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. A majority of these dealers finance their inventory through third-party floorplan lenders, who pay Marine Products generally within seven to 10 days after delivery of the products to the dealers.

The discussion on business and financial strategies of the Company set forth under the heading "Overview" in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2008 is incorporated herein by reference. There have been no significant changes in the strategies since year-end.

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, fuel costs, 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 unit, 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 and credit availability - 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.

We further reduced our production levels at various times during the three months ended March 31, 2009 in response to our concerns about dealer and consumer demand for products in our industry, which resulted from continued problems in the housing market, high fuel prices and concern regarding a general economic slowdown. In the first quarter of 2009, our production levels were significantly lower than the levels during the first quarter of 2008. Despite significant cost reduction efforts, the Company sustained a gross loss during the quarter primarily due to manufacturing cost inefficiencies due to very low production levels and sales to dealers, as well as additional costs of our winter retail incentive programs. Consistent with the overall reduction in demand for recreational products, including fiberglass boats, our unit backlog at the end of the quarter was approximately half of what it was at this time last year.

OUTLOOK

The discussion on the outlook for 2009 is incorporated herein by reference from the Company's annual report on Form 10-K for the fiscal year ended December 31, 2008.

The weak dealer and customer demand that began over three years ago accelerated during the third quarter of 2008 and the first quarter of 2009, as the severe economic downturn prompted consumers to halt virtually all large discretionary purchases. The winter boat show season, which is an important indicator of demand for the upcoming retail selling season, once again generated low attendance and sales, indicating that the 2009 retail selling season will be weak. The same macroeconomic and industry-specific factors that have been issues for our business continued to be problems during the first quarter of 2009, and were exacerbated by continued contractions in lending to both our dealers and potential retail customers. The ongoing recent curtailment of consumer and business lending has made it difficult for consumers and dealers to secure financing for retail purchases and for inventory financing. The Company does not believe that there are any near-term catalysts which will improve the retail selling environment for our products, and as a result, we have continued to reduce production in order to manage dealer inventory levels. We have accomplished this by consolidating several plants in the fourth quarter of 2008, undertaking additional workforce reductions, and periodically idling our manufacturing operations on a regular, planned schedule. In addition, the weak selling environment and dealer inventory levels have required us to develop sales incentive programs designed to sell dealer boat inventory. We recently developed a new retail incentive program to be in effect during the 2009 spring retail selling season. Management will continue to monitor the risk of dealer defaults and resulting repurchase obligations.

The Company's strategy at the present time is to produce an appropriate quantity of current-year models in order to meet firm demand and preserve the value of our brand names, while continuing a prudent amount of product development efforts to develop new models for the 2010 model year. In addition, we are continuing our ongoing strategy to reduce dealer field inventory to an appropriately low level in order to ultimately generate demand for our 2010 models. We anticipate that there will be additional costs associated with such planned field inventory reduction efforts including the cost of the spring retail program. The cost will depend upon the number of boats sold under this and other programs. Additionally, we expect that reduced consumer demand will continue at least through 2009 which will adversely affect net sales, net income, operating margins and cash flows.

                  MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

RESULTS OF OPERATIONS

Key operating and financial statistics for the three months ended March 31, 2009
and 2008 follow:

  ($ in thousands)                                  Three months ended
                                                         March 31
                                                    2009           2008

  Total number of boats sold                            310         1,402
  Average gross selling price per boat            $    45.2      $   44.7
  Net sales                                       $  13,806      $ 65,542
  Percentage of cost of goods sold to net sales       100.4 %        79.5 %
  Gross profit (loss) margin percent                   (0.4 )%       20.5 %
  Percentage of selling, general and
  administrative expenses to net sales                 34.0 %        12.6 %
  Operating (loss) income                         $  (4,757 )    $  5,205
  Warranty expense                                $     647      $  1,244

THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THREE MONTHS ENDED MARCH 31, 2008

Net sales for the three months ended March 31, 2009 decreased $51.7 million or 78.9 percent compared to the comparable period in 2008. The change in net sales was due primarily to a 77.9 percent decrease in the number of boats sold and the recognition of additional costs for our winter retail incentive program during the quarter. As a result of selling more boats from dealer field inventory under this program than estimated, first quarter's net sales include additional incentive costs of approximately $1.1 million making the total program cost for units in dealer inventory approximately $2.0 million. Unit sales among all models declined significantly compared to the prior year, although average gross selling price per boat remained relatively unchanged. In the first quarter of 2009, sales outside of the United States accounted for 35.1 percent of net sales compared to 32.3 percent of net sales in the prior year.

Cost of goods sold for the three months ended March 31, 2009 was $13.9 million compared to $52.1 million for the comparable period in 2008, a decrease of $38.2 million or 73.4 percent. Cost of goods sold, as a percentage of net sales, increased primarily as the result of significant manufacturing cost inefficiencies due to very low production volumes and lower net sales as discussed above.

