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 March 31, 2002
                                                      --------

                 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)

2300 Warrenville Road, 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: 301,826,000 shares of common stock on May 7, 2002.








<PAGE>




                                TABLE OF CONTENTS

                                                                            Page
                                                                             NO.

THE SERVICEMASTER COMPANY (Registrant) -


PART I.  FINANCIAL INFORMATION

Consolidated Statements of Income for the three
 months ended March 31, 2002 and March 31, 2001                                2

Consolidated Statements of Financial Position
   as of March 31, 2002 and December 31, 2001                                  3

Consolidated Statements of Cash Flows for the three months
   ended March 31, 2002 and March 31, 2001                                     4

Notes to Consolidated Financial Statements                                     5

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


PART II.  OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K                                     15

Signature                                                                     16




                                        1


<PAGE>




                          PART I. FINANCIAL INFORMATION

                            THE SERVICEMASTER COMPANY
                        Consolidated Statements of Income
                      (In thousands, except per share data)

<TABLE>


                                                                              Three Months Ended
                                                                                     March 31,
                                                                                2002         2001
                                                                            -----------  -----------
<S>                                                                          <C>          <C>
Operating Revenue ........................................................   $ 747,282    $ 735,721

Operating Costs and Expenses:
Cost of services rendered and products sold ..............................     542,794      540,928
Selling and administrative expenses.......................................     134,936      117,697
Goodwill, trade name and other intangible amortization (1)................       2,536       17,566
                                                                             ---------    ---------
Total operating costs and expenses .......................................     680,266      676,191
                                                                             ---------    ---------

Operating Income .........................................................      67,016       59,530

Memo:  Operating Income excluding goodwill and trade name amortization (1)      67,016       74,642

Non-operating  Expense (Income):
Interest expense .........................................................      22,541       34,574
Interest and investment income ...........................................      (3,647)      (3,518)
Minority interest and other expense (income), net ........................       1,570       (1,774)
                                                                              ---------    ---------

Income from Continuing Operations before Income Taxes.....................      46,552       30,248
Provision for income taxes................................................      17,457       12,457
                                                                              ---------    ---------
Income from Continuing Operations before Extraordinary Gain...............      29,095       17,791


Memo:  Income from Continuing Operations before Extraordinary Gain and
     excluding goodwill and trade name amortization (1) ..................      29,095       28,091

Income from discontinued operations, net of income taxes (2) .............           -        5,433
Extraordinary gain, net of income taxes (3) ..............................           -        6,003
                                                                             ---------    ---------
Net Income ...............................................................   $  29,095    $  29,227
                                                                             =========    =========
Per Share:(4)
Basic and Diluted Earnings Per Share:
Income from continuing operations before extraordinary gain ..............   $     .10    $     .06

Memo:  Income from Continuing Operations before Extraordinary Gain
and excluding goodwill and trade name amortization (1)....................   $     .10    $     .09

Discontinued operations, net (2) .........................................           -          .02
Extraordinary gain (3) ...................................................           -          .02
                                                                             ---------    ---------
                                                                             $     .10    $     .10
                                                                             =========    =========

Dividends per share ......................................................   $     .10    $     .10
                                                                             =========    =========
</TABLE>

(1)  The Company adopted SFAS  142, "Goodwill  and  Other  Intangible   Assets",
which eliminates  the amortization of goodwill and intangible  assets with
indefinite  lives beginning in 2002.  Had the  provisions  of SFAS 142 been
applied  to 2001,  amortization expense would have been reduced by $15.1 million
($10.3 million, after-tax).

(2) In the fourth quarter of 2001, the Company's  Board of Directors  approved a
series of actions related to the strategic review of its portfolio of businesses
that commenced  earlier in the year. These actions included the sale in November
2001 of the Company's  Management  Services  business as well as the decision to
exit certain  non-strategic and  under-performing  businesses including TruGreen
LandCare  Construction  and  Certified  Systems,  Inc. as well as certain  other
operations. These operations are included in "Discontinued operations" in 2001.

(3) In the first quarter of 2001, the Company  purchased a portion of its public
debt securities and recognized an extraordinary gain on the early extinguishment
of debt.

(4) Basic earnings per share are calculated  based on 300,173 shares and 297,790
shares for the three months ended March 31, 2002 and 2001, respectively. Diluted
earnings per share are  calculated  based on 315,285 and 309,831  shares for the
three months ended March 31, 2002 and 2001,  respectively.  These shares include
the incremental  effect related to outstanding  options whose market price is in
excess  of the  exercise  price  as well as  shares  potentially  issuble  under
convertible  securities.  In computing diluted earnings per share, the after-tax
interest  expense related to convertible  debentures is added back to net income
in the numerator.



