Issued to Employees.” SFAS 123R requires all share-based payments
          to employees, including grants of employee stock options, to be recognized
          in
          the financial statements based on their fair values. The pro forma disclosures
          previously permitted under SFAS 123 will no longer be an alternative to
          financial statement recognition. Under SFAS 123R, the Company must
          determine the appropriate fair value model to be used for valuing share-based
          payments, the amortization method for compensation cost and the transition
          method to be used at date of adoption. The transition methods available
          are the
          modified prospective application and the modified retrospective application.
          Under the modified retrospective application, prior periods may  be
          restated either as of the beginning of the year of adoption or for all
          periods
          presented. The modified prospective application requires that compensation
          expense be recorded for all unvested stock options and restricted stock
          at the
          beginning of the first quarter of adoption of SFAS 123R, while the modified
          retrospective application would record compensation expense for all unvested
          stock options and restricted stock beginning with the first period restated.
          SFAS No. 123R states that the requirement is to adopt the provisions in
          the
          first interim or annual period beginning after June 15, 2005. However,
          the
          Securities and Exchange Commission (“SEC”) issued a new rule that allows
          companies to implement Statement No. 123R at the beginning of their next
          fiscal
          year, instead of the next reporting period, that begins after June 15,
          2005. In
          March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”)
          regarding the interaction between SFAS 123R and certain SEC rules and
          regulations and provides the staff’s view regarding the valuation of share-based
          payment arrangements for public companies. In November 2005, the FASB issued
          FASB Staff Position (“FSP”) FAS 123R-3, “Transition Election Related to
          Accounting for the Tax Effects of Share-Based Payment Awards”
(“FAS 123R-3”). FAS 123R-3 provides for a practical transition
          election related to accounting for the tax effects of share-based payment
          awards
          to employees. Companies may elect either the guidance in SFAS No. 123R
          or this alternative transition method up to one year from the later of
          its
          initial adoption of SFAS No. 123R or the effective date of this FSP to
          make this one time election.





The
      Company will implement the provisions of SFAS 123R in the first quarter of
      2006
      using the modified prospective method. As
      permitted by SFAS No. 123, the Company currently uses APB 25’s intrinsic
      value method and recognizes no compensation cost for employee stock options.
      The
      Company currently utilizes a standard option pricing model (i.e., Black-Scholes)
      to measure the fair value of stock options granted to employees and will
      continue to use the Black-Scholes model for option valuation. Had we adopted
      earlier, the impact of SFAS 123R would have approximated the impact of SFAS
      No. 123 as described in the disclosure of pro forma net income and earnings
      per share in Note 1 to our audited financial statements. SFAS No. 123R also
      requires the benefits of tax deductions in excess of recognized compensation
      cost to be reported as a financing cash flow, rather than as an operating cash
      flow. This requirement will reduce net operating cash flows and increase net
      financing cash flows in periods after adoption. The Company cannot estimate
      what those amounts will be in the future partly because the Company cannot
      predict the stock prices when i) the employees exercise non-qualified options
      or
      ii) the restricted stock vests. Also, under the provision of SFAS 123R, unearned
      compensation related to unvested restricted stock awards are not recorded.
      Accordingly, any remaining unearned compensation related to unvested restricted
      stock awards and the corresponding amount in paid-in capital will no longer
      be
      included in stockholders’ equity beginning January 1, 2006. Based on stock
      options and restricted stock granted to employees through December 31,
      2005, the Company expects that the adoption of SFAS 123R on January 1,
      2006, will reduce first quarter net income by approximately $125,000. See
      Note 10 for further information on the Company’s stock-based compensation
      plans. The cumulative amount of excess tax deductions related to share-based
      payment awards to employees computed in accordance with the provisions of SFAS
      123R is approximately $874,000 as of December 31, 2005.




In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
      Assets—An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
      Transactions” (“SFAS 153”). The amendments made by SFAS 153 are based on the
      principle that exchanges of nonmonetary assets should be measured based on
      the
      fair value of the assets exchanged. Further, the amendments eliminate the narrow
      exception for non-monetary exchanges of similar productive assets and replace
      it
      with a broader exception for exchanges of nonmonetary assets that do not have
      commercial substance. Previously, Opinion 29 required that the accounting for
      an
      exchange of a productive asset for a similar productive asset or an equivalent
      interest in the same or similar productive asset should be based on the recorded
      amount of the asset relinquished. By focusing the exception on exchanges that
      lack commercial substance, SFAS 153 intends to produce financial reporting
      that
      more faithfully represents the economics of the transaction. SFAS 153 is
      effective for the fiscal periods beginning after June 15, 2005 and the
      provisions are to be applied prospectively. The Company has adopted the
      provisions of SFAS 153 resulting in no material impact on its consolidated
      results of operations and financial condition.





FASB
      Staff Position (“FSP”) No. 109-1, “Application of FAS 109 to Tax Deduction
      on Qualified Production Activities,” issued in December 2004 (“FSP 109-1”),
      provides guidance on the application of FASB Statement No. 109, “Accounting
      for Income Taxes,” (“SFAS 109”), to the tax deduction on qualified production
      activities provided by the American Jobs Creation Act of 2004 (the “Jobs Act”).
      The Jobs Act was enacted on October 22, 2004. FSP 109-1 is intended to
      clarify that the




23
 
   domestic
        manufacturing deduction should be accounted for as a special deduction (rather
        than a rate reduction) under SFAS 109. A special deduction is recognized
        under
        SFAS 109 as it is earned. During the fourth quarter, the Company completed
        a
        study to quantify the methodology and determine the deduction amount.  The
        provisions of FSP 109-1 generated an after-tax benefit of approximately $400,000
        during 2005.





In
      March
      2005, the FASB issued FIN 47, “Accounting
      for
      Conditional Asset Retirement Obligations, an interpretation of FASB Statement
      No. 143”
      (“FIN 47”),
      which requires
      an entity to recognize a liability for the fair value of a conditional asset
      retirement obligation when incurred if the liability’s fair
      value can
      be reasonably estimated. FIN 47 is effective for fiscal years ending after
      December 15, 2005 and has been adopted by the Company in the fiscal year
      ended December 31, 2005. Adoption of FIN 47 did not have a material impact
      on the consolidated results of operations and financial condition of the
      Company.





In
      May
      2005, the FASB has issued FASB Statement No. 154, “Accounting
      Changes
      and Error Corrections” (“SFAS 154”)
      which replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No.
      3,
“Reporting
      Accounting Changes in Interim Financial Statements.” Among
      other
      changes, SFAS 154 requires that a voluntary change in accounting principle
      or a
      change required by a new accounting pronouncement that does not include specific
      transition provisions be applied retrospectively with all prior period financial
      statements presented based on the new accounting principle, unless it is
      impracticable to do so. SFAS 154 also provides that (1) a change in method
      of
      depreciating or amortizing a long-lived nonfinancial asset be accounted for
      as a
      change in estimate (prospectively) that was effected by a change in accounting
      principle, and (2) correction of errors in previously issued financial
      statements should be termed a “restatement.”
      SFAS 154 is
      effective for accounting changes and correction of errors made in fiscal years
      beginning after December 15, 2005 with early adoption permitted for accounting
      changes and correction of errors made in fiscal years beginning after June
      1,
      2005. Accordingly,
      the Company plans to adopt the provisions of SFAS 154 in the first quarter
      of
      fiscal 2006, beginning on January 1, 2006 and does not expect it to have a
      material impact on its consolidated results of operations and financial
      condition of the Company.




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




Marine
      Products does not utilize financial instruments for trading purposes and holds
      no derivative financial instruments which could expose Marine Products to
      significant market risk. Marine Products maintains an investment portfolio,
      comprised of United States Government, corporate backed obligations, asset
      backed securities and municipal debt securities, which is subject to interest
      rate risk exposure. This risk is managed through conservative policies to invest
      in high-quality obligations. Marine Products has performed an interest rate
      sensitivity analysis using a duration model over the near term with a 10 percent
      change in interest rates. Marine Products’ portfolio is not subject to material
      interest rate risk exposure based on this analysis. Marine Products does not
      expect any material changes in market risk exposures or how those risks are
      managed.




24








MANAGEMENT’S
      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING




To
      the
      Stockholders of Marine Products Corporation:




The
      management of Marine Products Corporation is responsible for establishing and
      maintaining adequate internal control over financial reporting for the Company.
      Marine Products Corporation maintains a system of internal accounting controls
      designed to provide reasonable assurance, at a reasonable cost, that assets
      are
      safeguarded against loss or unauthorized use and that the financial records
      are
      adequate and can be relied upon to produce financial statements in accordance
      with accounting principles generally accepted in the United States of America.
      The internal control system is augmented by written policies and procedures,
      an
      internal audit program and the selection and training of qualified personnel.
      This system includes policies that require adherence to ethical business
      standards and compliance with all applicable laws and regulations.




There
      are
      inherent limitations to the effectiveness of any controls system. A controls
      system, no matter how well designed and operated, can provide only reasonable,
      not absolute, assurance that the objectives of the controls system are met.
      Also, no evaluation of controls can provide absolute assurance that all control
      issues and any instances of fraud, if any, within the Company will be detected.
      Further, the design of a controls system must reflect the fact that there are
      resource constraints, and the benefits of controls must be considered relative
      to their costs. The Company intends to continually improve and refine its
      internal controls.




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of the effectiveness of the design and operations of our internal
      control over financial reporting, as of December 31, 2005 based on criteria
      established in Internal Control—Integrated Framework issued by the Committee of
      Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
      management’s assessment is that Marine Products Corporation maintained effective
      internal control over financial reporting as of December 31, 2005.




The
      independent registered public accounting firm, Grant Thornton LLP, has audited
      the consolidated financial statements as of and for the year ended December
      31,
      2005, and has also issued their report on management’s assessment of the
      Company’s internal control over financial reporting, included in this report on
      page 26.




/s/
                Richard A.
                Hubbell
            
            /s/
                Ben M.
                PalmerRichard
                A. Hubbell
              President
                and Chief Executive Officer
            
            Ben
                M. Palmer
              Chief
                Financial Officer and Treasurer




Atlanta,
      Georgia


March
      8,
      2006







25






REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL
      REPORTING






Board
      of Directors and Stockholders  of
      Marine
      Products Corporation




We
      have
      audited management’s assessment included in Management’s Report on Internal
      Control Over Financial Reporting included in Marine Products Corporation’s Form
      10-K for 2005, that Marine Products Corporation (a Delaware Corporation)
      maintained effective internal control over financial reporting as of December
      31, 2005 based on criteria established in Internal Control—Integrated Framework
      issued by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO).  Marine Products Corporation’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.  Our responsibility is to express an opinion on management’s
      assessment and an opinion on the effectiveness of 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, evaluating management’s assessment,
      testing and evaluating the design and operating effectiveness of internal
      control, 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 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 its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements.  Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that 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, management’s assessment that Marine Products Corporation maintained
      effective internal control over financial reporting as of December 31, 2005,
      is
      fairly stated, in all material respects, based on criteria established in
      Internal Control—Integrated Framework issued by the COSO.  Also in our
      opinion, Marine Products Corporation maintained, in all material respects,
      effective internal control over financial reporting as of December 31, 2005,
      based on criteria established in Internal Control—Integrated Framework issued by
      the COSO.