Selling, general and administrative expenses for the three months ended March 31, 2009 were $4.7 million compared to $8.3 million for the comparable period in 2008, a decrease of $3.6 million or 43.1 percent. The decrease in selling, general and administrative expenses was primarily due to the variable nature of many of these expenses, including incentive compensation, which declined as a percentage of sales consistent with lower sales and profitability, and warranty expense. Also, salary, research and development and advertising expenses were lower due to cost control measures instituted in the past year. Warranty expense was 4.7 percent of net sales for the three months ended March 31, 2009 compared to 1.9 percent in the prior year due primarily to approximately $0.4 million in additional warranty expense recognized during the quarter relating to boats sold in prior years. This prior year adjustment was primarily as a result of an increase in claims filed for 2007 model year boats. Additionally, costs incurred during the first quarter of 2009 in connection with boat repurchase obligations totaled approximately $0.6 million.

Operating (loss) income for the three months ended March 31, 2009 decreased $10.1 million compared to the comparable period in 2008. Operating loss was primarily due to a gross loss partially offset by a decrease in selling, general and administrative expenses.

Interest income was $0.5 million during the three months ended March 31, 2009 and $0.6 million for the comparable period in 2008. The decrease was primarily due to a decrease in the short term interest rates compared to prior year.

Income tax (benefit) provision for the three months ended March 31, 2009 of $(1.8) million was $3.4 million lower than the income tax provision of $1.6 million for the comparable period in 2008. The income tax benefit for the three months ended March 31, 2009 reflects a beneficial effective tax rate of 42.2 percent, compared to an effective rate of 28.4 percent for the comparable period in the prior year. The change in the effective rate was due primarily to the relationship of our pretax income (loss) to permanent differences.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The Company's cash and cash equivalents at March 31, 2009 were $9.4 million. The
following table sets forth the historical cash flows for:

     (in thousands)                                      Three months ended March 31,
                                                            2009                2008

     Net cash provided by operating activities       $         4,550       $        12,028
     Net cash provided by (used for) investing
     activities                                                  854                (3,853 )
     Net cash used for financing activities          $          (599 )     $        (3,278 )

Cash provided by operating activities for the three months ended March 31, 2009 decreased approximately $7.5 million compared to the comparable period in 2008. This decrease is primarily the result of a decrease in net earnings partially offset by lower working capital requirements for inventory and accounts receivables consistent with lower sales in 2009 compared to 2008.

Cash provided by investing activities for the three months ended March 31, 2009 increased approximately $4.7 million compared to the comparable period in 2008, resulting primarily from the sales of long-term marketable securities in 2009.

Cash used for financing activities for the three months ended March 31, 2009 decreased approximately $2.7 million primarily due to a reduction in dividends paid per share during 2009 compared to 2008 coupled with lower cost of common share repurchases in 2009.

Financial Condition and Liquidity

The Company believes that the liquidity provided by existing cash, cash equivalents and marketable securities, its overall strong capitalization, and cash generated from operations, will provide sufficient capital to meet the Company's requirements for the next twelve months.

The Company's decisions about the amount of cash to be used for investing and financing purposes are influenced by its capital position and the expected amount of cash to be provided by operations.

Cash Requirements

The Company currently expects that capital expenditures during 2009 will be approximately $365 thousand, of which $13 thousand has been spent through March 31, 2009.

The Company participates in a multiple employer Retirement Income Plan, sponsored by RPC, Inc. ("RPC"). The Company does not currently expect to make any contributions to this plan during 2009.

On April 28, 2009, the Board of Directors voted to suspend the quarterly cash dividend to common stockholders.

On January 22, 2008, the Board of Directors authorized an additional 3,000,000 shares that the Company may repurchase, increasing the number of shares available for repurchase. The Company has purchased a total of 4,925,157 shares in the open market as of March 31, 2009. As of March 31, 2009, there are 3,324,843 shares that remain available for repurchase. The Company did not repurchase any shares under this program during the first quarter of 2009.

The Company incurred repurchase obligations totaling approximately $3.6 million during the first quarter of 2009 resulting from dealer defaults on floor plan financing. At March 31, 2009 the payable to floor plan lenders totaled $2.5 million. If additional dealers experience financial difficulty as a result of the current market conditions, the Company may incur additional repurchase obligations under current programs or programs initiated in the future for the 2010 model year. See further information regarding repurchase obligations in Note 7 of the Consolidated Financial Statements and in the section below titled "Off Balance Sheet Arrangements."

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 ranging from five to ten years. See Note 7 to the Consolidated Financial Statements for a detail of activity in the warranty accruals during the three months ended March 31, 2009 and 2008.

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 third-party floor plan lenders whereby the Company guarantees varying amounts of debt for qualifying dealers on boats in inventory. The Company's obligation under these guarantees becomes effective in the case of a default under the financing arrangement between the dealer and the third-party lender. 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 debt obligation on those boats, up to certain contractually determined dollar limits which vary by lender. As a result of dealer defaults, the Company became contractually obligated to repurchase dealer inventory of approximately $3.6 million during the first quarter of 2009. As of March 31, 2009, the Company has an aggregate remaining repurchase obligation to lenders of $1.8 million. The Company's remaining obligation relating to a maximum of $1.4 million of this obligation expires one year after the July 1, 2008 effective date of this agreement. Our obligation related to the remaining $0.4 million of this total as of March 31, 2009 varies based on dealer floor plan debt outstanding, declines over time based on the age of the inventory, and remains in force for periods ranging up to 24 months from the end of the first quarter of 2009.

