SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, D.C. 20549


                                    FORM 10-Q



            X    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
         -------
                 THE SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended September 30, 2001
                                                           ---------

                 TRANSITION REPORT PURSUANT TO SECTION 13 OR
         -------
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the transition period from _____ to

                         Commission file number 1-14762

                            THE SERVICEMASTER COMPANY
             (Exact name of registrant as specified in its charter)

          Delaware                                       36-3858106
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)


One ServiceMaster Way, Downers Grove, Illinois                 60515-1700
(Address of principal executive offices)                       (Zip Code)

                                  630-271-1300
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No .

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock: 300,197,062 shares of common stock on November 7, 2001.




                                       0
<PAGE>







                                TABLE OF CONTENTS

                                                                            Page
                                                                             NO.

THE SERVICEMASTER COMPANY (Registrant) -


PART I.  FINANCIAL INFORMATION

Consolidated Statements of Income for the three and nine
 months ended September 30, 2001 and September 30, 2000                        2

Consolidated Statements of Financial Position
   as of September 30, 2001 and December 31, 2000                              3

Consolidated Statements of Cash Flows for the nine months
   ended September 30, 2001 and September 30, 2000                             4

Notes to Consolidated Financial Statements                                     5

Management Discussion and Analysis of Financial Position
   and Results of Operations                                                  10


PART II.  OTHER INFORMATION

Item 1:  Legal Proceedings                                                    17

Item 6:  Exhibits and Reports on Form 8-K                                     17

Signature                                                                     18





                                       1
<PAGE>












                          PART I. FINANCIAL INFORMATION

                            THE SERVICEMASTER COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>


                                                                            Three Months Ended               Nine Months Ended
                                                                              September 30,                    September 30,
                                                                        2001              2000             2001             2000
                                                                 ----------------   ----------------   -------------   -------------

<S>                                                                  <C>              <C>              <C>              <C>
OPERATING REVENUE ..............................................     $ 1,129,088      $ 1,114,216      $ 3,153,529      $ 3,128,714

OPERATING COSTS AND EXPENSES:
Cost of services rendered and products sold ....................         801,939          798,149        2,271,454        2,262,531
Selling and administrative expenses.............................         238,126          218,245          633,892          572,482
                                                                     -----------      -----------      -----------      -----------
Total operating costs and expenses .............................       1,040,065       1,016,394         2,905,346        2,835,013
                                                                     -----------      -----------      -----------      -----------

OPERATING INCOME ...............................................          89,023           97,822          248,183          293,701

NON-OPERATING  EXPENSE (INCOME):
Interest expense ...............................................          30,948           35,503           97,347          103,048
Interest and investment income .................................          (7,409)          (9,026)         (14,672)         (19,675)
Minority interest and other expense (income), net ..............           2,248           (2,700)           3,312           (9,062)
                                                                     -----------      -----------      -----------      -----------

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ..........          63,236           74,045          162,196          219,390
Provision for income taxes......................................          27,716           32,318           69,951           94,176
                                                                     -----------      -----------      -----------      -----------
INCOME FROM CONTINUING OPERATIONS ..............................          35,520           41,727           92,245          125,214

Income from discontinued segment (Management Services),
    net of income taxes ........................................          10,603            9,059           27,815           27,941
Extraordinary Item - gain on repurchase of bonds, net of
   $4.2 million in income taxes (1) ............................             -                -              6,003              -
                                                                     -----------      -----------      -----------      -----------

NET INCOME .....................................................     $    46,123      $    50,786      $   126,063      $   153,155
                                                                     ===========      ===========      ===========      ===========


PER SHARE:(2)
Basic earnings per share from continuing operations ............     $       .12      $       .14      $       .31      $       .41
Basic earnings per share from discontinued operations ..........             .03              .03              .09              .09
Extraordinary gain on repurchase of bonds (1) ..................              -                -               .02               -
                                                                     -----------      -----------      -----------      -----------
Basic earnings per share .......................................     $       .15      $       .17      $       .42      $       .50
                                                                     ===========      ===========      ===========      ===========


Diluted earnings per share from continuing operations ..........     $       .12      $       .14      $       .31      $       .41
Diluted earnings per share from discontinued operations ........             .03              .03              .09              .09
Extraordinary gain on repurchase of bonds (1)...................              -                -               .02               -
                                                                     -----------      -----------      -----------      -----------
Diluted earnings per share .....................................     $       .15      $       .17      $       .42      $       .50
                                                                     ===========      ===========      ===========      ===========

Dividends per share ............................................     $       .10      $       .10      $       .30      $       .28
                                                                     ===========      ===========      ===========      ===========


</TABLE>




(1) During the first quarter the Company paid approximately $35 million to
purchase a portion of its public debt securities. As a result, the Company
recognized an after-tax extraordinary gain on the early extinguishment of debt
of approximately $6 million.

(2) Basic earnings per share are calculated based on 298,925 shares and 301,594
shares for the three months ended September 30, 2001 and 2000, respectively, and
298,425 and 303,876 shares for the nine months ended September 30, 2001 and
2000, respectively. Diluted earnings per share are calculated based on 312,524
and 303,363 shares for the three months ended September 30, 2001 and 2000,
respectively, and 311,044 and 307,317 shares for the nine months ended September
30, 2001 and 2000, respectively.

                       SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       2
<PAGE>



                                       THE SERVICEMASTER COMPANY
                             CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                            (IN THOUSANDS)

<TABLE>

                                                                                                                 As of
ASSETS                                                                                            September 30,         December 31,
                                                                                                       2001                  2000
                                                                                                 ---------------      --------------
<S>                                                                                                <C>                 <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................................         $    49,203          $    61,115
Marketable securities ....................................................................              60,837               56,531
Receivables less allowance of $32,781 and $31,633, respectively ..........................             470,712              446,797
Inventories ..............................................................................              84,059               76,440
Prepaid expenses and other assets ........................................................             181,342              146,803
Deferred taxes and tax receivables .......................................................              49,280               70,346
                                                                                                   -----------          -----------
       Total Current Assets ..............................................................             895,433              858,032
                                                                                                   -----------          -----------

PROPERTY AND EQUIPMENT:
   At cost ...............................................................................             535,193              526,465
   Less: accumulated depreciation ........................................................             308,905              286,700
                                                                                                   -----------          -----------
     Net property and equipment ..........................................................             226,288              239,765
                                                                                                   -----------          -----------

Intangible assets, primarily trade names and goodwill,
  net of accumulated amortization of $484,832 and $422,899 respectively ..................           2,561,766            2,478,773
Investment in discontinued segment .......................................................              57,026              112,257
Notes receivable, long-term securities, and other assets .................................             140,073              148,663
                                                                                                   -----------          -----------
       Total Assets ......................................................................         $ 3,880,586          $ 3,837,490
                                                                                                   ===========          ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable .........................................................................         $   125,594          $   139,480
Income taxes payable .....................................................................              76,274                1,235
Accrued liabilities ......................................................................             222,985              208,654
Deferred revenues ........................................................................             356,316              311,699
Current portion of long-term obligations .................................................             245,548               61,360
                                                                                                   -----------          -----------
       Total Current Liabilities .........................................................           1,026,717              722,428
                                                                                                   -----------          -----------

Long-Term Debt ...........................................................................           1,365,567            1,756,757
Deferred Tax Liability ...................................................................             114,947              115,184
Other Long-Term Obligations ..............................................................              76,757               75,247
Minority Interest ........................................................................             108,532                5,933