We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Marine
      Products Corporation and subsidiaries as of December 31, 2005 and 2004, and
      the
      related consolidated statements of income, stockholders’ equity, and cash flows
      for each of the two years in the period ended December 31, 2005 and our report
      dated March 8, 2006 expressed an unqualified opinion on those financial
      statements.








/s/
      Grant
      Thornton LLP




Atlanta,
      Georgia


March
      8,
      2006






26






**Item
      8. Financial Statements and Supplementary Data**




**CONSOLIDATED
                BALANCE SHEETS****MARINE
                PRODUCTS CORPORATION AND SUBSIDIARIES****(in
                thousands except share information)****December
                31,**
            **2005**
            **2004****ASSETS**Cash
                and cash equivalents
            $37,602
            $46,615Marketable
                securities
            1,323
            132Accounts
                receivable, net
            3,662
            1,082Inventories
            26,856
            25,869Income
                taxes receivable
            2,528
            1,160Deferred
                income taxes
            3,079
            3,006Prepaid
                expenses and other current assets
            1,343
            876Current
                assets
            76,393
            78,740Property,
                plant and equipment, net
            17,252
            18,362Goodwill
                and other intangibles, net
            3,738
            3,778Marketable
                securities
            5,893
            6,202Deferred
                income taxes
            1,126
            —Other
                assets
            4,403
            2,652Total
                assets
            $108,805
            $109,734**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Liabilities**Accounts
                payable
            $3,461
            $3,750Accrued
                expenses and other liabilities
            11,591
            13,001Current
                liabilities
            15,052
            16,751Pension
                liabilities
            4,923
            2,977Deferred
                income taxes
            —
            925Other
                long-term liabilities
            1,142
            1,709Total
                liabilities
            21,117
            22,362Commitments
                and contingencies**Stockholders’
                Equity**Preferred
                stock, $0.10 par value, 1,000,000 shares authorized, none
                issued
            —
            —Common
                stock, $0.10 par value, 74,000,000 shares authorized,
              issued and outstanding - 37,697,925 shares in 2005, 38,942,501 shares
                in
                2004
            3,770
            3,894Capital
                in excess of par value
            16,364
            34,239Retained
                earnings
            72,192
            52,042Deferred
                compensation
            (3,540)
            (1,899)Accumulated
                other comprehensive loss
            (1,098)
            (904)Total
                stockholders’ equity
            87,688
            87,372Total
                liabilities and stockholders’ equity
            $108,805
            $109,734




*The
      accompanying notes are an integral part of these statements.*




27







**CONSOLIDATED
                STATEMENTS OF INCOME****MARINE
                PRODUCTS CORPORATION AND SUBSIDIARIES****(in
                thousands except per share data)****Years
                ended December 31,**
            **2005**
            **2004**
            **2003**Net
                sales
            $272,057
            $252,418
            $193,980Cost
                of goods sold
            202,936
            186,832
            143,663Gross
                profit
            69,121
            65,586
            50,317Selling,
                general and administrative expenses
            33,557
            29,810
            23,015Operating
                income
            35,564
            35,776
            27,302Interest
                income
            1,330
            590
            501**Income
                before income taxes**
            36,894
            36,366
            27,803Income
                tax provision
            10,671
            12,623
            9,731**Net
                income**
            $26,223
            $23,743
            $18,072**EARNINGS
                PER SHARE**Basic
            $0.69
            $0.62
            $0.47Diluted
            $0.65
            $0.58
            $0.45**Dividends
                paid per share**
            **$0.16**
            **$0.11**
            **$0.07**




*The
      accompanying notes are an integral part of these statements.*





28







**CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY****MARINE
                PRODUCTS CORPORATION AND SUBSIDIARIES****(in
                thousands)****Three
                Years Ended**
              **December
                31, 2005**
            **Comprehensive**
              **Income**
            **Common**
              **Shares**
            **Stock**
              **Amount**
            **Capital
                in**
              **Excess
                of**
              **Par
                Value**
            **Retained**
              **Earnings**
            **Deferred**
              **Compensation**
            
            **Accumulated**
              **Other**
              **Comprehensive**
              **(Loss)
                Income**
            **Total**Balance,
                December 31, 2002
            
            38,523
            $3,852
            $36,138
            $17,074
            $(334)
            
            $103
            $56,833Stock
                issued for stock incentive plans, net
            
            257
            26
            550
            
            105
            
            
            681Stock
                purchased and retired
            
            (226)
            (23)
            (2,248)
            
            
            
            
            (2,271)Net
                income
            $18,072
            
            
            
            18,072
            
            
            
            18,072Minimum
                pension liability adjustment, net of taxes of $288
            (534)
            
            
            
            
            
            
            (534)
            (534)Unrealized
                loss on securities, net of taxes and reclassification adjustments
            (78)
            
            
            
            
            
            
            (78)
            (78)Comprehensive
                income
            $17,460Dividends
                declared
            
            
            
            
            (2,737)
            
            
            
            (2,737)Effect
                of stock splits
            
            38
            4
            (4)
            
            
            
            
            —Balance,
                December 31, 2003
            
            38,592
            3,859
            34,436
            32,409
            (229)
            
            (509)
            69,966Stock
                issued for stock incentive plans, net
            
            456
            46
            3,728
            
            (1,670)
            
            
            2,104Stock
                purchased and retired
            
            (244)
            (24)
            (3,912)
            
            
            
            
            (3,936)Net
                income
            $23,743
            
            
            
            23,743
            
            
            
            23,743Minimum
                pension liability adjustment, net of taxes of $162
            (301)
            
            
            
            
            
            
            (301)
            (301)Unrealized
                loss on securities, net of taxes and reclassification adjustments
            (94)
            
            
            
            
            
            
            (94)
            (94)Comprehensive
                income
            $23,348Dividends
                declared
            
            
            
            
            (4,110)
            
            
            
            (4,110)Effect
                of stock splits
            
            139
            13
            (13)
            
            
            
            
            —Balance,
                December 31, 2004
            
            38,943
            3,894
            34,239
            52,042
            (1,899)
            
            (904)
            87,372Stock
                issued for stock incentive plans, net
            
            278
            28
            2,862
            
            (1,641)
            
            
            1,249Stock
                purchased and retired
            
            (1,608)
            (161)
            (20,728)
            
            
            
            
            (20,889)Net
                income
            $26,223
            
            
            
            26,223
            
            
            
            26,223Minimum
                pension liability adjustment, net of taxes of $146
            (178)
            
            
            
            
            
            
            (178)
            (178)Unrealized
                loss on securities, net of taxes and reclassification adjustments
            (16)
            
            
            
            
            
            
            (16)
            (16)Comprehensive
                income
            $26,029Dividends
                declared
            
            
            
            
            (6,073)
            
            
            
            (6,073)Effect
                of stock splits
            
            85
            9
            (9)
            
            
            
            
            —Balance,
                December 31, 2005
            
            37,698
            $3,770
            $16,364
            $72,192
            $(3,540)
            
            $(1,098)
            $87,688




*The
      accompanying notes are an integral part of these statements.*




29







**CONSOLIDATED
                STATEMENTS OF CASH FLOWS****MARINE
                PRODUCTS CORPORATION AND SUBSIDIARIES****(in
                thousands)****Years
                ended December 31,**
            **2005**
            **2004**
            **2003****OPERATING
                ACTIVITIES**Net
                income
            $26,223
            $23,743
            $18,072Non-cash
                charges (credits) to earnings:Depreciation,
                amortization and other non-cash charges
            3,018
            2,532
            2,306Deferred
                income tax (benefit) provision
            (1,970)
            (784)
            1,029(Increase)
                decrease in assets:Accounts
                receivable
            (2,580)
            2,888
            (2,499)Inventories
            (987)
            (4,099)
            (1,085)Prepaid
                expenses and other current assets
            (467)
            (260)
            1,007Income
                taxes receivable
            (1,476)
            787
            (1,073)Other
                non-current assets
            (1,751)
            (1,187)
            (679)Increase
                (decrease) in liabilities:Accounts
                payable
            (289)
            1,153
            (730)Income
                taxes payable
            —
            —
            (1,066)Other
                accrued expenses
            (1,410)
            4,242
            1,135Other
                long-term liabilities
            1,055
            390
            1,411Net
                cash provided by operating activities
            19,366
            29,405
            17,828**INVESTING
                ACTIVITIES**Capital
                expenditures
            (1,118)
            (2,838)
            (3,707)Sale
                (purchase) of marketable securities
            (905)
            914
            (725)Net
                cash used for investing activities
            (2,023)
            (1,924)
            (4,432)**FINANCING
                ACTIVITIES**Payment
                of dividends
            (6,073)
            (4,110)
            (2,737)Cash
                paid for common stock purchased and retired
            (20,627)
            (3,768)
            (2,271)Proceeds
                received upon exercise of stock options
            344
            768
            576Net
                cash used for financing activities
            (26,356)
            (7,110)
            (4,432)Net
                (decrease) increase in cash and cash equivalents
            (9,013)
            20,371
            8,964Cash
                and cash equivalents at beginning of year
            46,615
            26,244
            17,280Cash
                and cash equivalents at end of year
            $37,602
            $46,615
            $26,244




*The
      accompanying notes are an integral part of these statements.*




30






**Notes
      to Consolidated Financial Statements**


**Marine
      Products Corporation and Subsidiaries**


**Years
      ended December 31, 2005, 2004 and 2003**






**NOTE
      1: SIGNIFICANT ACCOUNTING POLICIES**




*Basis
      of Consolidation and Presentation* —
The
      consolidated financial statements include the accounts of Marine Products
      Corporation (a Delaware corporation) and its wholly owned subsidiaries (“Marine
      Products” or the “Company”). Marine Products, through Chaparral Boats, Inc.
      (“Chaparral”) and Robalo Acquisition Company LLC (“Robalo”), operates as a
      manufacturer of fiberglass powerboats and related products and services to
      a
      broad range of consumers worldwide.




The
      consolidated financial statements included herein may not necessarily be
      indicative of the future results of operations, financial position and cash
      flows of Marine Products.




The
      Company has only one reportable segment — its Powerboat Manufacturing business.
      The Company’s results of operations and its financial condition are not
      significantly reliant upon any single customer or product model. Revenues from
      the Company’s international operations were approximately $43,000,000 in 2005
      and $27,500,000 in 2004.




*Nature
      of Operations* —
Marine
      Products is principally engaged in manufacturing powerboats and providing
      related products and services. Marine Products distributes fiberglass
      recreational boats through a network of domestic and international independent
      dealers.