Management continues to monitor the risk of additional defaults and resulting repurchase obligation based in part on information provided by the third-party floor plan lenders and will adjust the guarantee liability at the end of each reporting period based on information reasonably available at that time. See further information regarding repurchase obligations in Note 7 of the Consolidated Financial Statements.

Historically, and during most of 2008, there were at least two major marine dealer floor plan financing institutions. At the end of 2008, one of these institutions announced that it would cease floor plan lending to all unaffiliated dealers including those in the marine industry. During the first quarter of 2009, one lender approached Marine Products with a request to raise the contractual repurchase limit. During 2008 this lender imposed additional borrowing costs not covered in the current contractual arrangement. Marine Products is negotiating with this lender regarding these and other issues regarding contract provisions which expire at the end of the 2009 model year and contract provisions for the 2010 model year.

RELATED PARTY TRANSACTIONS

In conjunction with its spin-off from RPC in 2001, the Company and RPC entered into various agreements that define their relationship after the spin-off. A detailed discussion of the various agreements in effect is contained in the Company's annual report on Form 10-K for the year ended December 31, 2008. RPC charged the Company for its allocable share of administrative costs incurred for services rendered on behalf of Marine Products totaling approximately $0.2 million in the three months ended March 31, 2009 and approximately $0.3 million in the three months ended March 31, 2008.

CRITICAL ACCOUNTING POLICIES

The discussion of Critical Accounting Policies is incorporated herein by reference from the Company's annual report on Form 10-K for the fiscal year ended December 31, 2008. There have been no significant changes in the critical accounting policies since year-end.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

See Notes 3 and 12 of the Consolidated Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition.

SEASONALITY

Marine Products' quarterly operating results are affected by weather and general economic conditions. Quarterly operating results for the second quarter historically have reflected the highest quarterly sales volume during the year with the first quarter being the next highest sales quarter. However, the results for any quarter are not necessarily indicative of results to be expected in any future period.

INFLATION

During the third and fourth quarters of 2008 and continuing into the first quarter of 2009, the Company experienced a significant decline in certain material and component costs that include hydrocarbon feedstocks and industrial metals such as copper. During the first quarter of 2009, the prices of some of these commodities have stabilized. This fall in prices may lead to lower materials costs in 2009. However, no assurance can be given that commodities prices will remain low, or at what prices they can be purchased in the future. Also, given low retail consumer demand for the Company's products at the present time, no assurance can be given that the Company will be able to institute price increases to its dealers in the event that the prices of its raw materials and components increase in the future.

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 forego or delay their purchases or buy a less expensive boat in the event that interest rates rise.

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, the expected effect of recent accounting pronouncements on the Company's consolidated financial statements; the Company's estimate of the guarantee liability under dealer floor plan financing arrangements; the Company's expectation that it will not make any contributions to its pension plan in 2009; the Company's belief that there are not any near-term catalysts which will improve the retail selling environment and that the 2009 selling season will be weak; the Company's belief that it may be required to implement additional sales incentive programs designed to sell inventory; the Company's ability to produce an appropriate quantity of current-year models to meet firm demand and preserve the value of brand names while maintaining a prudent amount of research and development to develop new 2010 models; the Company's ability to reduce field inventory levels to allow dealers to purchase 2010 models; the Company's belief it will continue to experience the effect of reduced consumer demand for the remainder of 2009, which will adversely effect net sales, net income, operating margins and cash flows; the Company's belief that its liquidity, capitalization and cash expected to be generated from operations will provide sufficient capital to meet the Company's requirements for the next twelve months; the Company's expectations about capital expenditures during 2009; that the Company may in the future incur additional repurchase obligations as a result of dealer floor plan financing defaults; the Company's belief that the fall in prices of many commodities used as raw materials for its manufacturing processes may lead to lower material costs during the remainder of 2009; the Company's expectations regarding market risk of its investment portfolio; and the Company's expectation about the effect of litigation on the Company's financial position or results of operations. 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. 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. Risk factors that could cause such future events not to occur as expected include the following: economic conditions, unavailability of credit and possible decreases in the level of consumer confidence impacting discretionary spending, business interruptions due to adverse weather conditions, increased interest rates, unanticipated changes in consumer demand and preferences, deterioration in the quality of Marine Products' network of independent boat dealers or availability of financing of their inventory, our ability to insulate financial results against increasing commodity prices, the impact of rising gasoline prices and a weak housing market on consumer demand for our products, competition from other boat manufacturers and dealers, and insurance companies that insure a number of Marine Products' marketable securities have recently been downgraded, which may cause volatility in the market price of Marine Products' marketable securities. Additional discussion of factors that could cause the actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in Marine Products' Form 10-K, filed with the Securities and Exchange Commission for the year ended December 31, 2008. The Company does not undertake to update its forward-looking statements.