Callaway Golf ( ELY) posted a 23% jump in second-quarter earnings, but the profit missed analysts' forecasts as gross margins came in weaker than expected. The golf-equipment maker's earnings rose to $22.5 million, or 33 cents a share, from $18.4 million, or 27 cents a share, a year earlier. The latest quarter's earnings included charges of 3 cents a share related to stock-option costs, 1 cent a share tied to its purchase of Top-Flite and 1 cent a share for cost-cutting efforts. Excluding these items, earnings were 38 cents a share. Analysts polled by Thomson First Call expected a profit of 45 cents a share. The company's sales increased to $341.8 million from $323.1 million, topping Wall Street's projection of $331 million. Callaway, which began a restructuring plan last September after suffering from declining sales and profits, said it is making progress in cutting costs. The company's operating expenses for the quarter dropped to $101.3 million from $119 million, which Callaway attributed to cost cuts under the plan. However, the company had some issues in reining in margins during the quarter. The gross profit for the quarter fell to 41% of sales from 45% last year. "Our second quarter gross margin results did not meet our expectations due to some unanticipated execution issues and cost increases," said President and CEO George Fellows in a statement. "Initiatives are in process to begin improving gross margins, but they will not impact results until late 2006 and into next year." In addition to the margin improvement, Callaway said it is focused on restoring the Top-Flite brand, which it bought out of bankruptcy in 2003.