*Common
      Stock* —
Marine
      Products is authorized to issue 74,000,000 shares of common stock, $0.10 par
      value. Holders of common stock are entitled to receive dividends when, as,
      and
      if declared by our Board of Directors out of legally available funds. Each
      share
      of common stock is entitled to one vote on all matters submitted to a vote
      of
      stockholders. Holders of common stock do not have cumulative voting rights.
      In
      the event of any liquidation, dissolution or winding up of the Company, holders
      of common stock are entitled to ratable distribution of the remaining assets
      available for distribution to stockholders. **




*Preferred
      Stock* — ** Marine
      Products is authorized to issue up to 1,000,000 shares of preferred stock,
      $0.10
      par value. As of December 31, 2005, there were no shares of preferred stock
      issued. The Board of Directors is authorized, subject to any limitations
      prescribed by law, to provide for the issuance of preferred stock as a class
      without series or, if so determined from time to time, in one or more series,
      and by filing a certificate pursuant to the applicable laws of the state of
      Delaware and to fix the designations, powers, preferences and rights,
      exchangeability for shares of any other class or classes of stock. Any preferred
      stock to be issued could rank prior to the common stock with respect to dividend
      rights and rights on liquidation.




*Share
      Repurchases* —
The
      Company records the cost of share repurchases in stockholders’ equity as a
      reduction to common stock to the extent of par value of the shares acquired
      and
      the remainder is allocated to capital in excess of par value.




*Dividend* —
The
      Board of Directors, at their quarterly meeting on January 24, 2006, declared
      a quarterly dividend of $0.05 per common share that will be payable March 10,
      2006 to stockholders of record at the close of business on February 10,
      2006.




*Use
      of Estimates in the Preparation of Financial Statements* —
The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States 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 sales and expenses during the reporting
      period. Actual results could differ from those estimates. Significant estimates
      are used in the determination of sales incentives and discounts, warranty costs
      and income taxes.




*Reclassification* —
Certain
      prior year balances have been reclassified to conform with the current year
      presentation.




*Sales
      Recognition* —
Marine
      Products recognizes sales when a fully executed agreement exists, prices are
      established, products are delivered to the dealer in the case of domestic
      dealers and collectibility is reasonably assured. See “Deferred revenue” below
      for recognition of sales to international dealers.




*Deferred
      Revenue* —
Marine
      Products requires payment from international dealers prior to delivery of
      products to these dealers. Amounts received from international dealers toward
      the purchase of boats are categorized as deferred revenue and recognized as
      sales when the products are shipped.




31






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**


*Shipping
      and Handling Charges* —
The
      shipping and handling of the Company’s products to dealers is handled through a
      combination of a third-party marine transport service and a company owned fleet
      of delivery trucks. Fees charged to customers for shipping and handling are
      included in net sales in the accompanying consolidated statements of income;
      the
      related costs incurred by the Company are included in cost of goods sold.




*Advertising* —
      Advertising expenses are charged to expense during the period in which they
      are
      incurred. Expenses associated with product brochures and other inventoriable
      marketing materials are deferred and amortized over the related model year
      which
      approximates the consumption of these materials. As of December 31, 2005 and
      2004, the Company had approximately $390,000 and $327,000 in prepaid expenses
      related to the unamortized product brochure costs. Advertising expense totaled
      approximately $2,622,000 in 2005, $2,520,000 in 2004 and $2,785,000 in 2003.




*Sales
      Incentives and Discounts* —
Sales
      incentives including dealer discounts and retail sales promotions are provided
      for and recorded as a reduction in sales for the period in which the related
      sales are recorded. The Company records these incentives at the later of the
      recognition of the related sales or the announcement of a promotional program.




*Cash
      and Cash Equivalents* —
Highly
      liquid investments with original maturities of three months or less are
      considered to be cash equivalents.




*Marketable
      Securities* —
Marine
      Products maintains investments held with several large, well-capitalized
      financial institutions. Marine Products’ investment policy does not allow
      investment in any securities rated less than “investment grade” by national
      rating services.




Management
      determines the appropriate classification of debt securities at the time of
      purchase and re-evaluates such designations as of each balance sheet date.
      Debt
      securities are classified as available-for-sale because the Company does not
      have the intent to hold the securities to maturity. Available-for-sale
      securities are stated at their fair values, with the unrealized gains and
      losses, net of tax, reported as a separate component of stockholders’ equity.
      The cost of securities sold is based on the specific identification method.
      Realized gains and losses, declines in value judged to be other than temporary,
      interest and dividends on available-for-sale securities are included in interest
      income. Realized (losses)gains on marketable securities totaled $(52,174) in
      2005, $148,127 in 2004 and $87,738 in 2003. Of the total (losses) gains
      realized, reclassification from other comprehensive income totaled approximately
      $(38,000) in 2005, $165,000 in 2004 and $168,000 in 2003. The fair value and
      the
      unrealized gains (losses) of the available for sale securities are as
      follows:




**December
                31,**
            
            **2005**
            
            
            **2004****Type
                of Securities**
            
            **Fair
                Value**
            
            **Unrealized
                Gain (Loss)**
            
            
            **Fair
                Value**
            
            **Unrealized
                Gain (Loss)**U.S.
                Treasury Notes
            $
            1,630,000
            $
            (14,000)
            
            $
            1,398,000
            $
            (9,800)Federal
                Agency Obligations
            
            1,081,000
            
            (15,000)
            
            
            528,000
            
            1,000Mortgage
                Backed Obligations
            
            —
            
            —
            
            
            100,000
            
            (1,000)Corporate
                Backed Obligations
            
            1,654,000
            
            (24,000)
            
            
            1,386,000
            
            (11,000)Asset
                Backed Securities
            
            1,797,000
            
            (39,000)
            
            
            2,671,000
            
            (46,000)Municipal
                Obligations
            
            1,054,000
            
            —
            
            
            251,000
            
            (3,000)




Corporate
      backed obligations consist primarily of debentures and notes issued by other
      companies ranging in maturity from nine months to five years. These securities
      are rated A1/P1 or higher for the short-term securities and BBB or higher for
      the long-term securities.




Asset
      backed securities consist of a well diversified portfolio of securities backed
      by receivables such as auto loans, equipment loans and credit cards. These
      securities have a credit rating of A1/P1 or higher.




Investments
      with remaining maturities of less than 12 months are considered to be current
      marketable securities. Investments with remaining maturities greater than 12
      months are considered to be non-current marketable securities. The maturities
      of
      the Company’s non-current marketable securities are as follows: $0 in 2006,
      approximately $5,760,000 between 2007 and 2011, $128,000 between 2012 and 2016,
      $5,000 in 2017 and thereafter.




32




**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**






*Accounts
      Receivable —* The
      majority of the Company’s accounts
      receivable is due from dealers located in markets throughout the Unites States.
      Most of Marine Products’ domestic shipments are made pursuant to “floor plan
      financing” programs in which Marine Products’ subsidiaries participate on behalf
      of their dealers with two major third-party financing institutions. Under these
      arrangements, a dealer establishes lines of credit with one or more of these
      third-party lenders for the purchase of boat inventory for sales to retail
      customers in their show room or during boat show exhibitions. When a dealer
      purchases and takes delivery of a boat pursuant to a floor plan financing
      arrangement, it draws against its line of credit and the lender pays the invoice
      cost of the boat directly to Marine Products, generally, within 10 business
      days. The Company determines its allowance by considering a number of factors,
      including the length of time trade accounts receivable are past due, the
      Company’s previous loss history, the customer’s current ability to pay its
      obligation to the Company, and the condition of the general economy and the
      industry as a whole. The Company writes-off accounts receivable when they become
      uncollectible, and payments subsequently received on such receivables are
      credited to the allowance for doubtful accounts.




*Inventories* —
      Inventories are stated at the lower of cost (determined on a first-in, first-out
      basis) or market value. Market value is determined based on replacement cost
      for
      raw materials and net realizable value for work in process and finished goods.




*Property,
      Plant and Equipment* —
      Property, plant and equipment is carried at cost. Depreciation is provided
      principally on a straight-line basis over the estimated useful lives of the
      assets. The cost of assets retired or otherwise disposed of and the related
      accumulated depreciation are eliminated from the accounts in the year of
      disposal with the resulting gain or loss credited or charged to income.
      Expenditures for additions, major renewals, and betterments are capitalized
      while expenditures for routine maintenance and repairs are expensed as incurred.
      Depreciation expense on operating equipment used in production is included
      in
      cost of goods sold in the accompanying consolidated statements of income. All
      other depreciation is included in selling, general and administrative expenses
      in the accompanying consolidated statements of income. Property, plant and
      equipment are reviewed for impairment when indicators of impairment exist.




*Goodwill
      and Other Intangibles* —
      Intangibles consist primarily of goodwill and trade names related to businesses
      acquired. Goodwill represents the excess of the purchase price over the fair
      value of net assets of businesses acquired. The carrying amount of goodwill
      was
      $3,308,000 as of December 31, 2005 and 2004. Pursuant to the adoption of
      Statement of Financial Accounting Standard (“SFAS”) No. 142 beginning on January
      1, 2002, goodwill is no longer amortized to earnings but instead is subject
      to
      an annual test for impairment. The Company completed an initial impairment
      analysis upon adoption of SFAS No. 142 and subsequent analyses in each year.
      Based upon the results of these analyses, the Company has concluded that no
      impairment of its goodwill has occurred.




*Investments* —
The
      Company maintains certain securities in the non-qualified Supplemental Executive
      Retirement Plan that have been classified as Trading. See
      Note 10 for further information regarding these securites.




*Warranty
      Costs* —
The
      Company warrants the entire boat, excluding the engine, against defects in
      materials and workmanship for a period of one year. The Company also warrants
      the entire deck and hull, including its bulkhead and supporting stringer system,
      against defects in materials and workmanship for periods extending up to 10
      years. The Company accrues for estimated future warranty costs at the time
      of
      the sale based on its historical claims experience. An analysis of the warranty
      accruals for the years ended December 31, 2005 and 2004 is as follows:




**(in
                thousands)**
            **2005**
            **2004**Balance
                at beginning of year
            $3,796
            $2,846Less:
                Payments made during the year
            (4,453)
            (3,839)Add:
                Warranty accruals during the year
            4,435
            4,315Changes
                to warranty accruals issued in prior years
            494
            474Balance
                at end of year
            $4,272
            $3,796


Changes
        in warranties issued in prior years are due to updated information about
        the
        frequency and size of claims incurred related to prior year sales.




33






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**




*Insurance
      Accruals* —
The
      Company fully insures its risks related to general liability, product liability,
      workers’ compensation, and vehicle liability, whereas the health insurance plan
      is self-funded up to a maximum annual claim amount for each covered employee
      and
      related dependents. The estimated cost of claims under the self-insurance
      program is accrued as the claims are incurred and may subsequently be revised
      based on developments relating to such claims.




*Research
      and Development Costs* —
The
      Company expenses research and development costs for new products and components
      as incurred. Research and development costs are included in selling, general
      and
      administrative expenses and totaled $1,933,000 in 2005, $1,729,000 in 2004
      and
      $1,075,000 in 2003.




*Income
      Taxes* —
      Deferred tax liabilities and assets are determined based on the difference
      between the financial and tax bases of assets and liabilities using enacted
      tax
      rates in effect for the year in which the differences are expected to reverse.
      The Company establishes a valuation allowance against the carrying value of
      deferred tax assets if the Company concludes that it is more likely than not
      that the asset will not be realized through future taxable income.