                 See Notes to Consolidated Financial Statements

                                      2

<PAGE>


<TABLE>


                            THE SERVICEMASTER COMPANY
                  Consolidated Statements of Financial Position
                                 (In thousands)
                                                                                      As of
                                                                             March 31,    December 31,
Assets                                                                         2002          2001
                                                                           ------------   -------------
<S>                                                                        <C>            <C>
Current Assets:
Cash and cash equivalents ..............................................   $   337,427    $   421,550
Marketable securities ..................................................        57,766         61,561
Receivables, less allowance of $27,925 and $27,951 respectively ........       362,075        366,284
Inventories ............................................................        80,052         71,336
Prepaid expenses and other assets ......................................       256,754        169,327
Deferred taxes .........................................................        62,520         60,600
                                                                           -----------    -----------
       Total Current Assets ............................................     1,156,594      1,150,658
                                                                           -----------    -----------
Property and Equipment:
   At cost .............................................................       472,318        473,651
   Less: accumulated depreciation ......................................       286,805        284,679
                                                                           -----------    -----------
     Net property and equipment ........................................       185,513        188,972
                                                                           -----------    -----------
Other Assets:
Intangible assets, primarily trade names and goodwill...................     2,171,720      2,167,723
Assets of discontinued operations ......................................        17,257         33,398
Notes receivable, long-term securities, and other assets ...............       135,644        133,988
                                                                           -----------    -----------
       Total Assets ....................................................   $ 3,666,728    $ 3,674,739
                                                                           ===========    ===========

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable .......................................................   $   124,659    $   123,800
Accrued liabilities:
   Payroll and related expenses ........................................        77,444         83,973
   Insurance and related expenses ......................................        41,675         40,019
   Income taxes payable ................................................        16,217         24,243
   Other ...............................................................       113,825        133,291
Deferred revenues ......................................................       442,200        373,916
Current portion of long-term debt ......................................        54,131         35,159
                                                                           -----------    -----------
       Total Current Liabilities .......................................       870,151        814,401
                                                                           -----------    -----------

Long-Term Debt .........................................................     1,039,394      1,105,518

Long-Term Liabilities:
     Deferred tax liability ............................................       263,103        263,000
     Liabilities of discontinued operations ............................        58,109         75,159
     Other long-term obligations .......................................        99,197         93,023
                                                                           -----------    -----------
        Total Long-Term Liabilities ....................................       420,409        431,182
                                                                           -----------    -----------

Minority Interest ......................................................       102,164        102,677

Commitments and Contingencies

Shareholders' Equity:
Common stock $0.01 par value, authorized 1 billion shares; issued
     and outstanding 301,578 and 300,531 shares, respectively ..........         3,016          3,005
Additional paid-in capital .............................................     1,044,385      1,037,969
Retained earnings ......................................................       336,925        337,232
Accumulated other comprehensive income .................................        (1,055)        (1,888)
Restricted stock .......................................................        (1,240)        (1,285)
Treasury stock .........................................................      (147,421)      (154,072)
                                                                           -----------    -----------
       Total Shareholders' Equity ......................................     1,234,610      1,220,961
                                                                           -----------    -----------
       Total Liabilities and Shareholders' Equity ......................   $ 3,666,728    $ 3,674,739
                                                                           ===========    ===========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                        3
<PAGE>



                            THE SERVICEMASTER COMPANY
                      Consolidated Statements of Cash Flows
                                 (In thousands)
<TABLE>

                                                                                 Three Months Ended
                                                                                      March 31,
                                                                                 2002          2001
                                                                             -----------   ------------

<S>                                                                           <C>          <C>
Cash and Cash Equivalents at January 1 ....................................   $ 421,550    $  57,948

Cash Flows from Operations:
Net Income ................................................................      29,095       29,227
     Adjustments to reconcile net income to net cash flows from operations:
        Income from discontinued operations ...............................         -         (5,433)
        Extraordinary gain ................................................         -         (6,003)
        Depreciation expense ..............................................      13,003       13,170
        Amortization expense ..............................................       2,536       17,566
     Tax refund from prior years payments .................................         -         21,000
     Deferred income tax expense ..........................................      19,153       13,918
         Change in working capital, net of acquisitions:
            Receivables ...................................................      (4,224)      (8,758)
            Sale of receivables ...........................................         -         75,500
            Inventories and other current assets ..........................     (96,848)    (102,992)
            Accounts payable ..............................................       2,819      (22,552)
            Deferred revenues .............................................      74,784       70,946
            Accrued liabilities ...........................................     (12,284)     (14,734)
         Other, net .......................................................       1,511        2,609
                                                                              ---------    ---------
Net Cash Provided from Operations .........................................      29,545       83,464
                                                                              ---------    ---------

Memo:  Net Cash Provided from (Used for) Operations
       (Excluding Prior Year Sale of Receivables and Tax Refunds) .........      29,545      (13,036)

