Now, I'd like to turn the call over to Josh Collins, our CEO.
Thanks Cal, thanks for all of you for joining us today. First, I'll spend a few minutes discussing the highlights of the first quarter. Then, I'll have Cal cover some of the financial details. Then, I will conclude our prepared remarks by covering our revised outlook for 2010 and some overall observations about our strategic directions.
The performance over this past quarter has been encouraging on a number of fronts. Order intake have increased significantly. We are achieving good operating leverage on our manufacturing facilities, with the increased volume. We have seen the return of customers and markets that have experienced significant volume decline during the 2009 economic recession.
Consistent with the pattern, we experienced in the last half of 2009, we continued to see strong sales and profit, with overall operating income reaching the highest level since the third quarter 2008. Sales were up over 17% in the first quarter of 2010 compared to last year's first quarter.
The first quarter operating margins were solid at nearly 16% of sales, as we achieved good cost performance for plant efficiencies and lower steel costs year-over-year.
Additionally, we generated positive free cash flow and paid down debt in the first quarter, which is traditionally a quarter in which the company borrows cash rather than generating cash. Customer orders have continued to improve, as this year has progressed. We have seen backlog increase to the highest level since September 2008. Backlog has increased each month in the first quarter 2010.
This trend has increased our optimism with regard to the sustainability of the business recovery that began in the second half of 2009. Our rejuvenated new products efforts began contributing in the first quarter, as we recorded the first sales of our new PowerSharp Chain Sharpening System and continued to see sales growth as -PowerGrid Chain we introduced in 2009.