*Earnings
      per Share* —
SFAS
      No. 128, “Earnings Per Share,” requires a basic earnings per share and diluted
      earnings per share presentation. The two calculations differ as a result of
      the
      dilutive effect of stock options and time lapse restricted shares and
      performance restricted shares included in diluted earnings per share, but
      excluded from basic earnings per share. A reconciliation of weighted average
      shares outstanding is as follows:




**2005**
            **2004**
            **2003**Basic
            38,015,899
            38,452,704
            38,079,651Dilutive
                effect of stock options and restricted shares
            2,101,028
            2,318,547
            2,212,434Diluted
            40,116,927
            40,771,251
            40,292,085




*Fair
      Value of Financial Instruments* —
The
      Company’s financial instruments consist primarily of cash and cash equivalents,
      accounts receivable, accounts payable and marketable securities. The carrying
      value of cash, accounts receivable and accounts payable approximate their fair
      values because of the short-term nature of such instruments. The Company’s
      marketable securities are classified as available-for-sale securities and are
      carried at fair value in the accompanying consolidated balance sheets. The
      fair
      value of these securities is based upon quoted market prices.




*Concentration
      of Suppliers* —
The
      Company purchases a significant number of its sterndrive engines from only
      two
      available suppliers. This concentration of suppliers could impact our sales
      and
      profitability in the event of a sudden interruption in the delivery of these
      engines.




*New
      Accounting Standards —* In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs—An
      Amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends
      the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify
      the accounting for abnormal amounts of idle facility expense, freight, handling
      costs, and wasted material (spoilage). Among other provisions, the new rule
      requires that items such as idle facility expense, excessive spoilage, double
      freight, and rehandling costs be recognized as current-period charges regardless
      of whether they meet the criterion of “so abnormal” as stated in ARB
      No. 43. Additionally, SFAS 151 requires that the allocation of fixed
      production overheads to the costs of conversion be based on the normal capacity
      of the production facilities. SFAS 151 is effective for fiscal years
      beginning after June 15, 2005. The Company plans to adopt SFAS 151 in the
      first quarter of fiscal 2006, beginning on January 1, 2006. Adoption of
      SFAS 151 is not expected to have a material impact on the Company’s
      consolidated results of operations and financial condition.







34
 
   **Notes
          to Consolidated Financial Statements**
 **Marine
          Products Corporation and Subsidiaries**
 **Years
          ended December 31, 2005, 2004 and 2003**
   In
            December 2004, the FASB issued SFAS No. 123 (revised 2004),
“Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123,
“Accounting for Stock-Based Compensation,” (“SFAS 123”) and supersedes APB
            Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R
            requires all share-based payments to employees, including grants of employee
            stock options, to be recognized in the financial statements based on
            their fair
            values. The pro forma disclosures previously permitted under SFAS 123 will
            no longer be an alternative to financial statement recognition. Under
            SFAS 123R, the Company must determine the appropriate fair value model
            to be used for valuing share-based payments, the amortization method
            for
            compensation cost and the transition method to be used at date of adoption.
            The
            transition methods available are the modified prospective application
            and the
            modified retrospective application. Under the modified retrospective
            application, prior periods may  be restated either as of the beginning of
            the year of adoption or for all periods presented. The modified prospective
            application requires that compensation expense be recorded for all unvested
            stock options and restricted stock at the beginning of the first quarter
            of
            adoption of SFAS 123R, while the modified retrospective application would
            record compensation expense for all unvested stock options and restricted
            stock
            beginning with the first period restated. SFAS No. 123R states that the
            requirement is to adopt the provisions in the first interim or annual
            period
            beginning after June 15, 2005. However, the Securities and Exchange Commission
            (“SEC”) issued a new rule that allows companies to implement Statement No.
            123R
            at the beginning of their next fiscal year, instead of the next reporting
            period, that begins after June 15, 2005. In March 2005, the SEC issued
            Staff
            Accounting Bulletin No. 107 (“SAB 107”) regarding the interaction between SFAS
            123R and certain SEC rules and regulations and provides the staff’s view
            regarding the valuation of share-based payment arrangements for public
            companies. In November 2005, the FASB issued FASB Staff Position (“FSP”)
            FAS 123R-3, “Transition Election Related to Accounting for the Tax Effects
            of Share-Based Payment Awards” (“FAS 123R-3”). FAS 123R-3 provides for
            a practical transition election related to accounting for the tax effects
            of
            share-based payment awards to employees. Companies may elect either the
            guidance
            in SFAS No. 123R or this alternative transition method up to one year
            from the later of its initial adoption of SFAS No. 123R or the
            effective date of this FSP to make this one time
            election.





The
      Company will implement the provisions of SFAS 123R in the first quarter of
      2006
      using the modified prospective method. As
      permitted by SFAS No. 123, the Company currently uses APB 25’s intrinsic
      value method and recognizes no compensation cost for employee stock options.
      The
      Company currently utilizes a standard option pricing model (i.e., Black-Scholes)
      to measure the fair value of stock options granted to employees and will
      continue to use the Black-Scholes model for option valuation. Had we adopted
      earlier, the impact of SFAS 123R would have approximated the impact of SFAS
      No. 123 as described in the disclosure of pro forma net income and earnings
      per share in Note 1 to our audited financial statements. SFAS No. 123R also
      requires the benefits of tax deductions in excess of recognized compensation
      cost to be reported as a financing cash flow, rather than as an operating cash
      flow. This requirement will reduce net operating cash flows and increase net
      financing cash flows in periods after adoption. The Company cannot estimate
      what those amounts will be in the future partly because the Company cannot
      predict the stock prices when i) the employees exercise non-qualified options
      or
      ii) the restricted stock vests. Also, under the provision of SFAS 123R, unearned
      compensation related to unvested restricted stock awards are not recorded.
      Accordingly, any remaining unearned compensation related to unvested restricted
      stock awards and the corresponding amount in paid-in capital will no longer
      be
      included in stockholders’ equity beginning January 1, 2006. Based on stock
      options and restricted stock granted to employees through December 31,
      2005, the Company expects that the adoption of SFAS 123R on January 1,
      2006, will reduce first quarter net income by approximately $125,000. See
      Note 10 for further information on the Company’s stock-based compensation
      plans. The cumulative amount of excess tax deductions related to share-based
      payment awards to employees computed in accordance with the provisions of SFAS
      123R is approximately $874,000 as of December 31, 2005.




In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
      Assets—An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
      Transactions” (“SFAS 153”). The amendments made by SFAS 153 are based on the
      principle that exchanges of nonmonetary assets should be measured based on
      the
      fair value of the assets exchanged. Further, the amendments eliminate the narrow
      exception for non-monetary exchanges of similar productive assets and replace
      it
      with a broader exception for exchanges of nonmonetary assets that do not have
      commercial substance. Previously, Opinion 29 required that the accounting for
      an
      exchange of a productive asset for a similar productive asset or an equivalent
      interest in the same or similar productive asset should be based on the recorded
      amount of the asset relinquished. By focusing the exception on exchanges that
      lack commercial substance, SFAS 153 intends to produce financial reporting
      that
      more faithfully represents the economics of the transaction. SFAS 153 is
      effective for the fiscal periods beginning after June 15, 2005 and the
      provisions are to be applied prospectively. The Company has adopted the
      provisions of SFAS 153 resulting in no material impact to its consolidated
      results of operations and financial condition.







35
 
   **Notes
          to Consolidated Financial Statements**
 **Marine
          Products Corporation and Subsidiaries**
 **Years
          ended December 31, 2005, 2004 and 2003**
  FASB
          Staff Position (“FSP”) No. 109-1, “Application of FAS 109 to Tax Deduction
          on Qualified Production Activities,” issued in December 2004 (“FSP 109-1”),
          provides guidance on the application of FASB Statement No. 109, “Accounting
          for Income Taxes,” (“SFAS 109”), to the tax deduction on qualified production
          activities provided by the American Jobs Creation Act
          of
          2004 (the “Jobs Act”). The Jobs Act was enacted on October 22, 2004. FSP
          109-1 is intended to clarify that the domestic manufacturing deduction
          should be
          accounted for as a special deduction (rather than a rate reduction) under
          SFAS
          109. A special deduction is recognized under SFAS 109 as it is earned.
          During
          the fourth quarter, the Company completed a study to quantify the methodology
          and determine the deduction amount.  The provisions of FSP
          109-1 generated an after-tax benefit of approximately $400,000 during
          2005.





In
      March
      2005, the FASB issued FIN 47, “Accounting
      for
      Conditional Asset Retirement Obligations, an interpretation of FASB Statement
      No. 143”
      (“FIN 47”), which requires an entity to recognize a liability for the fair
      value of a conditional asset retirement obligation when incurred if the
      liability’s
      fair value can be reasonably estimated. FIN 47 is effective for fiscal
      years ending after December 15, 2005 and has been adopted by the Company in
      the fiscal year ended December 31, 2005. Adoption of FIN 47 did not have a
      material impact on the consolidated results of operations and financial
      condition of the Company.





In
      May
      2005, the FASB has issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections” (“SFAS 154”) which replaces APB Opinion No. 20, Accounting Changes,
      and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial
      Statements.” Among other changes, SFAS 154 requires that a voluntary change in
      accounting principle or a change required by a new accounting pronouncement
      that
      does not include specific transition provisions be applied retrospectively
      with
      all prior period financial statements presented on the new accounting principle,
      unless it is impracticable to do so. SFAS 154 also provides that (1) a change
      in
      method of depreciating or amortizing a long-lived nonfinancial asset be
      accounted for as a change in estimate (prospectively) that was effected by
      a
      change in accounting principle, and (2) correction of errors in previously
      issued financial statements should be termed a “restatement.” SFAS 154 is
      effective for accounting changes and correction of errors made in fiscal years
      beginning after December 15, 2005 with early adoption permitted for accounting
      changes and correction of errors made in fiscal years beginning after June
      1,
      2005. Accordingly,
      the Company plans to adopt the provisions of SFAS 154 in the first quarter
      of
      fiscal 2006, beginning on January 1, 2006 and does not expect it to have a
      material impact on its consolidated results of operations and financial
      condition of the Company.




*Stock-Based
      Compensation* —
Marine
      Products accounts for its stock incentive plan using the intrinsic value method
      prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting
      for Stock Issued to Employees.” Marine Products records deferred compensation
      related to the restricted stock grants based on the fair market value of the
      shares at the issue date and amortizes such amounts ratably over the vesting
      period of the shares. Marine Products recorded amortization of deferred
      compensation related to these restricted stock grants totaling approximately
      $750,000 in 2005, $294,000 in 2004 and $104,000 in 2003.