Cash Flows from Investing Activities:
      Property additions ..................................................      (9,669)      (9,921)
      Sale of equipment and other assets ..................................         866        3,188
      Business acquisitions, net of cash acquired .........................      (5,310)     (13,825)
      Proceeds from business sales and minority interests .................         -          5,371
      Notes receivable, financial investments and securities ..............       7,310       (6,265)
                                                                              ---------    ---------
Net Cash Used for Investing Activities ....................................      (6,803)     (21,452)
                                                                              ---------    ---------
Cash Flows from Financing Activities:
      Net payments of debt ................................................     (54,127)     (69,296)
      Purchase of ServiceMaster stock .....................................         -         (1,308)
      Shareholders' dividends .............................................     (29,402)     (29,837)
      Other, net ..........................................................       6,354        3,109
                                                                              ---------    ---------
Net Cash Used for Financing Activities ....................................     (77,175)     (97,332)
                                                                              ---------    ---------

Cash Provided from (Used for) Discontinued Operations .....................     (29,690)      10,081
                                                                              ---------    ---------

Cash Decrease During the Period ...........................................     (84,123)     (25,239)
                                                                              ---------    ---------

Cash and Cash Equivalents at March 31 .....................................   $ 337,427    $  32,709
                                                                              =========    =========

</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: 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.  The Company suggests 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 ended  December 31, 2001. In the
opinion  of the  Company,  all  adjustments  necessary  to  present  fairly  the
financial  position  of The  ServiceMaster  Company  as of  March  31,  2002 and
December 31, 2001,  and the results of  operations  and cash flows for the three
month  periods  ended  March 31,  2002 and 2001 have been  included.  As further
discussed in Note 4, in January 2002, the Company adopted Statement of Financial
Accounting  Standards  No. 142,  "Goodwill  and Other  Intangible  Assets".  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.  There has been no change
since  December  31,  2001 in the  Company's  Critical  Accounting  Policies  as
described in the Company's latest Annual Report to Shareholders.  The results of
operations for any interim period are not necessarily  indicative of the results
which might be obtained for a full year.

Note 3: On  October 3, 2001 the  Company's  Board of  Directors  approved a
series of strategic actions which were the culmination of an extensive portfolio
review  process that was initiated in the first quarter of 2001. 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  determined  it could  best  achieve  these  goals with a  portfolio  of
businesses which support the business  strategy to become America's Home Service
Company and have  attractive  cash flow and return  characteristics.  As part of
this  determination,  in the  fourth  quarter  of  2001,  the  Company  sold its
Management  Services  business to ARAMARK  Corporation  for  approximately  $800
million.  Also in the fourth quarter of 2001,  the Company's  Board of Directors
approved the exit of non-strategic  and  under-performing  businesses  including
TruGreen  LandCare  Construction  and Certified  Systems Inc.  (CSI), as well as
certain  other  small  operations.   The  Company  sold  its  TruGreen  LandCare
Construction  operations  to  Environmental  Industries,  Inc.  (EII) in certain
markets  and  entered  into an  agreement  with EII to manage the  wind-down  of
commercial  landscaping  construction  contracts in the  remaining  markets.  In
addition, the Company sold all of its customer contracts relating to the exit of
CSI (the Company's  professional employer  organization),  to AMS Staff Leasing,
N.A., Inc. and has almost  completed the wind-down of its remaining  operations.
The Company  also  completed  in the fourth  quarter of 2001 the sale of certain
subsidiaries of its European pest control and property services operations.

The Company has classified and separated the results of these  discontinued
business units, (including Management Services,  TruGreen LandCare Construction,
Certified  Systems  Inc.,  and the European  pest control and property  services
entities) as Discontinued Operations in the accompanying financial statements.

                                        5
<PAGE>


In the fourth quarter of 2001, the Company recorded reserves related to the
aforementioned  strategic  actions  and  the  costs  to  exit  the  discontinued
operations.  The Company believes that the reserves  continue to be adequate and
reasonable.  The table below  summarizes  the  activity  during the three months
ended March 31, 2002:

<TABLE>
<CAPTION>

     (in thousands)                                    Balance at                 Cash              Balance at
                                                      Dec. 31, 2001             Payments           Mar. 31, 2002
<S>                                                     <C>                     <C>                   <C>
Reserves related to strategic actions in the fourth
 quarter of 2001 (a)                                     $36,000                  $300                $35,700

Remaining liabilities from discontinued operations (b)
     LandCare Construction                               $33,700                $6,900                $26,800
     Certified Systems, Inc.                              23,800                 3,700                 20,100
     Management Services                                  11,400                 1,800                  9,600
     Other                                                 6,300                 4,700                  1,600
</TABLE>

(a)  Includes  accruals  for residual  value  guarantees  on leased  properties,
     severance for former executives and terminated employees, and other costs.

(b)  Includes the existing liabilities of the discontinued operations as well as
     the costs  recorded in the fourth  quarter of 2001 related to exiting these
     operations.  Cash  payments  made  in  the  first  quarter  related  to the
     wind-down of LandCare  Construction  contracts,  lease  termination  costs,
     workers' compensation payments and legal costs.