Commitments and Contingencies

SHAREHOLDERS' EQUITY:
Common stock $0.01 par value, authorized 1 billion shares; issued
     and outstanding 300,126 and 298,474 shares, respectively ............................               3,001                2,985
Additional paid-in capital ...............................................................           1,023,573            1,030,399
Retained earnings ........................................................................             338,349              301,207
Accumulated other comprehensive income ...................................................             (19,123)              (2,479)
Restricted stock .........................................................................              (1,400)              (1,829)
Treasury stock ...........................................................................            (156,334)            (168,342)
                                                                                                   -----------          -----------
       Total shareholders' equity ........................................................           1,188,066            1,161,941
                                                                                                   -----------          -----------
       Total Liabilities and Shareholders' Equity ........................................         $ 3,880,586          $ 3,837,490
                                                                                                   ===========          ===========

</TABLE>



                       SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       3
<PAGE>



<TABLE>


                                       THE SERVICEMASTER COMPANY
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (IN THOUSANDS)
                                                                                                             Nine Months Ended
                                                                                                               September 30,
                                                                                                           2001             2000
                                                                                                       ------------     -----------


<S>                                                                                                    <C>                <C>
CASH AND CASH EQUIVALENTS AT JANUARY 1 .......................................................         $  61,115          $  69,177

CASH FLOWS FROM OPERATIONS:
NET INCOME ...................................................................................            98,248            125,214
      Adjustments to reconcile net income to net cash flows from operations:
        Depreciation .........................................................................            43,384             45,783
        Amortization .........................................................................            61,933             58,085
     Tax refund from prior years payments ....................................................            21,000             39,000
     Deferred income taxes ...................................................................            77,538             61,046
         Change in working capital, net of acquisitions:
            Receivables ......................................................................           (66,856)           (71,439)
            Sale of receivables ..............................................................            92,500               --
            Inventories and other current assets .............................................           (38,245)           (28,646)
            Accounts payable .................................................................           (12,173)           (11,015)
            Deferred revenues ................................................................            45,064              8,091
            Accrued liabilities ..............................................................            13,190            (37,068)
         Other, net ..........................................................................             1,897                431
                                                                                                       ---------          ---------
NET CASH PROVIDED FROM OPERATIONS ............................................................           337,480            189,482
                                                                                                       ---------          ---------

 MEMO:  NET CASH PROVIDED FROM OPERATIONS (EXCLUDING SALE OF RECEIVABLES) ....................           244,980            189,482

CASH FLOWS FROM INVESTING ACTIVITIES:
      Property additions .....................................................................           (37,644)           (47,491)
      Sale of equipment and other assets .....................................................             8,324              5,950
      Business acquisitions, net of cash acquired ............................................          (123,298)          (129,456)
      Proceeds from business sales and minority interests ....................................           111,796             49,345
      Notes receivable, financial investments and securities .................................           (18,449)           (17,723)
                                                                                                       ---------          ---------
NET CASH USED FOR INVESTING ACTIVITIES .......................................................           (59,271)          (139,375)
                                                                                                       ---------          ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net borrowings (payments) ..............................................................          (246,123)           100,815
      Purchase of ServiceMaster stock ........................................................            (1,308)          (109,617)
      Shareholders' dividends ................................................................           (88,921)           (85,810)
      Other ..................................................................................             8,449              9,931
                                                                                                       ---------          ---------
NET CASH USED FOR FINANCING ACTIVITIES .......................................................          (327,903)           (84,681)
                                                                                                       ---------          ---------

                                                                                                       ---------          ---------
CASH PROVIDED FROM DISCONTINUED SEGMENT ......................................................            37,782             34,178
                                                                                                       ---------          ---------

CASH DECREASE DURING THE PERIOD ..............................................................           (11,912)              (396)
                                                                                                       ---------          ---------

CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 ....................................................         $  49,203          $  68,781
                                                                                                       =========          =========

</TABLE>

                       SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




                                       4
<PAGE>



                            THE SERVICEMASTER COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1:  The  consolidated   financial   statements  include  the  accounts  of
ServiceMaster and its significant subsidiaries, collectively referred to as "the
Company".  Intercompany  transactions  and  balances  have  been  eliminated  in
consolidation.

NOTE 2: On October 3, 2001, the Company's  Board of Directors  approved a series
of  actions  (the  "Restructuring")  related  to  the  strategic  review  of its
portfolio of businesses that commenced  earlier in the year. The Company's Board
of Directors  approved an agreement to sell the  Company's  Management  Services
business  to  Aramark  Corporation  (Aramark)  for  $800  million.  The all cash
transaction  is  expected  to  close  by year  end  after  obtaining  regulatory
clearance.  The  Company  expects  to report  an  after-tax  accounting  gain of
approximately $385 million from this sale. In accordance with generally accepted
accounting  principles  the  Management  Services  segment  is  reflected  as  a
discontinued operation in the accompanying consolidated financial statements. In
the  consolidated  statements  of  income,  the  Management  Services  segment's
operating results have been eliminated from continuing  operations and have been
presented as a single line in net income and earnings per share.  The  segment's
assets and liabilities  have been  eliminated from continuing  operations in the
consolidated  statements  of financial  position and have been recorded as a net
investment in the segment.  The investment reflects net accounts receivable sold
through the securitization program in 2001. In conjunction with the pending sale
of the Management  Services  segment,  in October 2001, the Company  repurchased
approximately $40 million of receivables sold to a third party. The consolidated
statements of cash flows reflect all cash provided from the discontinued segment
except for  proceeds  from the sale of  receivables  through the  securitization
program  which are included in the "Sale of  Receivables"  line in the cash flow
statement.  As part of the  Management  Services  sale, the Company also sold to
Aramark its headquarters facilities located in Downers Grove, Illinois.

Also on October 3, 2001, the Company's  Board of Directors  approved the exit of
certain  non-strategic and unprofitable  businesses  including TruGreen LandCare
Construction  and  Certified  Systems  Inc.,  as well  as  certain  other  small
operations.   The   Company   expects  to  record  a   non-recurring   after-tax
restructuring  charge in the fourth quarter of 2001 in the range of $300 million
to  $365  million,   related  primarily  to  goodwill  and  asset   impairments.
Approximately  $45  million of the charge is  expected  to result in future cash
payments  for  items  such  as  severance,  lease  termination  costs  and  loss
contracts. The Company expects to complete its exit from these businesses during
the first half of 2002. See additional  discussion of the  Restructuring  in the
Management Discussion and Analysis section.

On October 30, 2001, the Company closed the sale of certain  subsidiaries of its
European pest control and property  services  operations  to Nordic  Capital for
$101  million,  consisting  of $94  million  in cash and $7  million  in  seller
financing.   The  net  impact  of  this  transaction  is  not  material  to  the
consolidated statements of income. The Company continues to provide pest control
services in the United Kingdom and Ireland.

As a result of the Restructuring,  the Company anticipates  dilution of $.01 per
share in the fourth  quarter of 2001 under current  accounting  standards and of
$.06 per share in 2002,  following the adoption of SFAS 142 ("Goodwill and Other
Intangible  Assets").  In  addition,  the Company  expects that the earnings per
share equivalent of amortization expense eliminated under SFAS 142 would be $.16
in 2002.

NOTE 3: The consolidated financial statements included herein have been prepared
by the  Company  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  However, the Company believes that the disclosures are adequate to
make the  information  presented  not  misleading.  It is  suggested  that these
consolidated  financial  statements be read in conjunction with the consolidated
financial  statements  and the notes thereto  included in the  Company's  latest
Annual  Report to  Shareholders  and the  Annual  Report to the  Securities  and
Exchange  Commission  on Form 10-K for the year


                                       5
<PAGE>

ended  December  31,  2000.  In the  opinion  of the  Company,  all  adjustments
necessary to present fairly the financial position of The ServiceMaster  Company
as of September  30, 2001 and December 31, 2000,  and the results of  operations
for the three and nine month periods ended  September 30, 2001 and 2000, and the
cash  flows for the nine  months  ended  September  30,  2001 and 2000 have been
included.  The preparation of the financial  statements  requires  management to
make  certain  estimates  and  assumptions  required  under  generally  accepted
accounting  principles which may differ from the actual results.  The results of
operations for any interim period are not necessarily  indicative of the results
which might be obtained for a full year.