If
      Marine
      Products had accounted for the stock incentives in accordance with the
      provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” the total
      fair value of awards granted under the plan would be amortized over the vesting
      period of the awards, and Marine Products’ reported net income and diluted net
      income per share would have been as follows:




**Years
                ended December 31,**
            **2005**
            **2004**
            **2003****(in
                thousands*****)***Net
                income (as reported)
            $26,223
            $23,743
            $18,072Add:
                Stock-based employee compensation expense included in reported net
                income,
                net of related tax effect
            506
            191
            68Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for all awards, net of related tax
                effect
            (1,055)
            (550)
            (405)Pro
                forma net income
            $25,674
            $23,384
            $17,735Pro
                forma income per share would have been as follows:Basic
                — as reported
            $0.69
            $0.62
            $0.47Basic
                — pro forma
            $0.68
            $0.61
            $0.47Diluted
                — as reported
            $0.65
            $0.58
            $0.45Diluted
                — pro forma
            $0.64
            $0.57
            $0.44






36






**Notes
      to Consolidated Financial Statements**


**Marine
      Products Corporation and Subsidiaries**


**Years
      ended December 31, 2005, 2004 and 2003**






The
      Company did not grant any options during 2005 and has computed for pro forma
      disclosure purposes the value of all options granted during 2004 and 2003 using
      the Black-Scholes option pricing model as prescribed by SFAS No. 123 using
      the
      following weighted average assumptions:




**2005**
            **2004**
            **2003**Risk
                free interest rate
            N/A
            3.5%
            1.1%Expected
                dividend yield
            N/A
            0.9%
            1.3%Expected
                lives
            N/A
            7
                years
            7
                yearsExpected
                volatility
            N/A
            47-52%
            33%




The
      total
      fair value of options granted to Marine Products employees was $422,000 in
      2004
      and $1,838,000 in 2003.




*Stock
      Splits* —
All
      share and per share data appearing in the consolidated financial statements
      and
      related footnotes have been retroactively adjusted for the three-for-two stock
      splits effective March 10, 2005 and March 10, 2004.






**NOTE
      2:** **ACCOUNTS
      RECEIVABLE**




Accounts
      receivable consist of the following:




**December
                31,**
            **2005**
            **2004****(in
                thousands)**Trade
                receivables
            $3,249
            $1,024Other
            471
            118Total
            3,720
            1,142Less:
                Allowance for doubtful accounts
            (58)
            (60)Net
                accounts receivable
            $3,662
            $1,082




Trade
      receivables consist primarily of balances related to the sales of boats which
      are shipped pursuant to “floor-plan financing” programs with qualified
      lenders. Other receivables consist primarily of amounts due from vendors for
      co-op advertising and rebates on engine purchases.




Changes
      in the Company’s allowance for doubtful accounts are disclosed in Schedule II on
      page 51 of this report.






**NOTE
      3: INVENTORIES**




Inventories
      consist of the following:




**December
                31,**
            **2005**
            **2004****(in
                thousands)**Raw
                materials
            $13,212
            $12,768Work
                in process
            7,727
            6,721Finished
                goods
            5,917
            6,380Total
                inventories
            $26,856
            $25,869







37






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**






**NOTE
      4: PROPERTY, PLANT AND EQUIPMENT**




Property,
      plant and equipment are presented at cost, net of accumulated depreciation
      and
      consist of the following:




**December
                31,**
            **Estimated**
              **Useful
                Lives**
            **2005**
            **2004****(in
                thousands)**Land
            N/A
            $
                495
            $
                495Buildings
            20-39
            16,120
            16,010Operating
                equipment and property
            3-15
            8,453
            7,960Furniture
                and fixtures
            5-7
            1,224
            1,130Vehicles
            3-5
            5,831
            5,469Gross
                property, plant and equipment
            
            32,123
            31,064Less:
                accumulated depreciation
            
            (14,871)
            (12,702)Net
                property, plant and equipment
            
            $
                17,252
            $
                18,362




Depreciation
      expense was $2,245,000 in 2005, $2,237,000 in 2004 and $2,162,000 in 2003.






**NOTE
      5: RELATED PARTY TRANSACTIONS**




In
      conjunction with its spin-off from RPC, Inc. (“RPC”) in 2001, the Company and
      RPC entered into various agreements that define the companies’ relationship
      after the spin-off.




The
      Transition Support Services Agreement provides for RPC to provide certain
      services, including financial reporting and income tax administration,
      acquisition assistance, etc., to Marine Products until the agreement is
      terminated by either party. Marine Products reimbursed RPC for its estimated
      allocable share of administrative costs incurred for services rendered on behalf
      of Marine Products totaling $616,000 in 2005, $546,000 in 2004 and $496,000
      in
      2003. The Company’s directors are also directors of RPC and all of the executive
      officers with the exception of Mr. Lane are employees of both the Company and
      RPC. The Company paid $171,000 in 2003 to a division of RPC for the purchase,
      installation and service of overhead cranes.




The
      Employee Benefits Agreement provides for, among other things, the Company’s
      employees to continue participating subsequent to the spin-off in two RPC
      sponsored benefit plans, specifically, the defined contribution 401(k) plan
      and
      the defined benefit retirement income plan.




The
      Tax
      Sharing and Indemnification Agreement provides for, among other things, the
      treatment of income tax matters for periods through the date of the spin-off
      and
      responsibility for any adjustments as a result of audit by any taxing authority.
      The general terms provide for the indemnification for any tax detriment incurred
      by one party caused by the other party’s action. In accordance with the
      agreement, RPC transferred approximately $19,000 in 2004 to the Company related
      to tax settlements. Subsequent to the spin-off, Marine Products and RPC file
      separate tax returns.




38







**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**






**NOTE
      6: ACCRUED EXPENSES AND OTHER LIABILITIES**




Accrued
      expenses and other liabilities consist of the following:




**December
                31,**
            **2005**
            **2004****(in
                thousands)**Accrued
                payroll and related expenses
            $2,185
            $2,334Accrued
                sales incentives and discounts
            2,887
            3,058Accrued
                warranty costs
            4,272
            3,796Deferred
                revenue
            1,010
            2,474Other
            1,237
            1,339Total
                accrued expenses and other liabilities
            $11,591
            $13,001





**N** **OTE
      7: INCOME TAXES**




The
      following table lists the components of the provision for income taxes:




**Years
                ended December 31,**
            **2005**
            **2004**
            **2003****(in
                thousands)**Current
                provision:Federal
            $
                11,958
            $
                12,574
            $
                8,295State
            682
            833
            407Deferred
                (benefit) provision:Federal
            (1,862)
            (678)
            1,000State
            (107)
            (106)
            29Total
                income tax provision
            $
                10,671
            $
                12,623
            $
                9,731




A
      reconciliation between the federal statutory rate and Marine Products’ effective
      tax rate is as follows:




**Years
                ended December 31,**
            **2005**
            **2004**
            **2003**Federal
                statutory rate
            35.0%
            35.0%
            35.0%State
                income taxes, net of federal benefit
            0.8
            1.3
            1.3Other
            (6.9)
            (1.6)
            (1.3)Effective
                tax rate
            28.9%
            34.7%
            35.0%




Other
      includes the effect of the manufacturing deduction and a contingency adjustment.




39






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**




Significant
      components of the Company’s deferred tax assets and liabilities are as follows:




**December
                31,**
            **2005**
            **2004****(in
                thousands)**Deferred
                tax assets:Warranty
                costs
            $
                1,580
            $
                1,403Sales
                incentives and discounts
            700
            704Self-insurance
                expense
            134
            61Stock-based
                compensation
            538
            254Pension
                expense
            1,842
            1,069Payroll
                accrual
            125
            73Advertising
                expense
            207
            241Uniform
                capitalization
            148
            78All
                others
            172
            157Total
                deferred tax assets
            5,446
            4,040Deferred
                tax liabilities:Depreciation
                expense
            (1,241)
            (1,959)All
                others
            —
            —Total
                deferred tax liabilities
            (1,241)
            (1,959)Net
                deferred tax assets
            $
                4,205
            $
                2,081




Total
      income tax payments, net of refunds, were $14,307,000 in 2005, $12,608,000
      in
      2004 and $9,751,000 in 2003. The Company currently does not have a valuation
      allowance because it has determined that all of the deferred tax assets are
      more
      likely than not to be realized based on future market growth, forecasted
      earnings, future taxable income, the mix of earnings in the jurisdictions in
      which the Company operates, and prudent and feasible tax planning strategies.




40






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**





**NOTE
      8: ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME**




Accumulated
      other comprehensive (loss) income consists of the following:




**Minimum**
              **Pension**
              **Liability**
            **Unrealized**
              **Gain
                (Loss) on**
              **Securities**
            **Total****(in
                thousands)**Balance
                at December 31, 2003
            $(552)
            $43
            $(509)Change
                during 2004:Before-tax
                amount
            (463)
            19
            (444)Tax
                benefit
            162
            (6)
            156Reclassification
                adjustment, net of taxes
            —
            (107)
            (107)Total
                activity in 2004
            (301)
            (94)
            (395)Balance
                at December 31, 2004
            $(853)
            $(51)
            $(904)Change
                during 2005:Before-tax
                amount
            (324)
            (63)
            (387)Tax
                benefit
            146
            23
            169Reclassification
                adjustment, net of taxes
            —
            24
            24Total
                activity in 2005
            (178)
            (16)
            (194)Balance
                at December 31, 2005
            $(1,031)
            $(67)
            $(1,098)






**NOTE** **9:
      COMMITMENTS AND CONTINGENCIES**




*Lawsuits* —
The
      Company is a defendant in certain lawsuits which allege that plaintiffs have
      been damaged as a result of the use of the Company’s products. The Company is
      vigorously contesting these actions. Management, after consultation with legal
      counsel, is of the opinion that the outcome of these lawsuits will not have
      a
      material adverse effect on the financial position, results of operations or
      liquidity of Marine Products.




*Dealer
      Floor-Plan Financing* —
To
      assist dealers in obtaining financing for the purchase of its boats for
      inventory, the Company has entered into agreements with various dealers and
      selected third-party lenders to guarantee varying amounts of qualifying dealers’
debt obligations. The Company’s obligation under these guarantees becomes
      effective in the case of default by the dealer. The agreements provide for
      the
      return of all repossessed boats in “like new” condition to the Company, in
      exchange for the Company’s assumption of specified percentages of the dealers’
unpaid debt obligation on those boats. The maximum contractual obligation and
      the amount outstanding under these agreements, which expire in 2006 and 2007
      was
      $4.0 million as of December 31, 2005. The Company has recorded the estimated
      fair value of this guarantee; at December 31, 2005, this amount is immaterial
      and did not change from the prior year.




*Lease
      Obligation* —
In
      June
      2001, the Company entered into a lease transaction for existing boat
      manufacturing space located in Valdosta, Georgia. The lease has a term of 12
      years. This lease has been accounted for as a capital lease and accordingly,
      the
      building, land, and miscellaneous equipment have been recorded in property,
      plant and equipment on the consolidated balance sheet at a gross amount of
      $887,000 with accumulated depreciation of approximately $119,000. A liability
      equal to the estimated present value of the remaining lease obligation totaling
      $150,000 has been recorded and is included in other long-term liabilities on
      the
      consolidated balance sheet.




*Income
      Taxes* — 
      The amount of income taxes the Company pays is subject to ongoing audits by
      federal and state tax authorities, which often result in proposed assessments.
      Other long-term liabilities consist primarily of the Company’s estimated
      liabilities for these probable assessments and totaled approximately $992,000
      in
      2005 and $1,559,000 in 2004.