Note 4: In June 2001,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial  Accounting  Standards  No.142,   "Goodwill  and  Other
Intangible  Assets" (SFAS 142).  SFAS 142 requires that after December 31, 2001,
existing  goodwill  will no longer  be  amortized  and  intangible  assets  with
indefinite  useful  lives will not be  amortized  until their  useful  lives are
determined to be no longer  indefinite.  Goodwill and intangible assets that are
not amortized will be subject to at least an annual assessment for impairment by
applying a fair-value-based test. The Company expects to complete its impairment
testing  during the second  quarter of 2002.  Given the Company's past policy of
assessing  enterprise-level  goodwill,  which  utilized a  discounted  cash flow
methodology,  the  Company  does not  expect  any  impairment  charges  upon its
completion of the impairment review.

The following table provides summarized financial information for the three
month periods ended March 31, 2002 and 2001, with the 2001 information presented
on an adjusted basis to reflect the elimination of amortization expense required
under SFAS 142.

<TABLE>

                                                                               Three Months Ended
                                                                                  March 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)                                         2002              2001
                                                                          -----------        ----------
<S>                                                                       <C>               <C>
 Income from continuing operations before extraordinary
     gain as reported                                                      $ 29,095          $ 17,791
 Add back: Goodwill and trade name amortization, net of tax                     -              10,300
 Net income from continuing operations before extraordinary             ----------------  ----------------
     gain as adjusted under SFAS 142                                       $ 29,095          $ 28,091
                                                                        ================  ================

 Net income as reported                                                    $ 29,095          $ 29,227
 Add back:  Goodwill and trade name amortization, net of tax                    -              10,300
                                                                        ----------------  ----------------
 Net income as adjusted under SFAS 142                                     $ 29,095          $ 39,527
                                                                        ================  ================

BASIC AND DILUTED EARNINGS PER SHARE:
-------------------------------------
 Earnings per share from continuing operations before
     extraordinary gain as reported                                          $ 0.10            $ 0.06
 Add back: Goodwill and trade name amortization, net of tax                       -              0.03
 Earnings per share from continuing operations before                   ----------------  ----------------
     extraordinary gain as adjusted under SFAS 142                           $ 0.10            $ 0.09
                                                                        ================  ================

 Earnings per share as reported                                              $ 0.10            $ 0.10
 Add back:  Goodwill and trade name amortization, net of tax                      -              0.03
                                                                        ----------------  ----------------
Earnings per share as adjusted under SFAS 142                                $ 0.10            $ 0.13
                                                                        ================  ================
</TABLE>
                                        6
<PAGE>

The following table summarizes goodwill and intangible assets.

<TABLE>

                                                  As of                  As of
        (in thousands)                         March 31, 2002       December 31, 2001
        <S>                                        <C>                    <C>
        Covenants not to compete                     $ 139,197               $ 138,445
        Accumulated amortization                       (62,017)                (59,952)
                                              -----------------     -------------------
          Net covenants not to compete                  77,180                  78,493

        Other intangibles                                7,298                   6,639
        Accumulated amortization                          (898)                   (427)
                                              -----------------     -------------------
          Net other intangibles                          6,400                   6,212

        Trade names (1)                                238,550                 238,550

        Goodwill (1), (2)                            1,849,590               1,844,468
                                              -----------------     -------------------

        Total                                      $ 2,171,720             $ 2,167,723
                                              =================     ===================
</TABLE>

        (1) Not subject to amortization.
        (2) For the three months ended March 31, 2002 approximately $5.0 million
             of additional goodwill was recorded.

NOTE 5: Basic  earnings  per share is computed by dividing  income  available to
common stockholders by the weighted-average number of shares outstanding for the
period.  The weighted  average common shares for the diluted  earnings per share
calculation includes the incremental effect related to outstanding options whose
market price is in excess of the exercise  price.  Shares  potentially  issuable
under  convertible  securities have been considered  outstanding for purposes of
the diluted earnings per share  calculations.  In computing diluted earnings per
share, the after-tax interest expense related to convertible debentures is added
back to net income in the numerator, while the diluted shares in the denominator
include the shares issuable upon conversion of the debentures.

The following  chart  reconciles  both the numerator and the  denominator of the
basic earnings per share computation to the numerator and the denominator of the
diluted earnings per share computation.

<TABLE>

(IN THOUSANDS, EXCEPT PER SHARE DATA)            Three Months                          Three Months
                                             Ended March 31, 2002                  Ended March 31, 2001
                                       --------------------------------       ------------------------------

                                        INCOME       SHARES      EPS           INCOME      SHARES     EPS
                                       --------     --------     ----         --------    --------   ----
<S>                                     <C>         <C>        <C>            <C>         <C>        <C>

 Basic earnings per share from
    continuing operations before
    extraordinary gain in 2001           $29,095     300,173    $0.10          $17,791     297,790    $0.06

                                                               ========                              =======
  Effect of dilutive securities, net of tax:
    Options                                    -       6,912                          -      3,941
    Convertible securities                 1,195       8,200                      1,192      8,100
                                       ----------   ---------                 ----------  ---------