NOTE 4: In December 1999,  the Staff of the  Securities and Exchange  Commission
issued Staff Accounting  Bulletin (SAB) No. 101,  "Revenue  Recognition,"  which
provides   additional   guidance  in  applying  generally  accepted   accounting
principles  for revenue  recognition  in  financial  statements.  The  Company's
interpretation  of the  requirements  of SAB No. 101  resulted in changes to the
Company's  accounting  policies for revenue  recognition on sales of its termite
baiting  contracts.  These  changes were adopted in the fourth  quarter of 2000,
however,  as required by SAB No. 101, the impact of adoption  was  retroactively
recorded as of January 1, 2000 which  required the third  quarter and nine month
2000 financial information to be restated to incorporate this accounting change.

NOTE 5: In June 2001, the Financial Accounting Standards Board issued Statements
of Financial  Accounting  Standards No. 141, "Business  Combinations" (SFAS 141)
and No.  142,  "Goodwill  and Other  Intangible  Assets"  (SFAS  142).  SFAS 141
requires  all  business  combinations  initiated  after  June  30,  2001,  to be
accounted for using the purchase method. SFAS 142 requires that for fiscal years
beginning after December 31, 2001 existing goodwill will no longer be subject to
amortization.  Rather goodwill will be subject to at least an annual  assessment
for  impairment  by applying a  fair-value-based  test.  The Company has not yet
concluded  its  impairment  assessments  nor has it  determined  the  effect  of
applying the impairment  provisions of SFAS 142. Goodwill  amortization  expense
which would be eliminated under SFAS 142 was $.04 per diluted share for both the
three month periods ended September 30, 2001 and 2000 and $.12 per diluted share
for both the nine month periods ended September 30, 2001 and 2000. For 2002, the
amortization  expense that would be eliminated under SFAS 142 is estimated to be
$.16 per diluted share.

NOTE 6: Basic earnings per share from continuing operations includes no dilution
from  options,  debentures  or other  financial  instruments  and is computed by
dividing income available to common  stockholders by the weighted average number
of shares  outstanding.  Diluted  earnings per share from continuing  operations
reflects  the  potential  dilution  of  convertible  securities  and  options to
purchase common stock. The following chart reconciles both the numerator and the
denominator  of  the  basic  earnings  per  share  from  continuing   operations
computation to the numerator and  denominator of the diluted  earnings per share
from continuing operations computation.



                                      6
<PAGE>


(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>

                                                      Three Months                          Three Months
                                                Ended September 30, 2001              Ended September 30, 2000
                                            --------------------------------       -------------------------------

                                              INCOME       SHARES      EPS           INCOME      SHARES      EPS
                                             --------     --------    -----         --------    --------    -----

<S>                                            <C>         <C>        <C>           <C>          <C>         <C>
 Basic earnings per share,
    from continuing operations                 $35,520     298,925    $0.12          $41,727     301,594     $0.14
                                                                     ========                              ========

 Effect of dilutive securities, net of tax:
    Options                                          -       5,399                          -      1,769
    Convertible securities                       1,195       8,200                          -          -
                                             ----------   ---------                 ----------  ---------

 Diluted earnings per share
     from continuing operations               $36,715     312,524     $0.12          $41,727     303,363     $0.14
                                             ==========   =========  ========       ==========  =========  ========

</TABLE>


<TABLE>





(IN THOUSANDS, EXCEPT PER SHARE DATA)                        Nine Months                            Nine Months
                                                      Ended September 30, 2001              Ended September 30, 2000
                                                 --------------------------------       -------------------------------

                                                  INCOME       SHARES      EPS           INCOME      SHARES      EPS
                                                 --------     --------    -----         --------    --------    -----

<S>                                                <C>        <C>         <C>           <C>          <C>        <C>
 Basic earnings per share,
    from continuing operations                     $92,245    298,425     $0.31         $125,214     303,876    $0.41
                                                                         ========                              ========

 Effect of dilutive securities, net of tax:
    Options                                             -       4,419                          -       3,441
     Convertible securities                          3,579      8,200                          -           -
                                                 ----------   ---------                 ----------  ---------

 Diluted earnings per share
     from continuing operations                    $95,824     311,044    $0.31          $125,214    307,317    $0.41
                                                 ==========   =========  ========       ==========  =========  ========

</TABLE>

NOTE 7: In the Consolidated  Statements of Cash Flows, the caption Cash and Cash
Equivalents includes investments in short-term,  highly-liquid securities having
a maturity of three  months or less.  Supplemental  information  relating to the
Consolidated  Statements  of Cash Flows for the nine months ended  September 30,
2001 and 2000 is presented in the following  table. Tax payments in 2001 include
a $21 million tax refund related to tax  over-payments in 2000,  compared to $39
million of tax refunds  received last year. The decrease in tax payments in 2001
is primarily  due to lower levels of taxable  income and the timing of estimated
tax  payments  in 2001.  On January 2, 2001,  the Company  acquired  the largest
Terminix franchise,  Allied Bruce Terminix Companies. The total consideration of
$125 million  consisted of a note of $25 million and a minority  equity interest
in  the  Terminix   subsidiary,   which  is  exchangeable   into  eight  million
ServiceMaster  common  shares.  The  non-cash  transaction  is  presented in the
consolidated statements of cash flows in the "Business acquisitions" line offset
by an equal amount in the "Proceeds from business sales and minority  interests"
line.

                                                          (IN  THOUSANDS)
                                                           2001        2000
                                                        ---------   ---------
CASH  PAID  OR  (RECEIVED) FOR:
Interest expense......................................  $ 106,645   $ 108,220
Interest and dividend  income.........................  $ (6,659)   $  (7,647)
Income taxes..........................................  $ (7,277)   $   9,836


NOTE 8: Total  comprehensive  income was $41.1 million and $45.4 million for the
three months ended September 30, 2001 and 2000, respectively, and $109.8 million
and $158.2  million  for the nine  months  ended  September  30,  2001 and 2000,
respectively.  Total comprehensive income includes primarily net income, changes
in  unrealized  gains  and  losses  on  marketable  securities  and  translation
balances.

NOTE 9: At the end of the first  quarter of 2001,  the Company  entered  into an
agreement to sell, on a revolving basis, certain of its accounts receivable to a
wholly-owned,  bankruptcy-remote  subsidiary,  ServiceMaster Funding Company LLC
which entered into an agreement to transfer,  on a revolving basis, an undivided
percentage  ownership  interest in a pool of accounts  receivable  to  unrelated
third party purchasers.  ServiceMaster  Funding Company LLC retains an undivided
percentage  interest in the pool of accounts  receivable and bad debt losses for
the entire pool are allocated first to this retained  interest.  Amounts sold to
the purchasers under this agreement  include certain of the accounts  receivable
from the Company's  TruGreen,  Terminix and Management  Services  segments.  The
agreement is a 364-day facility renewable at the option of the purchasers.

Through September 30, 2001,  $1.424 billion of net accounts  receivable had been
sold to ServiceMaster Funding Company LLC.  ServiceMaster Funding Company LLC in
turn sold an undivided interest to Falcon Asset Securitization Corporation under
this  agreement.  Approximately  $1.258 billion of these  receivables  have been
collected.  The  amount of the  retained  interest  in the  receivables  was $41
million as of September 30, 2001 and is classified as accounts receivable in the
Consolidated  Statements  of  Financial  Position.  The  $92.5  million  of cash
proceeds relating to outstanding  receivables sold under this agreement was used
to pay down bank revolving credit debt.