41






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**


*Employment
      Agreements* —
The
      Company has an agreement with two employees, which provides for a monthly
      payment to each of the employees equal to 10 percent of profits (defined as
      pretax income before goodwill amortization and certain allocated corporate
      expenses) in addition to a base salary. The expense under these agreements
      totaled approximately $10,320,000 in 2005, $9,997,000 in 2004 and $7,240,000
      in
      2003 and is included in selling, general and administrative expenses in the
      accompanying consolidated statements of income.






**NOTE** **10:
      EMPLOYEE BENEFIT PLANS**




*Retirement
      Plan* —
Marine
      Products participates in the tax-qualified, defined benefit, noncontributory,
      trusteed retirement income plan sponsored by RPC that covers substantially
      all
      employees with at least one year of service prior to 2002. In the first quarter
      of 2002, the Company’s Board of Directors approved a resolution to cease all
      future retirement benefit accruals under the Retirement Income Plan effective
      March 31, 2002. In lieu thereof, the Company began providing enhanced benefits
      in the form of cash contributions for certain longer serviced employees that
      had
      not reached the normal retirement age of 65 as of March 31, 2002. These
      discretionary contributions are expected to be made over a seven year period
      beginning in 2002 to either a non-qualified Supplemental Executive Retirement
      Plan (“SERP”) established by the Company or to the 401(k) plan for each employee
      that is entitled to the enhanced benefit. The expenses related to the enhanced
      benefits were $119,000 in 2005, $122,000 in 2004 and $126,000 in 2003.




Beginning
      late in 2002, the Company began permitting selected highly compensated employees
      to defer a portion of their compensation into the non-qualified SERP. The SERP
      assets are marked to market and as of December 31, 2005 and 2004 totaled
      approximately $3,686,000 and $1,949,000. The assets are reported in other assets
      on the balance sheet and changes related to the fair value of the SERP assets
      are included in selling, general and administrative expenses on the consolidated
      statement of income for 2005 and 2004. The SERP deferrals and the contributions
      are recorded on the balance sheet in pension liabilities with any change in
      the
      fair value of the SERP liabilities recorded as compensation cost in the
      statement of income.




The
      following table sets forth the funded status of the retirement income plan
      and
      the amounts recognized in Marine Products’ consolidated balance sheets:




**December
                31,**
            **2005**
            **2004****(in
                thousands)**CHANGE
                IN BENEFIT OBLIGATION:Benefit
                obligation at beginning of year
            $4,403
            $3,703Service
                cost
            —
            —Interest
                cost
            251
            240Actuarial
                loss
            336
            515Benefits
                paid
            (73)
            (55)Benefit
                obligation at end of year
            $
                4,917
            $
                4,403CHANGE
                IN PLAN ASSETS:Fair
                value of plan assets at beginning of year
            $3,378
            $2,604Actual
                return on plan assets
            175
            198Employer
                contribution
            300
            631Benefits
                paid
            (73)
            (55)Fair
                value of plan assets at end of year
            $3,780
            $3,378Funded
                status
            $(1,137)
            $(1,025)Unrecognized
                net loss
            1,637
            1,313Net
                prepaid benefit cost
            $500
            $288




42




**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**


The
      accumulated benefit obligation for the defined benefit pension plan at December
      31, 2005 and 2004 have been disclosed above. The Company uses a December 31
      measurement date for its qualified plan.




Marine
      Products’ funding policy is to contribute to the retirement income plan the
      amount required, if any, under the Employee Retirement Income Security Act
      of
      1974. Marine Products contributed $300,000 in 2005, $631,000 in 2004 and $25,000
      in 2003.




Pursuant
      to the provisions of SFAS No. 87, “Employers’ Accounting for Pensions,” the
      Company recorded pre-tax minimum pension liability adjustments of $324,000
      in
      2005 and $462,000 in 2004. As there were no previously unrecognized prior
      service costs as of December 31, 2005 and 2004, the full amount of the
      adjustments, net of related taxes, are reflected as a reduction to stockholders’
equity.




Amounts
      recognized in the consolidated balance sheets and reflected as pension
      liabilities consist of:




**December
                31,**
            **2005**
            **2004****(in
                thousands)**Net
                prepaid benefit cost
            $(500)
            $(288)Minimum
                pension liability
            1,637
            1,313SERP
                employer contributions
            275
            206SERP
                employee deferrals
            3,511
            1,746Net
                amount recognized
            $4,923
            $2,977




The
      components of net periodic benefit cost are summarized as follows:




**Years
                ended December 31,**
            **2005**
            **2004****(in
                thousands)**Service
                cost for benefits earned during the period
            $
                —
            $
                —Interest
                cost on projected benefit obligation
            251
            240Expected
                return on plan assets
            (285)
            (231)Amortization
                of net loss
            122
            86Net
                periodic benefit cost
            $
                88
            $
                95




The
      weighted average assumptions as of December 31 used to determine the projected
      benefit obligation and net benefit cost were as follows:




**December
                31,**
            **2005**
            **2004**PROJECTED
                BENEFIT OBLIGATION:Discount
                rate
            5.500%
            5.750%Rate
                of compensation increase
            N/A
            N/ANET
                BENEFIT COST:Discount
                rate
            5.750%
            6.250%Expected
                return on plan assets
            8.000%
            8.000%Rate
                of compensation increase
            N/A
            N/A




The
      Company’s expected return on assets assumption is derived from a detailed
      periodic assessment by its management and investment advisor. It includes a
      review of anticipated future long-term performance of individual asset classes
      and consideration of the appropriate asset allocation strategy given the
      anticipated requirements of the plan to determine the average rate of earnings
      expected on the funds invested to provide for the pension plan benefits. While
      the assessment gives appropriate consideration to recent fund performance and
      historical returns, the rate of return assumption is derived primarily from
      a
      long-term, prospective view. Based on its recent assessment, the Company has
      concluded that its expected long-term return assumption of eight percent is
      reasonable.




43






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**


At
      December 31, 2005 and 2004, the Plan’s assets were comprised primarily of listed
      common stocks and U.S. Government and corporate securities. The plan’s weighted
      average asset allocation at December 31, 2005 and 2004 by asset category along
      with the target allocation for 2006 are as follows:




**Asset
                Category**
            **Target**
              **Allocation**
              **for
                2006**
            
            **Percentage
                of**
              **Plan
                Assets as of**
              **December
                31,**
              **2005**
            
            **Percentage
                of**
              **Plan
                Assets as of**
              **December
                31,**
              **2004**Equity
                Securities
            48.9
            %
            48.3
            %
            51.2
            %Debt
                Securities — Core Fixed Income
            27.2
            
            28.7
            
            29.5Tactical
                — Fund of Equity and Debt Securities
            5.4
            
            2.6
            
            2.7Real
                Estate
            5.4
            
            5.4
            
            5.1Other
            13.1
            
            15.0
            
            11.5Total
            100.0
            %
            100.0
            %
            100.0
            %




The
      Company’s investment strategy for its pension plan is to maximize the long-term
      rate of return on plan assets within an acceptable level of risk in order to
      minimize the cost of providing pension benefits in accordance with this plan.
      The investment policy establishes a target allocation for each asset class,
      which is rebalanced as required. The Company utilizes a number of investment
      approaches, including individual marketable securities, equity and fixed income
      funds in which the underlying securities are marketable, and debt funds to
      achieve this target allocation. The Company expects to contribute approximately
      $300,000 to the pension plan in 2006.




The
      Company estimates that the future benefits payable for the defined benefit
      plan
      over the next ten years are as follows: $96,000 in 2006, $108,000 in 2007,
      $201,000 in 2008, $216,000 in 2009, $224,000 in 2010 and $1,313,000 between
      2011-2015.




*401(k)
      Plan* —
Marine
      Products participates in a defined contribution 401(k) plan sponsored by RPC
      that is available to substantially all full-time employees with more than six
      months of service. This plan allows employees to make tax-deferred contributions
      of up to 25 percent of their annual compensation, not exceeding the permissible
      deduction imposed by the Internal Revenue Code. The Company matches 50 percent
      of each employee’s contributions that do not exceed six percent of the
      employee’s compensation, as defined by the 401(k) plan. Employees vest in the
      Company’s contributions after three years of service. The charges to expense for
      Marine Products’ contributions to the 401(k) plan were approximately $149,000 in
      2005, $149,000 in 2004 and $147,000 in 2003.




*Stock
      Incentive Plan* —
During
      2001, Marine Products adopted a 10 year Employee Stock Incentive Plan (“2001
      Plan”) under which 3,000,000 shares of common stock had been reserved for
      issuance to Marine Products employees. In 2004, Marine Products adopted a new
      10
      year Employee Stock Incentive Plan (“2004 Plan”) under which 2,250,000 shares of
      common stock have been reserved for issuance. Both plans provide for the
      issuance of various forms of stock incentives, including, among others,
      incentive and non-qualified stock options and restricted stock. As of December
      31, 2005, 166,378 shares were available for grants under the 2001 Plan and
      2,044,500 shares were available for grant under the 2004 Plan. All grants in
      2005 were made under the 2001 Plan.




Stock
      Options —
Stock
      options are granted at an exercise price equal to the fair market value of
      the
      Company’s common stock at the date of grant except for grants of incentive stock
      options to owners of greater than 10 percent of the Company’s voting securities
      which must be made at 110 percent of the fair market value of the Company’s
      common stock. Options generally vest ratably over a period of five years and
      expire in 10 years, except to owners of greater than 10 percent of the Company’s
      voting securities, which expire in five years.




