Our sales increased by 3% to $9.2 billion.
Adjusting for the effects of our first-quarter divestiture of the IT services business, organic sales increased 10%.
Additionally, program execution across the portfolio was exceptional, which drove our segment operating margins to exceed 12%.
This follows on strong Q1 performance resulting in a year-to-date segment operating margin of 12.1%, and we continue to expect solid performance for the remainder of the year.
Earnings per share increased 7% this quarter and transaction-adjusted earnings per share has increased 16% year to date.
Transaction-adjusted free cash flow is also trending favorably and has increased 26% year to date.
As a result, we ended the quarter with just under $4 billion in cash on the balance sheet.
We completed the $2-billion accelerated share repurchase in Q2 and continue to expect to repurchase over $3 billion for the year.
Additionally, we increased our dividend by 8% in May.
And while it's still relatively early in the budget process, we're pleased to see strong support for national security from the Congress, including a $25 billion increase to the president's budget request approved last week by the Senate Armed Services Committee.
Both the House Appropriations Committee and SASC have voiced strong support for many of our programs, including B-21, GBSD, Triton and F-35, to name a few.
NASA was also well-supported in the budget, with a 7% year-over-year increase in proposed funding.
In partnership with the Air Force, the B-21 program remains on track, with two test aircraft in production today, and we continue to make solid progress toward first flight.
The Air Force recently published an artist rendering and a B-21 fact sheet that provides additional insights into the program.
The fact sheet highlights that the B-21 is being designed with open systems architecture to reduce integration risk and enable future modernization efforts to allow for the aircraft to evolve as the threat environment changes.
And as a reminder, the Freedom Radios equip both the F-35 and F-22.
This latest flight test integrated the widest variety of sensors to date, including a Marine Corps G/ATOR radar, which is our GaN-based expeditionary radar that entered full-rate production last year, as well as F-35 and other ground sensors and interceptors.
Additionally, after two years of book to bill over 1.3, we expect our book to bill for the full year to be close to one this year, with key booking opportunities in the second half of the year that include HALO, SLS, F-35 and several restricted programs, laying the foundation for continued growth.
Our year-to-date transaction-adjusted free cash flow increased 26%, and we continue to return cash to shareholders through our buyback program and our quarterly dividend, which we increased by 8% in Q2.
Normalizing for the IT services divestiture, which was a $585 million headwind in the second quarter of 2021, our organic sales increased 10% compared to last year.
Moving to Slide 5, which compares our earnings per share between Q2 of 2020 and Q2 2021, our earnings per share increased 7% to $6.42.
Operational performance contributed $0.60 of growth and lower unallocated corporate costs driven by state tax changes added another $0.22.
But compared to the even more favorable equity markets experienced in the same quarter last year, it represented a year-over-year headwind of $0.18.
Aeronautics sales were roughly flat for the quarter and up 2% year to date.
At defense systems, sales decreased by 24% in the quarter and 21% year to date, and on an organic basis, sales were down roughly 3% in both periods.
Lower organic sales were driven by the completion of our Lake City activities, which represented a headwind of $120 million in the quarter and $260 million year to date.
Mission systems sales were up 6% in the second quarter and 8% year to date.
On an organic basis, MS delivered another double-digit sales increase in the quarter of almost 12%, and organic sales were higher in all four of its business units in both periods.
Turning to space systems, sales continue to grow at a robust rate, rising 34% in the second quarter and 32% year to date.
We had an outstanding operational quarter with segment margin rate at 12.2%.
Aeronautics' Q2 operating income decreased 3% due to a benefit of $21 million recognized in the second quarter of 2020 from the resolution of a government accounting matter.
Operating margin rate was consistent at 10.3% in Q2 and the year-to-date period.
At defense systems, operating income decreased by 18% in the quarter and 15% year to date, primarily due to the impact of the IT services divestiture.
Operating margin rate increased to 12.4% in the quarter and 11.8% year to date.
Operating income in Mission Systems rose 18% in the quarter and 15% year to date due to higher sales volume and improved performance.
Operating margin rate increased to 15.8% in the quarter and benefited from the favorable resolution of certain cost accounting matters, as well as changes in business mix, as a result of the IT services divestiture.
Year to date, operating margin rate increased to 15.5%.
Space systems operating income rose 44% in the quarter and 40% year to date, and operating margin rate was 11% in both periods.
For sales, we're increasing the midpoint of our guide by $500 million to a range of $35.8 billion to $36.2 billion.
This translates to full-year organic growth of over 4% and over 5% excluding the 2020 equipment sale at AS.
We're also increasing both our segment operating margin rate and our overall operating margin rate ranges by 10 basis points to 11.6% to 11.8% and 15.5% to 15.7%, respectively.
Keep in mind that the gain from the IT services divestiture contributed approximately 5 points of our overall operating margin benefit.
For unallocated corporate expense, our updated guidance reflects a $30 million reduction associated with state tax changes.
And we now foresee an effective federal tax rate in the high 17% range, excluding the effects of the divestiture, which is an increase from our prior guidance.
We project a federal tax rate of approximately 22.5% on a GAAP basis.
The increase in guidance is driven by $0.40 of segment operational improvement.
Lower unallocated corporate costs almost fully offset the headwind from the higher federal tax rate, leading to an increase in our transaction-adjusted earnings per share guidance of $0.35 at the midpoint.
Since our call in January, we've raised the midpoint of our sales guide by $700 million.
But in light of our outstanding first-half cash flow performance, we project that we can absorb that additional working capital in our existing transaction-adjusted free cash flow guidance of $3 billion to $3.3 billion.
While asset returns and actuarial assumptions will continue to influence the final number, our current estimate is approximately $185 million of CAS recoveries in 2022, down $55 million from our January guide and down about $300 million from our expected 2021 level.
Regarding cash deployment, as Kathy mentioned, we completed our $2 billion accelerated share repurchase in the second quarter, retiring over six million shares at an average price of around $327 per share.
And we continue to target over $3 billion of total buybacks in 2021.
At the end of the second quarter, we had approximately $3.7 billion of remaining share repurchase authorization.

Summary:
Our sales increased by 3% to $9.2 billion.
Moving to Slide 5, which compares our earnings per share between Q2 of 2020 and Q2 2021, our earnings per share increased 7% to $6.42.
Year to date, operating margin rate increased to 15.5%.
Space systems operating income rose 44% in the quarter and 40% year to date, and operating margin rate was 11% in both periods.
For sales, we're increasing the midpoint of our guide by $500 million to a range of $35.8 billion to $36.2 billion.