                                    7
<PAGE>

The retained interest in the accounts receivable sold are valued at the carrying
amount of the retained  accounts  receivable  net of applicable  loss  reserves,
which approximates fair value. Management monitors the change in the outstanding
retained  interest and makes  adjustments to its carrying amount based on actual
and projected  losses.  Any changes in interest  rates would only have a minimal
impact on the value of the residual interest due to the short-term nature of the
receivables.

The Company, as agent for the purchaser,  retains servicing responsibilities for
the sold receivables. The fees received by the Company for these services during
the quarter and nine months ended September 30, 2001, were at fair market value,
therefore,  no related assets or liabilities have been recorded. The loss on the
Company's  sale of  receivables  totaled  $1.0  million for the quarter and $2.8
million  for the  nine  months  ended  September  30,  2001 and is  included  in
"Minority  interest  and  other  expense  (income),  net"  in  the  Consolidated
Statements of Income.

In  October  2001,  the  Company's   Management   Services  segment  repurchased
approximately  $70 million of net receivables  previously sold to  ServiceMaster
Funding Company LLC and ServiceMaster Funding LLC repurchased  approximately $40
million of receivables from Falcon Asset Securitization Corporation.

NOTE 10: The Company has a bank revolving  credit  facility which expires April,
2002. Because the facility is scheduled to mature within the next twelve months,
outstanding  amounts  under the  facility  as of  September  30,  2001 have been
classified  as current  debt  maturities.  The  Company  expects to enter into a
replacement  facility in an amount that is expected to meet its revolving credit
facility needs prior to the maturity of the existing facility.

NOTE 11: In conjunction with the pending sale of Management Services to Aramark,
on November 5, 2001,  the Company  repaid its $70 million 6.65% senior notes due
January  31,  2004.  In  connection  with  the  repayment,  the  Company  paid a
make-whole  premium of  approximately  $4.2 million that will be recorded in the
fourth quarter as an extraordinary loss on the early extinguishment of debt.

NOTE 12: The continuing  business of the Company is primarily  conducted through
three  operating  segments:   TruGreen,   Terminix,  and  Home  Maintenance  and
Improvement.  In accordance with Statement of Financial Accounting Standards No.
131 (SFAS 131), the Company's  reportable  segments are strategic business units
that offer different  services.  The TruGreen segment  provides  residential and
commercial lawn care and landscaping  services through the TruGreen ChemLawn and
TruGreen  LandCare  companies.  As a result of the decision to exit the LandCare
Construction  business,  the results of these operations are now included in the
Other Operations segment. The Terminix segment provides termite and pest control
services to residential and commercial U.S. customers.  The Home Maintenance and
Improvement  segment  includes  American  Residential  Services,  American  Home
Shield,  ServiceMaster  Clean and Merry Maids.  This segment  provides  heating,
ventilation and air conditioning,  plumbing,  disaster  restoration and cleaning
services to residential  and commercial  customers as well as home warranties to
consumers.

The Other Operations  segment includes entities that are managed separately from
the three major units and aggregated together in accordance with SFAS 131 due to
their size, developmental nature or as a result of a decision to discontinue the
underlying  business.  This segment includes  ServiceMaster  Home Service Center
(formerly WeServeHomes.com),  a joint venture initiative that provides customers
with the  ability to purchase  all of the  Company's  services  through a single
point of contact;  the  Company's  international  operations  which  include the
retained  Terminix  operations  in the  United  Kingdom  and  Ireland;  and  the
Company's headquarters  operations.  This segment also includes certain non-core
businesses that the Company is exiting or has sold including  TruGreen  LandCare
Construction;  Certified  Systems  Inc.;  and certain  European pest control and
property services operations. Segment information as of and for the three months
and nine months ended  September 30, 2001 and 2000 is presented on the following
page.



                                       8
<PAGE>

<TABLE>


(IN THOUSANDS)                                      THREE MONTHS            THREE MONTHS        NINE MONTHS           NINE MONTHS
                                                   ENDED SEPTEMBER        ENDED SEPTEMBER     ENDED SEPTEMBER       ENDED SEPTEMBER
                                                         30,                    30,                 30,                    30,
                                                        2001                   2000                 2001                  2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>                    <C>                   <C>
OPERATING REVENUE:
TruGreen                                            $  415,810            $   414,844            $1,078,603            $1,068,878
Terminix                                               212,080                190,848               634,071               555,844
Home Maintenance
    and Improvement                                    350,238                332,751               994,471               906,700
Other Operations                                       150,960                175,773               446,384               597,292
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE                             $1,129,088            $ 1,114,216            $3,153,529            $3,128,714
----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME:
TruGreen                                            $   51,794            $    59,933             $ 125,835             $ 145,488
Terminix                                                21,195                 19,056                81,224                70,138
Home Maintenance
    and Improvement                                     30,411                 29,005                83,348                78,579
Other Operations                                       (14,377)               (10,172)              (42,224)                 (504)
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME                              $   89,023             $   97,822             $ 248,183             $ 293,701
----------------------------------------------------------------------------------------------------------------------------------
CAPITAL EMPLOYED:
TruGreen                                            $1,122,586             $1,211,064
Terminix                                               578,793                526,912
Home Maintenance
    and Improvement                                    668,048                635,368
Other Operations &
    Discontinued Segment                               538,286                727,643
---------------------------------------------------------------------------------------
TOTAL CAPITAL EMPLOYED                              $2,907,713             $3,100,987
---------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS:
TruGreen                                            $1,205,695             $1,310,573
Terminix                                               781,869                705,406
Home Maintenance
    and Improvement                                  1,041,620                983,298
Other Operations &
    Discontinued Segment                               851,402                925,505
---------------------------------------------------------------------------------------
TOTAL IDENTIFIABLE ASSETS                           $3,880,586             $3,924,782
---------------------------------------------------------------------------------------

</TABLE>


NOTE 13: In  August  2001,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial  Accounting  Standards  No.  144,  "Accounting  for the
Impairment  or Disposal of Long-Lived  Assets"  (SFAS 144) which amends  certain
requirements  of  the  previously  issued  pronouncement  on  asset  impairment,
Statement of Financial  Accounting  Standards  No. 121. The primary  impact this
statement  may have on the Company is that SFAS 144 expands the  definition of a
discontinued  operation as  previously  defined by Accounting  Principles  Board
Opinion No. 30. As such, in connection with its portfolio review,  management is
evaluating the impact this statement will have on its planned dispositions.





                                       9
<PAGE>



                       MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS OF THE COMPANY'S PORTFOLIO REVIEW AND STRATEGIC ACTIONS

PORTFOLIO REVIEW

On  October 3,  2001,  the  Company's  Board of  Directors  approved a series of
strategic  actions  (the  "Restructuring")  which  were  the  culmination  of an
extensive portfolio review process that was initiated in the first quarter.  The
goal of the  portfolio  review was to increase  shareholder  value by creating a
focused  and  aligned  company  that  provides  the  greatest  return and growth
potential.  The Company's  Board of Directors  approved an agreement to sell the
Management Services business to Aramark Corporation  (Aramark) for $800 million,
which is expected to result in net after-tax cash proceeds of approximately $600
million.  The  Management  Services  business  provides a variety of  supportive
management  services to  institutional  healthcare,  education,  and  commercial
facilities.  The  all-cash  transaction  is  expected to close by year end after
obtaining  regulatory  clearance.  The  Company  expects to report an  after-tax
accounting  gain of  approximately  $385 million from this sale.  As part of the
sale of  Management  Services,  the  Company  also agreed to sell to Aramark its
headquarters facilities located in Downers Grove, Illinois.