 Diluted earnings per share from
    continuing operations before
    extraordinary gain in 2001           $30,290     315,285     $0.10          $18,983     309,831    $0.06
                                       ==========   =========  ========       ==========  =========  =======
</TABLE>


NOTE 6: 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 three months ended March 31, 2002
and 2001 is presented in the following table:

                                                             (IN THOUSANDS)
                                                            2002         2001
                                                         ---------   -----------
CASH PAID OR (RECEIVED) FOR:
----------------------------
Interest expense......................................  $   28,969  $   46,703
Interest and dividend income..........................  $   (3,198) $   (2,157)
Income taxes............................... ..........  $   28,090  $  (19,761)

                                        7
<PAGE>

The decrease in interest  paid in 2002 is  primarily  due to reduced debt levels
reflecting  debt  retirements  with a portion of the  proceeds  from the sale of
Management Services. The increase in interest income received is also due to the
proceeds  received  from the  Management  Services sale as there is an increased
cash level after the debt paydowns that have been completed. The increase in tax
payments is due to a significant tax payment resulting from the gain on the sale
of the Management Services business. There was also a prior year $21 million tax
refund related to over-payments made in 2000.

NOTE 7: Total  comprehensive  income was $29.9 million and $19.3 million for the
three months ended March 31, 2002 and 2001,  respectively.  Total  comprehensive
income includes primarily net income,  changes in unrealized gains and losses on
marketable securities and translation balances.

NOTE 8: On March 23, 2001, the Company  entered into an agreement which provides
for the ongoing  revolving sale of a designated  pool of accounts  receivable of
TruGreen and Terminix. At March 31, 2002, there were no outstanding  receivables
sold to third parties under this  agreement.  However,  the Company may sell its
receivables in the future which would provide an alternative funding source.

Under this agreement,  the Company sells, on a revolving  basis,  certain of its
accounts   receivable   to   a   wholly-owned,   bankruptcy-remote   subsidiary,
ServiceMaster  Funding  Company  LLC  which has  entered  into an  agreement  to
transfer,  on a revolving basis, an undivided percentage ownership interest in a
pool of accounts receivable to an unrelated third party purchaser. ServiceMaster
Funding  Company LLC  retains an  undivided  percentage  interest in the pool of
accounts receivable.  Bad debt losses for the entire pool are allocated first to
this retained  interest.  This agreement is a 364-day facility  renewable at the
option of the purchasers.

For the three  months ended March 31, 2002,  there were no  receivables  sold to
Falcon Asset  Securitization  Corporation  under this  agreement.  For the three
months ended March 31, 2001, $127.9 million 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.  Net cash proceeds of $75.3 million were received in 2001 on the
sale and were used to pay down bank revolving credit debt. As of March 31, 2001,
the amount of the retained interest in the receivables was $52.4 million and was
classified as accounts  receivable.  The above amounts include  receivables from
the sold Management Services segment, which were approximately two thirds of the
receivables  sold.  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 first  quarter of 2001,  were at fair market  value,  therefore,  no related
assets or  liabilities  have been  recorded.  The loss on sale  arising from the
securitization transactions in the first quarter of 2001 was immaterial.

NOTE 9: In the first quarter of 2001,  the Company  repurchased a portion of its
public debt securities and recognized a $6 million after-tax  extraordinary gain
on the early extinguishment of debt.

NOTE 10: The  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 in the fourth quarter of 2001 to
exit
                                        8

<PAGE>

the  LandCare  Construction  business,  the  results  of the  construction
operations are now included in  discontinued  operations.  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,  (ARS) and American Mechanical Services (AMS) that provide
heating,  ventilation,  air conditioning (HVAC) and plumbing services as well as
American  Home Shield which  provides home  warranties  to consumers  that cover
HVAC, plumbing and other appliances. The segment also includes the two franchise
operations,   ServiceMaster  Clean  and  Merry  Maids,  which  provide  disaster
restoration and cleaning services.

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 or developmental  nature.  This segment includes  ServiceMaster  Home
Service Center, an initiative that has developed valuable marketing, call center
and  technology  competencies  and  has  built  an  infrastructure  that  allows
customers 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.

Segment information as of and for the three months ended March 31, 2002 and 2001
is presented below.

<TABLE>

                                        2002                                            2001
                              ------------------------------               ------------------------------
                                                   Operating                                   Operating
                              Revenue              Income                   Revenue            Income (1)
---------------------------------------------------------------------------------------------------------------------
<S>                        <C>                  <C>                     <C>                  <C>
 TruGreen                   $ 229,143             $ 24,621                $ 229,755             $ 29,032
 Terminix                     220,050               36,253                  195,772               29,884
 Home Maintenance
    and Improvement           280,927               17,737                  291,013               23,796
 Other Operations              17,162              (11,595)                  19,181               (8,070)
---------------------------------------------------------------------------------------------------------------------
 Total                      $ 747,282             $ 67,016                $ 735,721             $ 74,642
---------------------------------------------------------------------------------------------------------------------