44





**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**






Transactions
      involving the Marine Products stock options were as follows:




**Total
                Options Outstanding**
            **Exercisable
                Options****Shares**
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            **Shares**
            **Weighted**
              **Average**
              **Exercise**
              **Price**Outstanding
                December 31, 2002
            2,888,004
            $1.47
            1,298,622
            $
                0.82Granted
            760,500
            4.61Canceled
            (4,050)
            1.71Exercised
            (576,943)
            1.00Outstanding
                December 31, 2003
            3,067,511
            $2.34
            1,269,260
            $
                1.17Granted
            72,000
            12.47Canceled
            (46,950)
            4.47Exercised
            (565,047)
            1.65Outstanding
                December 31, 2004
            2,527,514
            $2.75
            1,209,627
            $
                1.55Granted
            -
            -Canceled
            (39,902)
            6.84Exercised
            (215,299)
            2.77Outstanding
                December 31, 2005
            2,272,313
            $2.67
            1,376,141
            $
                1.90




Options
      exercised during 2005 and 2004 include transactions that involved exchange
      of
      shares and cash. The fair value of shares tendered to exercise employee stock
      options totaled approximately $262,000 in 2005 and $168,000 in 2004 and have
      been excluded from the consolidated statements of cash flows. As of December
      31,
      2005, the options outstanding and the exercise prices together with the weighted
      average remaining contractual life are as follows:




**Exercise
                Prices**
            **Number
                of Options**
            **Weighted
                Average**
              **Exercise
                Prices**
            **Weighted**
              **Average**
              **Remaining**
              **Contractual
                Life****Total**
            **Exercisable**
            **Total**
            **Exercisable**$
                0.39
            151,864
            151,864
            $0.39
            $0.39
            0.1
                years$
                0.66
            83,536
            83,536
            0.66
            0.66
            1.1
                years$
                1.12
            242,975
            242,975
            1.12
            1.12
            2.1
                years$
                0.61
            326,510
            326,510
            0.61
            0.61
            3.1
                years$
                1.71
            204,148
            128,773
            1.71
            1.71
            5.3
                years$
                2.67
            573,230
            169,133
            2.67
            2.67
            6.1
                years$
                4.54 - 4.99
            636,750
            263,250
            4.62
            4.65
            6.2
                years$
                12.47
            53,300
            10,100
            12.47
            12.47
            8.3
                years2,272,313
            1,376,141
            $2.67
            $
                1.90
            4.7
                years




Restricted
      Stock —
Marine
      Products has granted employees two forms of restricted stock; time lapse
      restricted and performance restricted. Time lapse restricted shares vest after
      certain stipulated number of years from the grant date, depending on the terms
      of the issue. The Company has issued time lapse restricted shares that vest
      over
      ten years in prior years and in 2005 and 2004 issued time lapse restricted
      shares that vest in 20 percent increments starting with the second anniversary
      of the grant, over the six year period beginning on the date of grant. During
      these years, grantees receive all dividends declared and retain voting rights
      for the granted shares. Units granted under these restricted stock programs
      totaled 157,500 in 2005 and 157,500 in 2004; no units were granted in 2003.
      The
      performance restricted shares are granted, but not earned and issued, until
      certain five-year tiered performance criteria are met. The performance criteria
      are




45






**Notes
        to Consolidated Financial Statements**
 **Marine
        Products Corporation and Subsidiaries**
 **Years
        ended December 31, 2005, 2004 and 2003**




predetermined
      market prices of Marine Products’ common stock. On the date the common stock
      appreciates to each level (determination date), 20 percent of performance shares
      are earned. Once earned, the performance shares vest five years from the
      determination date. After the determination date, the grantee will receive
      all
      dividends declared and also voting rights to the shares. There were no units
      earned and issued under these plans in 2005, 2004 and 2003. There were no
      forfeitures of shares in 2005, 2004 and 2003. Compensation cost on restricted
      shares is recorded at the fair market value on the date of issuance and
      amortized ratably over the respective vesting periods. Total weighted average
      value of restricted stock granted totaled approximately $2,465,000 in 2005,
      $1,964,000 in 2004 and $0 in 2003. As of December 31, 2005, there were 562,574
      shares of unvested restricted stock outstanding. During 2004, 167,400 shares
      of
      restricted stock vested and were released to the employees; no restricted shares
      vested in 2005 or 2003. During 2004, the
      tax
      benefit aggregating $874,000 for compensation tax deductions in excess of
      compensation expense was credited to capital in excess of par
      value.




The
      agreements under which the restricted stock is issued provide that shares
      awarded may not be sold or otherwise transferred until restrictions established
      under the plans have lapsed. Upon termination of employment from the Company
      or,
      in certain cases, termination of employment from RPC, shares with restrictions
      must be returned to the Company.






46




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




None.




**Item
      9A. Controls and Procedures**




*Evaluation
      of disclosure controls and procedures* —
The
      Company maintains disclosure controls and procedures that are designed to ensure
      that information required to be disclosed in its Exchange Act reports is
      recorded, processed, summarized and reported within the time periods specified
      in the Commission’s rules and forms, and that such information is accumulated
      and communicated to its management, including the Chief Executive Officer and
      Chief Financial Officer, as appropriate, to allow timely decisions regarding
      required disclosure.




As
      of the
      end of the period covered by this report, December 31, 2005 (the “Evaluation
      Date”), the Company carried out an evaluation, under the supervision and with
      the participation of its management, including the Chief Executive Officer
      and
      Chief Financial Officer, of the effectiveness of the design and operation of
      its
      disclosure controls and procedures. Based upon this evaluation, the Chief
      Executive Officer and the Chief Financial Officer concluded that the Company’s
      disclosure controls and procedures were effective at the reasonable assurance
      level as of the Evaluation Date.




*Management’s
      report on internal control over financial reporting* —
      Management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Exchange Act Rules
      13a-15(f) and 15d-15(f). Management’s report on internal control over financial
      reporting is included on page 25 of this report. Grant Thornton LLP, the
      Company’s independent registered public accounting firm, has audited
      management’s assessment of the effectiveness of internal control as of December
      31, 2005 and issued a report thereon which is included on page 26 of this
      report.




*Changes
      in internal control over financial reporting* —
There
      were no changes in the Company’s internal control over financial reporting that
      occurred during the Company’s most recently completed fiscal quarter that have
      materially affected, or are reasonably likely to materially affect, the
      Company’s internal control over financial reporting.




**Item
      9B. Other Information**




None.




47






**PART
      III**




**Item
      10. Directors and Executive Officers of the Registrant**




Information
      concerning directors and executive officers will be included in the Marine
      Products Proxy Statement for its 2006 Annual Meeting of Stockholders, in the
      section titled “Election of Directors.” This information is incorporated herein
      by reference. Information about executive officers is contained on page 12
      of
      this document.




***Audit
      Committee and Audit Committee Financial Expert***




Information
      concerning the Audit Committee of the Company and the Audit Committee Financial
      Expert(s) will be included in the Marine Products Proxy Statement for its 2006
      Annual Meeting of Stockholders, in the section titled “Corporate Governance and
      Board of Directors Compensation, Committees and Meetings.” This information is
      incorporated herein by reference.




***Code
      of Ethics***




Marine
      Products has a Code of Business Conduct that applies to all employees. In
      addition, the Company has a Supplemental Code of Business Conduct and Ethics
      for
      directors, the Principal Executive Officer and Principal Financial and
      Accounting Officer. Both of these documents are available on the Company’s
      website at www.marineproductscorp.com .
      Copies
      are also available at no extra charge by writing to Attn.: Human Resources,
      Marine Products Corporation, 2170 Piedmont Road, NE, Atlanta, Georgia
      30324.




***Section
      16(a) Beneficial Ownership Reporting Compliance***




Information
      regarding compliance with Section 16(a) of the Exchange Act will be included
      under “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s
      Proxy Statement for its 2006 Annual Meeting of Stockholders, which is
      incorporated herein by reference.




**Item
      11. Executive Compensation**




Information
      concerning executive compensation will be included in the Marine Products Proxy
      Statement for its 2006 Annual Meeting of Stockholders, in the section titled
      “Executive Compensation.” This information is incorporated herein by reference.




**Item
      12. Security Ownership of Certain Beneficial Owners and Management**




Information
      concerning security ownership will be included in the Marine Products Proxy
      Statement for its 2006 Annual Meeting of Stockholders, in the sections titled,
      “Capital Stock” and “Election of Directors.” This information is incorporated
      herein by reference.




Information
      regarding Marine Products’ equity compensation plans including plans approved by
      security holders and plans not approved by security holders will be included
      in
      the section titled, “Executive Compensation” in the Marine Products Proxy
      Statement for its 2006 Annual Meeting of Stockholders, which is incorporated
      herein by reference.




**Item
      13. Certain Relationships and Related Party Transactions**




Information
      concerning certain relationships and related party transactions will be included
      in the Marine Products Proxy Statement for its 2006 Annual Meeting of
      Stockholders, in the sections titled, “Certain Relationships and Related Party
      Transactions” and “Compensation Committee Interlocks and Insider Participation.”
This information is incorporated herein by reference.




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




Information
      regarding principal accountant fees and services will be included in the section
      titled, “Independent Public Accountants” in the Marine Products Proxy Statement
      for its 2006 Annual Meeting of Stockholders. This information is incorporated
      herein by reference.





48






**PART
      IV**




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




*Consolidated
      Financial Statements, Financial Statement Schedule and Exhibits.*




1.
            Consolidated
                financial statements listed in the accompanying Index to Consolidated
                Financial Statements and Schedule are filed as part of this report.




2.
            The
                financial statement schedule listed in the accompanying Index to
                Consolidated Financial Statements and Schedule is filed as part of
                this
                report.




3.
            Exhibits
                listed in the accompanying Index to Exhibits are filed as part of
                this
                report. The following such exhibits are management contracts or
                compensatory plans or arrangements:




10.1
            Marine
                Products Corporation 2001 Employee Stock Incentive Plan (incorporated
                herein by reference to Exhibit 10.1 to the Form 10 filed on February
                13,
                2001).




10.6
            Compensation
                Agreement between James A. Lane, Jr. and Chaparral Boats, Inc.
                (incorporated herein by reference to Exhibit 10.6 to the Form 10
                filed on
                February 13, 2001).




10.7
            Marine
                Products Corporation 2004 Stock Incentive Plan (incorporated herein
                by
                reference to Appendix B to the Definitive Proxy Statement filed on
                March
                24, 2004).




10.8
            Form
                of stock option grant agreement under the 2001 Employee Stock Incentive
                Plan (incorporated herein by reference to Exhibit 10.7 to the Form
                10-K
                filed on March 21, 2003).




10.9
            Form
                of time lapse restricted stock grant agreement under the 2001 Employee
                Stock Incentive Plan (incorporated herein by reference to Exhibit
                10.8 to
                the Form 10-K filed on March 21,
                2003).




10.10
            Form
                of performance restricted stock grant agreement under the 2001 Employee
                Stock Incentive Plan (incorporated herein by reference to Exhibit
                10.9 to
                the Form 10-K filed on March 21,
                2003).




10.11
            Form
                of stock option grant agreement under the 2004 Stock Incentive Plan
                (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q
                filed
                on November 1, 2004).




10.12
            Form
                of time lapse restricted stock grant agreement under the 2004 Stock
                Incentive Plan (incorporated herein by reference to Exhibit 10.8
                to the
                Form 10-Q filed on November 1,
                2004).




10.13
            Form
                of performance restricted stock grant agreement under the 2004 Stock
                Incentive Plan (incorporated herein by reference to Exhibit 10.9
                to the
                Form 10-Q filed on November 1,
                2004).




10.14
            Summary
                of ‘at will’ compensation arrangements with the Executive
                Officers.




10.15
            Summary
                of compensation arrangements with the Directors (incorporated herein
                by
                reference to Exhibit 10.15 to the Form 10-K filed on March 15,
                2005).




10.16
            Supplemental
                Retirement Plan (incorporated herein by reference to Exhibit 10.16
                to the
                Form 10-K filed on March 15, 2005).