Also on October 3, 2001, the Company's  Board of Directors  approved the exit of
certain  non-strategic and unprofitable  businesses  including TruGreen LandCare
Construction  and Certified  Systems Inc.  (CSI), as well as certain other small
operations.  The Company expects to record a non-recurring  after-tax  charge in
the fourth quarter of 2001 in the range of $300 million to $365 million, related
primarily to goodwill and asset impairments.

The Company expects to complete its exit from these businesses  during the first
half of 2002.  Approximately  80  percent  of the total  charge  relates  to the
wind-down of the TruGreen LandCare Construction operations. The Company has sold
certain TruGreen LandCare Construction  operations to Environmental  Industries,
Inc.  (EII) and has  entered  into an  agreement  with EII to manage the current
backlog of TruGreen LandCare Construction  contracts.  In addition,  relating to
the discontinuance of CSI (the Company's  professional  employer  organization),
the Company has sold all of its customer  contracts to AMS Staff Leasing,  N.A.,
Inc. and is in the process of winding-down CSI's remaining operations.

Approximately  $45  million of the charge is  expected  to result in future cash
payments  for  items  such  as  severance,  lease  termination  costs  and  loss
contracts. The remaining amount of the charge is expected to consist of goodwill
and  asset  impairments.  Throughout  the  fourth  quarter,  management  will be
completing  its  review  and  assessment  of the  future  cash  flows  of  these
businesses. Specifically, the Company's measure for goodwill impairment utilizes
a discounted cash flow methodology  whereby the present value of future expected
cash flows of a business is compared to its book value.  The  impairment  charge
estimates  the excess of the book value over the present  value of expected cash
flows of certain businesses.  Management also believes that the decision to exit
the  businesses  will impair its ability to receive the value  currently  on the
books for certain  assets  including  accounts  receivable,  inventory and fixed
assets.

On October 30, 2001, the Company closed the sale of certain  subsidiaries of its
European  pest  control  and  property  services  operations  for $101  million,
consisting  of $94 million in cash and $7 million in seller  financing.  The net
impact of this  transaction  is not material to the  consolidated  statements of
income.  The Company  continues to provide  pest control  services in the United
Kingdom and Ireland.

The net cash proceeds from the  Restructuring  (which  includes all of the above
items) is estimated to be  approximately  $648 million.  These net cash proceeds
will be used in the near term to reduce outstanding debt.

As a result of the Restructuring,  the Company anticipates  dilution in earnings
per  share of $.01 for the  fourth  quarter  of 2001  under  current  accounting
standards related to goodwill amortization. Earnings per share dilution for 2002
with the  adoption  of SFAS 142  ("Goodwill  and Other  Intangible  Assets")  is
estimated  to be $.06.  In addition,  the Company  expects that the



                                       10
<PAGE>


earnings per share equivalent of amortization  expense eliminated under SFAS 142
would be $.16 in 2002.

The  Restructuring  reflects a major  realignment in the Company's  strategy and
goals.  Management  believes  that these  changes  will result in a more focused
enterprise with  significantly  improved  prospects for long-term top and bottom
line growth and improving return on invested  capital.  These actions  recognize
that the Company is in a unique  position to serve the  residential  consumer in
U.S.  markets.  The sale of Management  Services  significantly  strengthens the
Company's  financial  flexibility,  providing  greater latitude to invest in its
strong brands in growing consumer markets.

The following table provides summarized financial  information for the three and
nine month  periods ended  September 30, 2001 on a pro forma basis  assuming the
Restructuring had occurred at the beginning of the year.

<TABLE>



    (IN THOUSANDS, EXCEPT PER SHARE DATA)                  Three Months Ended
                                                            September 30, 2001
                                         -----------------------------------------------------
                                                         Management
                                           Reported      Services       Other (1)      Pro forma
                                         -------------- -----------   -------------   -----------

    <S>                                    <C>            <C>          <C>              <C>
    Revenue                                $ 1,129,088    Note (2)     $(129,274)       $999,814


    Operating Income
                                                89,023    Note (2)         1,052          90,075

    Non-operating Expense  (primarily
    interest)                                   25,787    Note (2)        (9,220)         16,567

    Net Income
                                                46,123    (10,603)         6,472          41,992

    Diluted Earnings Per Share
                                                  0.15      (0.03)          0.02            0.14

    AMORTIZATION EXPENSE AFTER-TAX (3)          12,435          -         (1,750)         10,685

    EARNINGS PER SHARE EQUIVALENT                 0.04          -          (0.01)           0.03

    Prior Year Diluted Earnings Per
    Share                                         0.17      (0.03)          0.01            0.15

</TABLE>

<TABLE>


                                                          Nine Months Ended
                                                          September 30, 2001
                                         -----------------------------------------------------
                                                        Management
                                           Reported      Services    Other (1)     Pro forma
                                         -------------- ----------- -------------  -----------

    <S>                                    <C>            <C>         <C>           <C>
    Revenue                                $ 3,153,529    Note (2)    $ (385,726)   $2,767,803


    Operating Income                           248,183    Note (2)         8,749       256,932


    Non-operating Expense (primarily
    interest)                                   85,987    Note (2)       (27,660)       58,327

    Net Income                                 126,063    (27,815)        22,789       121,037


    Diluted Earnings Per Share                    0.42      (0.09)          0.07          0.40


    AMORTIZATION EXPENSE AFTER-TAX (3)          37,062          -         (5,240)       31,822

    EARNINGS PER SHARE EQUIVALENT                 0.12          -          (0.02)         0.10

    Prior Year Diluted  Earnings Per
    Share                                         0.50      (0.09)          0.03          0.44


</TABLE>


(1)  "Other" includes operations that are being sold or discontinued and
     interest on the proceeds from the sale of the Management Services segment
     that are used to pay down debt balances.

(2)  Management Services' revenue and operating income have been eliminated from
     the reported income statement.

(3)  After-tax amortization expense represents the increase in earnings per
     share expected by the adoption of SFAS 142.


STRATEGIC ACTIONS

In the first  quarter of 2001,  the  Company  announced  that it will  implement
operational  imperatives  to focus on ways to improve  the  quality of  service,
customer retention and employee loyalty.  The Company has begun implementing Six
Sigma, with a broadening  rollout of the program expected to occur over a twelve
to twenty-four month period. Six Sigma is a continuous  improvement  methodology
that drives improved business  results.  The Company has identified team leaders
across  the  Company  and in  November  hired a senior  executive  who will have
overall  responsibility  for the  implementation  of Six Sigma.  The Company has
engaged a


                                       11
<PAGE>

recognized  leader in customer and  employee  data  collection  to assist in its
effort in measuring and analyzing customer and employee satisfaction.


RESULTS OF OPERATIONS

THIRD QUARTER 2001 COMPARED TO THIRD QUARTER 2000

The events of September  11th and the already  weakened  economy  contributed to
earnings pressure during the quarter by bringing caution and changes in consumer
buying behavior. Although the potential effects in ServiceMaster's business will
primarily be based on longer-term economic trends, some are beginning to be seen
including   customers  deferring  the  replacement  of  HVAC  units,  a  reduced
propensity of landscape and lawn care  customers to purchase  enhancements,  and
increased  skips  in  maid  service.  Although  certain  areas  of  the  Company
experienced  heavily  dampened  sales and  renewal  activity in  September,  the
Company is already  seeing much of the  activity  come back.  The home  services
market has proven to be very  resilient  and  management  believes that families
view home services  less  discretionary  than ever before.  The stability of the
Company's recurring base of business results in more pressure on new sales in an
economic downtown,  but revenue overall,  is not as dramatically  affected as in
many other sectors of economy.