                              Capital           Identifiable                Capital           Identifiable
                             Employed              Assets                  Employed              Assets
---------------------------------------------------------------------------------------------------------------------
 TruGreen                  $ 1,046,503          $ 1,197,320              $ 1,097,730          $ 1,252,405
 Terminix                      617,091              846,044                  625,496              788,529
 Home Maintenance
    and Improvement            676,886            1,055,266                  660,468              983,755
 Other Operations and
    Discontinued Operations     89,819              568,098                  633,136            1,021,794
---------------------------------------------------------------------------------------------------------------------
 Total                     $ 2,430,299          $ 3,666,728              $ 3,016,830          $ 4,046,483
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company adopted SFAS 142, "Goodwill and Other Intangible Assets",  which
eliminates the  amortization  of goodwill and intangible  assets with indefinite
lives  beginning in 2002. For  comparative  purposes,  2001 segment results have
been restated to exclude the amortization expense affected by the new accounting
standard.


 The following table summarizes by segment goodwill and trade names that are
 not subject to amortization:

                                     March 31,          December 31,
                                       2002                 2001
                                -------------------   --------------------
 TruGreen                            $ 895,744            $ 895,744
 Terminix                              666,986              661,864
 Home Maintenance
    and Improvement                    505,410              505,410
 Other Operations                       20,000               20,000
                                  -------------        -------------
 Total                             $ 2,088,140          $ 2,083,018
                                  -------------        -------------

                                        9
<PAGE>

                       MANAGEMENT DISCUSSION AND ANALYSIS


RESULTS OF OPERATIONS

FIRST QUARTER 2002 COMPARED TO FIRST QUARTER 2001
-------------------------------------------------

Revenue for the first quarter totaled $747 million,  two percent above the prior
year.  Reported  operating  income  was $67  million in 2002  compared  with $60
million in 2001.  Statement of Financial Accounting Standards No. 142, "Goodwill
and Other  Intangible  Assets"  (SFAS 142),  requires  that  beginning  in 2002,
goodwill and trade names will no longer be  amortized.  SFAS 142 does not permit
the  restatement  of 2001  financial  information  to reflect the impact of this
Statement.  For comparability  purposes,  however, the Company has provided memo
line  presentation  of certain  2001  information  as  adjusted  to reflect  the
elimination of goodwill and trade name amortization. Operating income, with 2001
adjusted  for SFAS 142 was $75  million,  reflecting a decrease of 10 percent in
2002 with margins  decreasing  from 10.1 percent to 9.0 percent.  The decline in
operating  income  reflects  strong  growth at Terminix and American Home Shield
offset by lower  volume in the HVAC and  plumbing  businesses  of ARS and AMS, a
reduced  deferral of seasonal costs  compared to the prior year at TruGreen,  as
well as increased  investments for  Company-wide  initiatives.  Reported diluted
earnings per share from continuing operations was $.10 compared to $.06 in 2001.
Adjusting  for SFAS  142,  2001  diluted  earnings  per  share  from  continuing
operations would have been $.09. Further adjusting 2001 to reflect the pro forma
impact on interest expense assuming  proceeds received from dispositions late in
2001  were used to repay  debt,  diluted  earnings  per  share  from  continuing
operations for 2001 would have been $.11.

Consistent  with its previous  guidance,  the Company  anticipates  earnings per
share  for 2002 to be in the range of $.60 to $.63.  The  Company  continues  to
estimate  a cost in 2002 of $20  million  related to the  implementation  of Six
Sigma and  initiatives to measure  customer and employee  satisfaction,  with an
offsetting  return on these  initiatives of  approximately  $15 million in 2002.
This outlook also  reflects a reduction in earnings  from certain  non-operating
items  compared  to 2001  levels,  including  the  elimination  of $6 million in
minority  interest income as well as a reduction of  approximately $8 million in
investment  income generated  through venture capital and other portfolio gains.
Earnings  per share  growth in the  second  half of the year is  expected  to be
stronger  than  the  first  half  as  the  growth  and  savings  related  to the
investments are expected to materialize later in the year.

The Company has  successfully  begun  implementing  Six Sigma,  a methodology to
support continuous improvement of business processes.  Over 2,500 employees have
received  varying  levels of  training  within the  program  with 27 black belts
devoted  full-time  to the program.  The initial wave of projects  will roll out
through June, with another group of black belts beginning  training in May and a
second wave of projects to follow.  By the end of the year, the Company projects
to have a run rate of approximately 100 Six Sigma projects.

In  February,  the  Company  launched a pilot  program  with Home Depot in three
markets  (Orlando,  Memphis  and  Sacramento)  as it  continues  to explore  new
channels  through  which to market home  services.  The pilot  program  services
include lawn care,  landscape  maintenance,  termite and pest control,  plumbing
repair, drain cleaning and fixture installation,  home warranties and carpet and
upholstery cleaning. Early results in this retail setting have been encouraging.
The pilot program is currently scheduled to end on December 31, 2002.

