Year-to-date, free cash is up over 60% from prior-year levels and over 200% of adjusted net income.
Combined, the year-over-year organic sales decline of 10.5% in the quarter, improved from 13.5% decline last quarter.
The positive sales momentum has continued into the early part of fiscal third quarter with organic sales through the first 17 days of January down a mid-single digit percent over the prior year.
Our technical position and long-term opportunity is further supplemented by the progress we are making in expanding our next-generation automation solutions following three acquisitions in the past 16 months.
Unusual items in the quarter include a $49.5 million pre-tax non-cash impairment charge on certain fixed, leased and intangible assets, as well as non-routine costs of $7.8 million pre-tax related to an inventory reserve charge, facility consolidations and severance.
Now turning to our results, absent these in our non-routine charges during our second quarter, consolidated sales decrease 9.9% over the prior year quarter.
Acquisitions contributed a half point of growth and foreign currency was favorable by 0.1%.
Netting these factors, sales decreased 10.5% on an organic basis with a light number of selling days year-over-year.
While still down as compared to the prior year quarter, sales exceeded our expectations with average daily sales rates at nearly 3% sequentially on an organic basis and above the normal seasonal trends for the second straight quarter.
Following a slow start to the quarter in early October, sales activities strengthened sequentially and remained firm late in the quarter, despite typical seasonal slowness and rising COVID cases across the U.S. Comparative sales performance was relatively consistent across both segments as highlighted on slide 6 and 7.
Sales in our Service Center segment declined 10.4% year-over-year or 10.5% on an organic basis when excluding the modest impact from foreign currency.
The year-over-year organic decline of 10.5% improved notably relative to the mid-teens to low 20% declines we saw of the prior two quarters, while the segment's average daily sales rates increased nearly 4% sequentially from our September quarter and over 8% from the June quarter.
Within our Fluid Power and Flow Control segment, sales decreased 8.5% over the prior year quarter, with our recent acquisition of ACS contributing 1.6 points of growth.
On an organic basis, segment sales declined 10.1%, reflecting lower demand across various industrial, off-highway mobile and process-related end markets.
Moving to gross margin performance, as highlighted on Page 8 of the deck, adjusted gross margin of 28.9% declined 8 basis points year-over-year, or 19 basis points when excluding non-cash LIFO expense, $0.9 million in the quarter and $1.9 million in the prior year quarter.
On an adjusted basis, selling, distribution and administrative expenses declined 11.2% year-over-year or approximately 12% when excluding incremental operating cost associated with our ACS acquisition.
For your reference, our second quarter depreciation and the amortization expense of $13.5 million is a good quarterly run rate to assume going forward.
Adjusted EBITDA in the quarter was $68.3 million, down 8.4% compared to the prior year quarter, while adjusted EBITDA margin was 9.1%, up 14 basis points over the prior year or virtually flat when excluding non-cash LIFO expense in both periods.
On a GAAP basis, we reported an operating loss of $0.14 per share, which includes the previously referenced non-cash impairment and non-routine charges.
On a non-GAAP adjusted basis, excluding these items, we reported earnings per share of $0.98, which compared to $0.97 in the prior year quarter.
Our adjusted tax-rate during the quarter of 18.6% was below prior year levels of 23%, as well as our guidance of 23% to 25%.
We believe the tax rate of 23% to 25% for the second half of fiscal 2021 is appropriate assumption near-term.
Cash generated from operating activities during the second quarter was $77.5 million, while free cash flow totaled $72.7 million or approximately 190% of adjusted net income.
This was up from $55 million and $48 million respectively, as compared to the prior year quarter and represents record second quarter cash generation.
Year-to-date, free cash generation of $151 million is up over 60% for prior year levels and represents a 206% factor of adjusted net income.
Given the strong free cash flow performance in the quarter, we ended December with approximately $289 million of cash on hand.
Net leverage stood at 2.1 times adjusted EBITDA at quarter-end, consistent with the prior quarter and below the prior year level of 2.5 times.
In addition, our revolver remains undrawn with approximately $250 million of capacity and an additional $250 million accordion option.
Based on month-to-date trends in January and assuming normal sequential patterns, we would expect fiscal third quarter 2021 organic sales to decline by 3% to 4% on a year-over-year basis.
In addition, we expect our recent acquisitions at ACS and Gibson Engineering to contribute approximately $10 million to $11 million in sales during our fiscal third quarter.
As it relates to operating costs, based on the 3% to 4% organic sales decline assumption, we would expect selling, distribution and administrative expense of between $170 million and $175 million during our fiscal third quarter.
We remain confident on our cash generation potential and reiterate our normalized annual free cash target of at least 100% of net income over a cycle.
This includes record cash generation and a 30% reduction in our net debt, our strong cost execution supporting relatively stable EBITDA margins despite the meaningful end market slowdown.
We are delivering on our requirements and commitments while moving the organization toward our longer-term next milestone financial objectives of $4.5 billion of revenue and 11% EBITDA margins.

Summary:
On a GAAP basis, we reported an operating loss of $0.14 per share, which includes the previously referenced non-cash impairment and non-routine charges.
On a non-GAAP adjusted basis, excluding these items, we reported earnings per share of $0.98, which compared to $0.97 in the prior year quarter.
Based on month-to-date trends in January and assuming normal sequential patterns, we would expect fiscal third quarter 2021 organic sales to decline by 3% to 4% on a year-over-year basis.
As it relates to operating costs, based on the 3% to 4% organic sales decline assumption, we would expect selling, distribution and administrative expense of between $170 million and $175 million during our fiscal third quarter.