Revenue for the third quarter totaled $1.13 billion, one percent above the prior
year.  Revenue growth from  businesses  that the Company intends to retain was 4
percent  for the  quarter.  Operating  income  decreased  nine  percent to $89.0
million, with margins decreasing to 7.9 percent from 8.8 percent. The decline in
operating income reflects growth in operating  earnings in the Terminix and Home
Maintenance  and  Improvement  segments which were offset  primarily by earnings
pressure in the  residential  lawn care and  commercial  landscape  construction
business. Diluted earnings per share declined to $.15 from $.17 for the quarter,
and net income decreased to $46.1 million from $50.8 million.

The TruGreen segment includes lawn care operations performed under the TruGreen
ChemLawn brand name and landscaping services provided under the TruGreen
LandCare brand name. This segment's results for both 2001 and 2000 have been
adjusted to exclude the TruGreen LandCare Construction business. The Company has
announced that it is exiting this business and its financial results are now
reported in the Other Operations segment. The TruGreen segment reported revenue
of $416 million up slightly from $415 million in the prior year. Operating
income decreased 14 percent to $52 million from $60 million last year. Revenue
in the lawn care business was slightly below the prior year reflecting a
decrease in customer counts, partially offset by the impact of price increases
and growth in ancillary (e.g., tree and shrub) services. The lawn care
operations experienced a decline in operating margins, primarily due to
increased labor costs. Revenue in the landscape maintenance operations increased
slightly while operating margins declined modestly. With the wind-down of the
construction operations, management is focused on growing margins in the
maintenance business through the implementation of plant and material purchasing
programs, improved labor productivity and more effective leveraging of
overheads. Capital employed decreased 7 percent primarily reflecting improved
working capital management as well as the sale of a portion of this segment's
accounts receivable.

The Terminix  segment,  which  includes  the  domestic  termite and pest control
services,  reported an 11 percent  increase in revenue to $212 million from $191
million in 2000 and  operating  income  growth of 11 percent to $21 million from
$19 million last year.  This strong growth  reflects the continued  migration of
the customer base to termite baiting systems, improved branch efficiencies,  and
the impact of price  increases.  The results for the quarter  benefited from the
impact  of  the  acquisition  of  the  Allied  Bruce  Terminix  Companies.  This
acquisition  was completed in January 2001 and continues to exceed  management's
expectations.  On October  3, 2001 the  Company  completed  the  acquisition  of
certain assets of Sears Termite and Pest Control,  Inc. The  integration of this
business is meeting management's  expectations and Terminix is experiencing good
lead flow  from this base of new  customers.  Overall,  the  segment  has seen a
strong  improvement in customer  retention (in both termite and pest) which is a
direct result of customer  service and  satisfaction  initiatives that have been
taken at the branch level. Margins for


                                       12
<PAGE>


the quarter  were  comparable  to last year,  reflecting  improved  branch-level
margins  offset by a higher level of incentive  expense than last year.  Capital
employed  increased 10 percent primarily due to acquisitions,  offset in part by
higher prepaid contracts and improved working capital management.

The Home Maintenance and Improvement segment includes heating,  ventilation, air
conditioning   (HVAC),   and  plumbing  services  provided  under  the  American
Residential  Services (ARS),  Rescue Rooter,  and AMS (for commercial  accounts)
brand names;  home systems and  appliance  warranty  contracts  offered  through
American Home Shield;  and disaster  restoration and cleaning  services provided
through the  franchised  operations,  ServiceMaster  Clean and Merry Maids.  The
segment achieved revenue of $350 million,  an increase of five percent from $333
million  last  year.  The  combined  ARS and  AMS  operations  reported  revenue
consistent  with last year,  reflecting  reduced  service  call  volume for both
plumbing  and  HVAC  services,   partially  offset  by  acquisitions  and  price
increases.  This call volume  decline  appears to be  occurring  throughout  the
industry as a result of the softening of the economy and cooler weather compared
to last year. Of all the business in the  ServiceMaster  portfolio,  ARS has the
largest mix of  non-recurring  revenue and,  consequently,  appears to have been
most  impacted by the condition of the economy.  American  Home Shield  reported
double-digit increases in all major distribution channels which will continue to
support  revenue  growth  in  the  future  as  revenue  on  these  contracts  is
recognized. The franchise operations achieved double-digit revenue growth driven
by strong increases in the disaster  restoration business of ServiceMaster Clean
and growth in Merry Maids' branch operations.  Operating income for this segment
increased five percent to $30 million compared to $29 million in the prior year,
while operating  income margins were  consistent  with last year.  American Home
Shield reported  improved margins  reflecting a reduced level of claim activity.
Margins in the combined ARS operations were  negatively  impacted by the reduced
call  volume  experienced  during  the  quarter.  Management  of ARS  has  taken
aggressive  action to reduce the cost  structure  in the  business,  both at the
overhead and technician levels. The franchise operations  experienced  increased
operating  efficiencies.  Capital  employed  increased  five percent,  primarily
reflecting acquisitions at ARS.

Other   Operations   consists  of  the   Company's   international   operations;
ServiceMaster  Home Service Center  (formerly  WeServeHomes.com);  the Company's
headquarters  operations;  and certain non-core  businesses that the Company has
sold,  discontinued,  or is exiting including TruGreen LandCare Construction and
Certified  Systems Inc.  Revenues and capital  employed in the Other  Operations
segment declined,  reflecting the impact of sold or discontinued operations. The
decrease in operating income primarily  reflects lower earnings in the landscape
construction  business and  increased  expenses  related to  ServiceMaster  Home
Service  Center.  Throughout  2000 and until May 2001,  the operating  losses of
ServiceMaster  Home Service Center had been allocated to the Company's  minority
partner in ServiceMaster Home Service Center,  Kleiner Perkins,  and were offset
through  minority  interest income below the operating income line. In May 2001,
the  cumulative  operating  losses of  ServiceMaster  Home Service  Center began
exceeding the funding  provided by Kleiner Perkins.  As a result,  the operating
losses since May have been  absorbed in the  accompanying  financial  statements
without an offset at the minority interest income line.

Results from discontinued  operations reflect the Company's  Management Services
segment.  These  operations  reported  net income of $11 million for the quarter
compared to $9 million last year.  Diluted earnings per share from  discontinued
operations totaled $.03, consistent with last year.

Cost of services  rendered and products sold increased  slightly for the quarter
and  decreased  as a  percentage  of revenue  to 71.0  percent in 2001 from 71.6
percent in 2000. Selling and administrative  expenses increased nine percent and
increased as a percentage of revenue to 21.1 percent from 19.6 percent in 2000.

Interest  expense  decreased from the prior year,  primarily due to reduced debt
levels  from  improved  cash  flows  and the sale of  certain  of the  Company's
accounts receivable. Interest income decreased primarily due to a lower level of
investment  gains  realized on the American  Home Shield  investment  portfolio.
Minority  interest  and other  expense/income  reflected $5


                                       13
<PAGE>

million  more  expense than last year due to:  lower  minority  interest  income
related to the  ServiceMaster  Home Service Center  venture,  minority  interest
expense related to the equity  security issued in the Allied Bruce  acquisition,
and the loss from the Company's sale of receivables.