The table  below  presents  selected  metrics  related  to  customer  counts and
customer  retention  for the three most  profitable  businesses  of the Company.
These measures are presented on a rolling, twelve month basis.

                                        10
<PAGE>

                                                      Key Performance Indicators
                                                            As of March 31,

<TABLE>
                                                      2002                        2001
                                                -----------------           -----------------
<S>                                                       <C>                         <C>
TruGreen -
   Growth in Full Program Contracts                           0%                          0%
      (as of April 19, 2002)
   Customer Retention Rate                                 63.2%                       62.3%
      (as of April 19, 2002)

Terminix -
   Growth in Pest Control Customers                          11%                         16%
   Pest Control Customer Retention Rate                    77.1%                       75.9%

   Growth in Termite Customers                                8%                         20%
   Termite Customer Retention Rate                         89.9%                       88.4%

American Home Shield -
   Growth in Warranty Contracts                              15%                          9%
   Customer Retention Rate                                 52.6%                       50.5%

</TABLE>

Note:  The Company  adopted SFAS 142,  "Goodwill and Other  Intangible  Assets",
which  eliminates  the  amortization  of  goodwill  and  intangible  assets with
indefinite  lives  beginning in 2002.  For  comparative  purposes,  2001 segment
results have been restated to exclude the  amortization  expense affected by the
new accounting standard.

The TruGreen segment includes lawn care operations  performed under the TruGreen
ChemLawn  brand  name and  landscape  maintenance  services  provided  under the
TruGreen  LandCare  brand name.  This  segment's  results for both 2002 and 2001
exclude the discontinued TruGreen LandCare Construction  business.  The TruGreen
segment  reported  revenue  of $229  million,  consistent  with the prior  year.
Operating income decreased to $25 million from $29 million last year,  primarily
reflecting a reduced  level of snow  removal  business and the timing of certain
seasonal  expenses.  Revenue in the lawn care  business was  slightly  above the
prior year.  Although  customer count levels in April 2002 do not reflect growth
from 2001 (see  table  above),  during  the first  four  months of this year the
business  has  overcome a four  percent  degradation  in  customer  counts  that
occurred from early 2001 to late in the year.  These  improvements  reflect new,
more focused marketing strategies and quality of service initiatives which began
during  the  fall of 2001,  resulting  in  higher  sales  of new  customers  and
improving retention of existing customers.  Telemarketing is the primary channel
employed by TruGreen  ChemLawn to sell its  services.  Increasing  telemarketing
restrictions have continued to present a challenge, but management is addressing
this  challenge by improving the quality of the call lists and by employing more
sophisticated segmentation techniques. The Company is also increasing its use of
direct mail marketing,  with encouraging results.  Operating margins in the lawn
care operations declined,  primarily reflecting a reduction in deferred seasonal
costs,  as the  prior  year  deferral  was based on a higher  level of  expected
revenues than what actually  materialized.  Revenue in the landscape maintenance
operations  declined primarily  reflecting a reduction in snow removal services.
The core  maintenance  business  experienced a slight  increase in the number of
contracts.  Operating  margins in the  landscaping  services  business  declined
primarily  reflecting  the  decreased  volume  of  higher  margin  snow  removal
business.  This business is focusing on various  initiatives to improve its cost
structure  including  more  aggressive  and  controlled  bidding  of plants  and
materials,  a vehicle reduction program, and labor efficiency programs.  Capital
employed decreased five percent,  primarily  reflecting stronger working capital
management and a decline in intangibles and fixed assets.

                                        11
<PAGE>

The Terminix  segment,  which  includes  the  domestic  termite and pest control
services,  reported a 12 percent  increase in revenue to $220  million from $196
million in 2001 and  operating  income  growth of 21 percent to $36 million from
$30 million  last year.  Revenue  growth was  supported  by new sales,  improved
customer  retention in both the termite and pest  control  business and from the
Sears Termite & Pest Control acquisition.  The improved customer retention rates
for both pest control and termite  services reflect the benefits of training and
quality programs and increased customer service representatives in the branches.
Operating  margins  improved  over the prior  year  reflecting  improved  branch
efficiencies,  the  integration  of  acquisitions,  and  continuing  growth  and
acceptance of termite baiting treatments. Capital employed decreased one percent
reflecting a higher level of deferred revenue, offset in part by acquisitions.