49






**Exhibits
      (inclusive of item 3 above):**




**Exhibit**
              **Number**
            **Description**3.1
            (A)
                Articles of Incorporation of Marine Products Corporation (incorporated
                herein by reference to Exhibit 3.1to
                the Form 10 filed on February 13, 2001).(B)
                Certificate of Amendment of Certificate of Incorporation of Marine
                Products Corporation executed on June8,
                2005 (incorporated herein by reference to Exhibit 99.1 to the current
                report on Form 8-K filed on June 9,2005).3.2
            Bylaws
                of Marine Products Corporation (incorporated herein by reference
                to
                Exhibit 3.2 to the Form 10-Q filed on May 5, 2004).4
            Form
                of Common Stock Certificate of Marine Products Corporation (incorporated
                herein by reference to Exhibit 4.1 to the Form 10 filed on February
                13,
                2001).10.1
            Marine
                Products Corporation 2001 Employee Stock Incentive Plan (incorporated
                herein by reference to Exhibit 10.1 to the Form 10 filed on February
                13,
                2001).10.2
            Agreement
                Regarding Distribution and Plan of Reorganization, dated February
                12,
                2001, by and between RPC, Inc. and Marine Products Corporation
                (incorporated herein by reference to Exhibit 10.2 to the Form 10
                filed on
                February 13, 2001).10.3
            Employee
                Benefits Agreement, dated February 12, 2001, by and between RPC,
                Inc.,
                Chaparral Boats, Inc. and Marine Products Corporation (incorporated
                herein
                by reference to Exhibit 10.3 to the Form 10 filed on February 13,
                2002).10.4
            Transition
                Support Services Agreement, dated February 12, 2001, by and between
                RPC,
                Inc. and Marine Products Corporation (incorporated herein by reference
                to
                Exhibit 10.4 to the Form 10 filed on February 13, 2001).10.5
            Tax
                Sharing Agreement, dated February 12, 2001, by and between RPC, Inc.
                and
                Marine Products Corporation (incorporated herein by reference to
                Exhibit
                10.5 to the Form 10 filed on February 13, 2001).10.6
            Compensation
                Agreement between James A. Lane, Jr. and Chaparral Boats, Inc.
                (incorporated herein by reference to Exhibit 10.6 to the Form 10
                filed on
                February 13, 2001).10.7
            Marine
                Products Corporation 2004 Stock Incentive Plan (incorporated herein
                by
                reference to Appendix B to the Definitive Proxy Statement filed on
                March
                24, 2004).10.8
            Form
                of stock option grant agreement under the 2001 Employee Stock Incentive
                Plan (incorporated herein by reference to Exhibit 10.7 to the Form
                10-K
                filed on March 21, 2003).10.9
            Form
                of time lapse restricted stock grant agreement under the 2001 Employee
                Stock Incentive Plan (incorporated herein by reference to Exhibit
                10.8 to
                the Form 10-K filed on March 21, 2003).10.10
            Form
                of performance restricted stock grant agreement under the 2001 Employee
                Stock Incentive Plan (incorporated herein by reference to Exhibit
                10.9 to
                the Form 10-K filed on March 21, 2003).10.11
            Form
                of stock option grant agreement under the 2004 Stock Incentive Plan
                (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q
                filed
                on November 1, 2004).10.12
            Form
                of time lapse restricted stock grant agreement under the 2004 Stock
                Incentive Plan(incorporated
                herein by reference to Exhibit 10.2 to the Form 10-Q filed on November
                1,
                2004).10.13
            Form
                of performance restricted stock grant agreement under the 2004 Stock
                Incentive Plan(incorporated
                herein by reference to Exhibit 10.3 to the Form 10-Q filed on November
                1,
                2004).10.14
            Summary
                of ‘at will’ compensation arrangements with the Executive
                Officers.10.15
            Summary
                of compensation arrangements with the Directors (incorporated herein
                by
                reference to Exhibit 10.15 to the Form 10-K filed on March 15,
                2005).10.16
            Supplemental
                Retirement Plan (incorporated herein by reference to Exhibit 10.16
                to the
                Form 10-K filed on March 15, 2005).21
            Subsidiaries
                of Marine Products Corporation (incorporated herein by reference
                to
                Exhibit 21 to the Form 10-K filed on March 15, 2005).23.1
            Consent
                of Grant Thornton LLP23.2
            Consent
                of Ernst & Young LLP24
            Powers
                of Attorney for Directors31.1
            Section
                302 certification for Chief Executive Officer31.2
            Section
                302 certification for Chief Financial Officer32.1
            Section
                906 certification for Chief Executive Officer and Chief Financial
                Officer




Any
      schedules or exhibits not shown above have been omitted because they are not
      applicable.




50







**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.






Marine Products Corporation/s/ Richard A.
              HubbellRichard A. Hubbell
              President and Chief Executive Officer
              March 13, 2006






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 and on the dates indicated.




**Name**
            **Title**
            **Date**/s/
                Richard A.
                Hubbell
              Richard
                A. Hubbell
            President
                and Chief Executive Officer
              (Principal
                Executive Officer)
            March
                13, 2006/s/
                Ben M.
                Palmer
              Ben
                M. Palmer
            Chief
                Financial Officer
              (Principal
                Financial and Accounting Officer)
            March
                13, 2006






The
      Directors of Marine Products (listed below) executed a power of attorney,
      appointing Richard A. Hubbell their attorney-in-fact, empowering him to sign
      this report on their behalf.




R. Randall Rollins, Director
            James B. Williams, DirectorWilton Looney, Director
            James A. Lane, Jr., DirectorGary W. Rollins, Director
            Linda H. Graham, DirectorHenry B. Tippie, Director
            Bill J. Dismuke, Director




/s/Richard
      A.
      Hubbell


Richard
      A. Hubbell


Director
      and as Attorney-in-fact


March
      13,
      2006






51







**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS, REPORTS AND SCHEDULE**




The
      following documents are filed as part of this report.




**FINANCIAL
                STATEMENTS AND REPORTS**
            PAGEManagement’s
                Report on Internal Control Over Financial Reporting
            25Report
                of Independent Registered Public Accounting Firm on Internal Control
                Over
                Financial Reporting
            26Consolidated
                Balance Sheets as of December 31, 2005 and 2004
            27Consolidated
                Statements of Income for the three years ended December 31,
                2005
            28Consolidated
                Statements of Stockholders’ Equity for the three years ended December 31,
                2005
            29Consolidated
                Statements of Cash Flows for the three years ended December 31,
                2005
            30Notes
                to Consolidated Financial Statements
            31-46Report
                of Independent Registered Public Accounting Firm on Consolidated
                Financial
                Statements (for 2005 and 2004)
            53Report
                of Independent Registered Public Accounting Firm on Consolidated
                Financial
                Statements (2003)
            54**SCHEDULE**Schedule
                II — Valuation and Qualifying Accounts
            S2




Schedules
      not listed above have been omitted because they are not applicable or the
      required information is included in the consolidated financial statements or
      notes thereto.




**SCHEDULE
      II—VALUATION AND QUALIFYING ACCOUNTS**


**MARINE
                PRODUCTS CORPORATION AND SUBSIDIARIES (in thousands of
                dollars)****For
                the years ended December 31, 2005, 2004 and
                2003****Description**
            **Balance
                at**
              **Beginning**
              **of
                Period**
            **Charged
                to**
              **Costs
                and**
              **Expenses**
            **Net**
              **(Write-Offs)/**
              **Recoveries**
            **Balance**
              **at
                End of**
              **Period**Year
                ended December 31, 2005
              Allowance
                for doubtful accounts
            $
                60
            $
                —
            $
                (2)
            $58Year
                ended December 31, 2004
              Allowance
                for doubtful accounts
            $
                67
            $
                —
            $
                (7)
            $60Year
                ended December 31, 2003
              Allowance
                for doubtful accounts
            $
                67
            $
                —
            $
                —
            $67






52






REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL
      STATEMENTS




Board
      of
      Directors and Stockholders  of
      Marine
      Products Corporation




We
      have
      audited the accompanying consolidated balance sheets of Marine Products
      Corporation (a Delaware corporation) and subsidiaries as of December 31, 2005
      and 2004, and the related consolidated statements of income, stockholders’
equity, and cash flows for each of the two years in the period ended December
      31, 2005.  These financial statements are the responsibility of the
      Company’s management.  Our responsibility is to express an opinion on these
      financial statements based on our audits.




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 audits 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 provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Marine Products Corporation
      and subsidiaries as of December 31, 2005 and 2004, and the results of their
      operations and their cash flows for each of the two years in the period ended
      December 31, 2005 in conformity with accounting principles generally accepted
      in
      the United States of America.




Our
      audits were conducted for the purpose of forming an opinion on the basic
      consolidated financial statements taken as a whole.  Schedule II for the
      years ended December 31, 2005 and 2004, listed in the Index is presented
      for purposes of additional analysis and is not a required part of the basic
      financial statements.  This schedule has been subjected to the auditing
      procedures applied in the audits of the basic consolidated financial statements
      and, in our opinion, is fairly stated in all material respects in relation
      to
      the basic consolidated financial statements taken as a whole.




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Marine Products
      Corporation’s internal control over financial reporting as of December 31, 2005,
      based on criteria established in Internal Control—Integrated Framework issued by
      the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
      and
      our report dated March 8, 2006 expressed an unqualified opinion.




/s/
      Grant Thornton LLP






Atlanta,
      Georgia


March
      8,
      2006






53







REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








The
      Board
      of Directors and Stockholders


Marine
      Products Corporation




We
      have
      audited the accompanying consolidated statements of income, stockholders’ equity
      and
      comprehensive income and cash flows for the year ended December 31, 2003. Our
      audit also included the financial statement schedule for the year ended December
      31, 2003, listed in the Index at Item 15(a). These financial statements and
      schedule are the responsibility of the Company’s management.
      Our
      responsibility is to express an opinion on these financial statements and
      schedule 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 financial statements referred to above present fairly, in all
      material respects, the consolidated results of operations of Marine Products
      Corporation and Subsidiaries and their cash flows for the year ended December
      31, 2003, in conformity with U.S. generally accepted accounting principles.
      Also, in our opinion, the related financial statement schedule for the year
      ended December 31, 2003, when considered in relation to the basic financial
      statements taken as a whole, presents fairly in all material respects the
      information set forth therein.






*/s/
      Ernst & Young LLP*





Atlanta,
      Georgia


February
      27, 2004, except for the matter discussed in the final


paragraph
      of Note 1, as to which the date is March 11, 2005







54






**SELECTED
      QUARTERLY FINANCIAL DATA (UNAUDITED)**


**First**
            **Second**
            **Third**
            **Fourth****(in
                thousands except per share data)**Restated
                for the three-for-two stock splits effective March 10, 2005 and March
                10,
                2004.**2005**Net
                sales
            $72,586
            $77,566
            $65,032
            $56,873Gross
                profit
            18,948
            19,875
            17,145
            13,153Net
                income
            6,817
            7,956
            7,265
            4,185Earnings
                per share — basic(a)
            0.18
            0.21
            0.19
            0.11Earnings
                per share — diluted(a)
            0.17
            0.20
            0.18
            0.11**2004**Net
                sales
            $61,830
            $64,775
            $63,129
            $62,684Gross
                profit
            15,723
            16,971
            17,117
            15,775Net
                income
            5,646
            6,396
            6,244
            5,457Earnings
                per share — basic(a)
            0.15
            0.17
            0.16
            0.14Earnings
                per share — diluted(a)
            0.14
            0.16
            0.15
            0.13




(a)   The
      sum
      of the earnings per share for the four quarters may differ from annual earnings
      per share due to the required method of computing the weighted average shares
      in
      interim periods.






55