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO SEPTEMBER 30, 2000


Revenue  for the nine months  increased  one  percent to $3.2  billion.  Revenue
growth from  businesses  that the Company  intends to retain was six percent for
the nine months.  Operating income decreased 15 percent to $248.2 million, while
margins  decreased  to 7.9 percent  from 9.4  percent.  The decline in operating
income for the nine  months  reflects  strong  growth at the  Terminix  and Home
Maintenance and Improvement segments,  offset primarily by lower earnings in the
TruGreen and Other Operations segments.  Diluted earnings per share for the nine
months  declined from $.50 to $.42 and net income  decreased from $153.2 million
to $126.1  million.  The 2001  results  include a $.02 per share,  or $6 million
after-tax  extraordinary  gain recorded in the first quarter  resulting from the
repurchase   of  certain   ServiceMaster   corporate   bonds.   Excluding   this
extraordinary  item,  net  income and  diluted  earnings  per share were  $120.1
million and $.40, respectively.

The TruGreen segment reported revenue growth of one percent to $1.1 billion, and
operating  income of $126 million,  14 percent below last year.  Revenues in the
lawn care  business  increased  modestly  over the prior  year,  reflecting  the
realization  of price  increases  and growth in  ancillary  services,  partially
offset by a decrease in customer counts. The results of the lawn care operations
were  unfavorably  impacted early in the year by winter weather  conditions that
persisted  much  later in 2001  than in the prior  year,  resulting  in  reduced
production levels and lower margins from sub-optimal labor utilization and fixed
cost leverage. In addition, early season sales were below expectations resulting
in reduced  operating  margins during the production  season as a cost structure
was in place to support a higher level of demand.  Landscaping services revenues
increased  slightly  over the prior year  primarily  reflecting  an  increase in
ancillary services.  Operating margins in the landscaping  operations were lower
mainly due to increased sales,  marketing,  and administrative costs. Cash flows
in this segment  have been  strong,  primarily  reflecting  improved  receivable
collections  in  the  landscaping  business  and  a  higher  level  of  customer
prepayments.

The Terminix  segment reported a 14 percent increase in revenues to $634 million
from $556  million  in 2000 and  operating  income  growth of 16  percent to $81
million from $70 million last year. The growth at Terminix  reflects the benefit
of the Allied  Bruce  acquisition  as well as strong  growth in both new termite
contracts and termite renewals.  The operating margin  improvement  reflects the
continued  increased mix of higher margin termite renewals,  the impact of price
increases,   as  well  as  ongoing   productivity   improvements   and  overhead
efficiencies.  Cash flows  continue to be strong with a significant  improvement
over last year.

The Home Maintenance and Improvement  segment achieved revenues of $994 million,
an  increase  of 10  percent  from $907  million  last  year.  Operating  income
increased  six  percent to $83  million  compared  with $79 million in the prior
year.  The  combined  ARS and AMS  operations  achieved  solid  revenue  growth,
reflecting strength in the commercial operations, the impact of acquisitions, as
well as price  increases.  For the nine  months,  residential  plumbing and HVAC
services showed solid growth  reflecting  strong increases in the first quarter,
partially  offset by lower than expected demand in the second and third quarter,
primarily  reflecting  cooler  weather  conditions  and the  softening  economic
environment.   American  Home  Shield  reported   double-digit   revenue  growth
continuing  its  strong  growth  across  all major  distribution  channels.  The
franchise operations, ServiceMaster Clean and Merry Maids, achieved double-digit
growth,  reflecting strong growth in disaster restoration services,  the benefit
of successful marketing programs,  national account relationships,  and employee
retention  initiatives.  Operating margins declined from last year primarily due
to reduced  margins at ARS resulting from decreases in residential  service call
volume.

Revenues in the Other Operations segment declined  reflecting the impact of sold
or  discontinued  operations.  Operating  income  declined due to  significantly
reduced  profitability in the LandCare Construction  operations,  as well as the
impact of certain favorable  non-recurring  items last

                                       14
<PAGE>

year  (including a benefit  resulting from the  resolution of a foreign  license
agreement and a marketing  arrangement  that is no longer in place),  and higher
expenses this year in certain business  operations  including the  ServiceMaster
Home Service Center venture. As noted in the three-month  comparison,  beginning
in May 2001, the operating losses of  ServiceMaster  Home Service Center were no
longer   allocated  to  the  Company's   minority   partner,   Kleiner  Perkins.
Consequently,  the consolidated  results for the nine months ended September 30,
2001 include  operating  losses of  ServiceMaster  Home Service Center since May
without an offset at the minority interest income line.

The Company's discontinued operations, the Management Services segment, reported
net income and diluted earnings per share for the nine months of $28 million and
$.09, respectively, consistent with last year.

Cost of services  rendered and  products  sold  increased  slightly for the nine
months and  decreased  as a  percentage  of revenue to 72.0 percent in 2001 from
72.3 percent in 2000. Selling and  administrative  expenses increased 11 percent
and  increased as a  percentage  of revenue to 20.1 percent from 18.3 percent in
2000.

Interest  expense  decreased  from the prior year,  primarily  due to lower debt
levels reflecting strong cash flows and the use of funds received on the sale of
receivables to pay down bank debt.  Interest income decreased primarily due to a
lower level of investment gains realized on the American Home Shield  investment
portfolio. Minority interest and other expense/income reflected $12 million more
expense than last year due to: lower  minority  interest  income  related to the
ServiceMaster Home Service Center venture,  minority interest expense related to
the equity  security  issued in the Allied Bruce  acquisition,  and the discount
from the Company's sale of receivables.

FINANCIAL POSITION

Net cash provided from operations for the nine months  increased $148 million to
$337 million  which  included the sale of $92.5  million of accounts  receivable
through the Company's  securitization program and a significant reduction in the
usage of working  capital.  Cash from operations  excluding the benefit from the
sale of  receivables  increased  29  percent to $245  million,  which is two and
one-half  times  reported  net  income.  This  result was due to strong  working
capital management,  reflecting improved receivable collections and reduced days
sales  outstanding  in  most  businesses,  but  especially  from  the  landscape
operations, and growth in prepaid contracts written at the Terminix and American
Home Shield companies.  Management believes that funds generated from operations
and other  existing  resources  will continue to be adequate to satisfy  ongoing
working capital needs of the Company.

Debt levels decreased  primarily  reflecting  strong cash flows and the proceeds
from the accounts receivable  securitization financing program. During the first
nine months of 2001, the Company  reduced its total debt by over $200 million to
$1.6 billion, the lowest level since March 1999. As a result of the planned sale
of Management  Services,  the Company anticipates further reductions in the debt
levels and projects  approximately $1.0 billion of outstanding debt at year end.
In  conjunction  with the pending  sale of  Management  Services to Aramark,  on
November 5, 2001,  the Company  repaid its $70 million  6.65%  senior  notes due
January  31,  2004.  In  connection  with  the  repayment,  the  Company  paid a
make-whole  premium of  approximately  $4.2 million that will be recorded in the
fourth quarter as an extraordinary loss on the early extinguishment of debt. The
Company is party to a number of long-term  debt  agreements  which require it to
maintain compliance with certain financial covenants,  including  limitations on
indebtedness,  restricted payments, fixed charge coverage ratios, and net worth.
The  Company  is  in  compliance  with  the  covenants  related  to  these  debt
agreements.

The Company has a bank  revolving  credit  facility which expires in April 2002.
The  outstanding  amounts  under the facility as of September 30, 2001 have been
classified  as current  debt  maturities.  The  Company  expects to enter into a
replacement  facility in an amount that is expected to meet its revolving credit
facility needs prior to the maturity of the existing facility.  The Company also
has $550 million of availability under an S-3 registration  statement filed with
the  Securities  and Exchange  Commission.

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Accounts receivable increased from year-end levels,  reflecting general business
growth and increased  seasonal activity in the major segments,  partially offset
by the sale of  receivables  through the  securitization  financing  program and
improved   collections  and  days  sales   outstanding  at  several   companies.
Inventories  increased  over  year-end  levels as a result  of  normal  seasonal
build-ups in the lawn care operations.

Prepaids  and  other  assets  have  increased   from  year-end   reflecting  the
seasonality in the lawn care  operations  and the increased  volume of contracts
written at Terminix and American  Home Shield.  The lawn care  operations  defer
marketing  and other  costs  that are  incurred  earlier  in the  year,  but are
directly associated with revenues realized in subsequent quarters of the current
year.  These costs are then  amortized over the balance of the current lawn care
production  season,  as the related  revenues are recognized.  In addition,  the
Company capitalizes sales commission and other direct contract acquisition costs
relating  to  termite  baiting  and  pest  contracts  as well  as home  warranty
agreements.

Deferred   revenues  grew   significantly   reflecting   increases  in  customer
prepayments  for pest control  services and strong growth in warranty  contracts
written at American Home Shield.

Capital  expenditures  which include  recurring  capital  needs and  information
technology  projects are below prior year levels  reflecting  fewer  large-scale
technology  projects.  As part of the sale of the Management Services segment to
Aramark, the Company also agreed to sell to Aramark its headquarters  facilities
located  in  Downers  Grove,  Illinois.  The  Company  has no  material  capital
commitments at this time.

The  increase  in  the  minority  interest  liability   primarily  reflects  the
acquisition of the Allied Bruce Terminix  Companies,  in which the consideration
included an equity  interest in the Terminix  subsidiary  which is  exchangeable
into eight million ServiceMaster common shares.

In October 2001, the Company  purchased certain assets of Sears Termite and Pest
Control,   Inc.  The  integration  of  this  business  is  meeting  management's
expectations  with  the  conversion  of  the  financial  and  operating  systems
completed and baiting systems  installed in one-fourth of the homes.  Management
expects to complete the  installation on the entire base by year end, which will
be important  to ensuring  the  effective  management  of damage  claims in that
business.

In  February  2001,   Kleiner  Perkins,   the  Company's   minority  partner  in
ServiceMaster  Home  Service  Center  (formerly  WeServeHomes.com),  exercised a
warrant to purchase  additional  capital  stock for $5 million,  and the Company
purchased additional capital stock for $10 million. The Company currently has an
81 percent ownership  interest in ServiceMaster  Home Service Center and Kleiner
Perkins  has an 18  percent  interest.  Kleiner  Perkins  also has a warrant  to
purchase additional capital stock for $6.5 million.

Total shareholders' equity was $1.2 billion at September 30, 2001, approximately
the same level as year end, reflecting  earnings offset by cash dividends.  Cash
dividends paid directly to shareholders  totaled $89 million, or $.30 per share,
for the nine  months  ended  September  30,  2001.  In July  2000,  the  Company
announced  that its  Board of  Directors  authorized  $350  million  for a share
repurchase  program.  The Company  purchased  approximately  $136 million of its
shares in 2000 subsequent to the  authorization.  The Company has not undertaken
material  share  repurchases  in 2001.  Decisions  relating to any future  share
repurchases will take various factors into  consideration  such as the Company's
commitment  to  maintain  investment  grade  credit  ratings,  general  business
conditions, and other strategic investment opportunities.

THE COMPANY  NOTES THAT  STATEMENTS  THAT LOOK  FORWARD IN TIME,  WHICH  INCLUDE
EVERYTHING OTHER THAN HISTORICAL  INFORMATION,  INVOLVE RISKS AND  UNCERTAINTIES
THAT  AFFECT THE  COMPANY'S  RESULTS OF  OPERATIONS.  FACTORS  WHICH COULD CAUSE
ACTUAL  RESULTS  TO DIFFER  MATERIALLY  FROM  THOSE  EXPRESSED  OR  IMPLIED IN A
FORWARD-LOOKING   STATEMENT  INCLUDE  THE  FOLLOWING  (AMONG  OTHERS):   WEATHER
CONDITIONS ADVERSE TO CERTAIN OF THE COMPANY'S CONSUMER AND COMMERCIAL  SERVICES
BUSINESSES;  THE ENTRY OF ADDITIONAL COMPETITORS IN ANY OF THE MARKETS SERVED BY
THE  COMPANY;  LABOR  SHORTAGES;  UNEXPECTED  CHANGES IN  OPERATING  COSTS;  THE
CONDITION  OF THE U.S.  ECONOMY;  THE COST AND  LENGTH OF TIME  ASSOCIATED  WITH
INTEGRATING  OR WINDING DOWN  BUSINESSES  AND OTHER FACTORS  LISTED FROM TIME TO
TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.



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                                 PART II. OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

In the ordinary  course of  conducting  its business  activities,  ServiceMaster
becomes involved in judicial,  administrative  and regulatory  proceedings which
involve both private  parties and  governmental  authorities.  As of November 1,
2001, these proceedings  included general and commercial liability actions and a
small number of environmental proceedings.

     RAY D.  MARTIN V.  SERVICEMASTER.  In June 1996,  Ray D.  Martin,  a former
salesman employed by ServiceMaster  Management Services,  filed a lawsuit in the
State Court of Fulton County,  Georgia (Civ. Action File No.  96VS114677J).  The
complaint,  as originally filed,  contended that  ServiceMaster had not paid Mr.
Martin  the  full  amount  of  commission  due to him on a sale in  which he was
involved. In the course of the pre-trial proceedings,  the trial court entered a
default  judgment  against  ServiceMaster,  thereby leaving only the question of
damages  to be  considered  at the trial.  At trial in  September  1999,  a jury
awarded the plaintiff  compensatory damages and fees of approximately $1 million
and punitive  damages of $135 million.  In October 1999,  ServiceMaster  filed a
motion for judgment  notwithstanding  the verdict or, in the alternative,  for a
new trial.  On June 1, 2000 the trial court entered a new judgment in the amount
of $461,440 in compensatory damages and $45 million in punitive damages, as well
as amounts for  attorneys'  fees and  interest.  ServiceMaster  appealed and Mr.
Martin  cross-appealed.  The  appeals  have been  fully  briefed.  ServiceMaster
believes  that the award of $45 million in punitive  damages is not supported by
the facts of the case or by  applicable  state law and that the judgment will be
reversed by the court of appeals.  The court of appeals  must issue its decision
by the end of 2001.  Under Georgia law, a judgment  accrues interest at the rate
of 12% per annum.  ServiceMaster  continues to be unable to reasonably  estimate
the ultimate  outcome of this case, and  accordingly,  minimal  expense has been
recorded. If the existing judgment is sustained,  or if the original judgment is
reinstated (which is not anticipated by ServiceMaster),  then it would be likely
that  ServiceMaster's  results  of  operations  for a  particular  year  may  be
materially adversely affected. However,  ServiceMaster believes, based on advice
from legal counsel, that the ultimate outcome of this litigation is not expected
to have a material  adverse  effect on  ServiceMaster's  financial  condition or
results of operations.




ITEM 6(B):    REPORTS ON FORM 8-K

The  Company  did not file any  current  reports on Form 8-K during the  quarter
ended  September  30,  2001.  A report on Form 8-K was filed on October 5, 2001,
reporting  under "Item 5. Other  Events"  that the  Company had entered  into an
agreement to sell its  Management  Services  division and certain  other related
businesses to Aramark Corporation for $800 million.






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                                    SIGNATURE




Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date:  November 14, 2001


                  THE SERVICEMASTER COMPANY
                  (Registrant)

                  By:          /S/STEVEN C. PRESTON
                     --------------------------------------

                                             Steven C. Preston
                  Executive Vice President and Chief Financial Officer






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