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 American  Mechanical  Services
(AMS) (for commercial accounts) brand names; home systems and appliance warranty
contracts offered through American Home Shield;  and the franchised  operations,
ServiceMaster  Clean and Merry  Maids.  The  segment  reported  revenue  of $281
million,  a decrease of three  percent from $291  million  last year.  Operating
income  decreased  25 percent to $18 million  compared to $24 million last year.
Performance  in the segment was  supported  by  double-digit  revenue and profit
growth at American Home Shield offset by a decline in volume of air conditioning
and  plumbing  services  in the ARS and AMS  businesses.  American  Home  Shield
reported  double-digit  growth  in all  of its  sales  channels,  with  improved
customer  retention  rates.  The total  number of  customers  surpassed  the one
million mark for the first time in American  Home  Shield's  history.  Operating
margins improved reflecting increased pricing and a decrease in the incidence of
claims.  The  combined  ARS and AMS  operations  reported  revenues  and profits
significantly   below  the  prior  year.  These  operations   experienced  lower
construction  activity in both the residential and commercial  sectors. A softer
economic  environment combined with mild weather led to lower demand for heating
and plumbing repairs and replacement service. With new leadership in place, this
business continues to focus on cost containment  initiatives and is implementing
significant  changes  to  its  sales  and  marketing  programs.   The  franchise
operations achieved solid revenue and profit growth,  primarily driven by strong
disaster  restoration  results and increased  franchise  sales at  ServiceMaster
Clean and growth in the direct-owned  branch operations at Merry Maids.  Capital
employed increased two percent.

Other   Operations   consists  of  the   Company's   international   operations;
ServiceMaster  Home Service Center; and the Company's  headquarters  operations.
Revenues declined to $17 million from $19 million in the prior year,  reflecting
the  divestiture  of certain small  operations  in the prior year.  This segment
shows a net operating  expense,  which  increased from the prior year reflecting
the increased  investments in  Company-wide  initiatives  including  purchasing,
marketing, and Six Sigma initiatives.  Capital employed in this segment includes
the  discontinued  operations  and therefore is  significantly  reduced from the
prior year,  reflecting the  divestitures  of the  businesses  made in the prior
year.

Cost of services  rendered and products sold increased  slightly for the quarter
and  decreased  as a  percentage  of revenue  to 72.6  percent in 2002 from 73.5
percent in 2001.  Selling and  administrative  expenses increased 15 percent and
increased as a percentage  of revenue to 18.1 percent from 16.0 percent in 2001.
The increase in selling and administrative expenses reflects increased sales and
marketing expenses and investments in certain Company-wide initiatives.

Interest  expense  decreased from the prior year,  primarily due to reduced debt
levels as a portion of the proceeds  received from the Management  Services sale
were used to pay down debt. Minority interest and other expense/income reflected
$3 million more expense than last year primarily due to minority interest income
related to the  ServiceMaster  Home Service Center  initiative  that occurred in
2001. In the first quarter of 2001, the operating losses of  ServiceMaster  Home
Service  Center had been offset  through  minority  interest  income  (below the
operating  income line) because of  investments  in the venture made by Kleiner,
Perkins,  Caufield & Byers. In December 2001, the Company  acquired the minority
interest in the ServiceMaster  Home Service Center held by Kleiner Perkins.  The
operating losses incurred in the first quarter of 2002

                                        12
<PAGE>

from  ServiceMaster  Home Service Center have been absorbed in the  accompanying
financial statements without an offset at the minority interest income line.

The tax  provision  reflects  a lower  effective  tax  rate  compared  to  2001,
primarily  reflecting the benefit of the utilization of prior year net operating
losses of a subsidiary operation.

FINANCIAL POSITION
------------------

Net cash  provided  from  operations  for the quarter  totaled $30  million,  an
improvement  of $43  million  before  the  impact of the  Company's  prior  year
accounts  receivable  securitization  program and tax refunds.  This  reflects a
significant  reduction  in the use of working  capital,  primarily  at  TruGreen
ChemLawn and American Home Shield as a result of increased customer  prepayments
and improved  management  of accounts  payable.  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.

Cash and marketable  securities totaled  approximately $337 million at March 31,
2002 reflecting a portion of the proceeds from the sale of Management  Services.
The Company still holds  approximately $275 million in discretionary cash and is
expected to make  approximately  $30 million in after-tax  cash payments for the
remainder  of  2002  for  items  related  to  discontinued  operations  and  the
restructuring  charge. In the first quarter,  the Company made approximately $70
million in tax payments relating to the sale of Management Services.  There were
other cash  payments  relating to the wind-down of the  discontinued  operations
which were offset by cash collected on assets  remaining from these  operations.
In addition to the $30 million in after-tax  cash  payments for the remainder of
2002,  the Company is expecting to make  approximately  $17 million in after-tax
cash payments beyond 2002. The remainder of the discretionary  cash is available
for the repayment of debt, which  management  continues to target for the second
quarter of 2002 for  completion.  Debt  levels  decreased  by $47 million in the
quarter primarily reflecting the repurchase of a portion of the Company's public
debt.

There  have been no  material  changes in the terms of the  Company's  financing
agreements  since December 31, 2001. As described in the Company's latest Annual
Report to  Shareholders,  the  Company  is party to a number of debt  agreements
which require it to maintain certain  financial and other  covenants,  including
limitations on indebtedness  and interest  coverage  ratio.  In addition,  under
certain  circumstances,  the agreements  may limit the Company's  ability to pay
dividends and  repurchase  shares of common  stock.  These  limitations  are not
expected to be a factor in the Company's  future  dividend and share  repurchase
plans.  Failure by the Company to maintain these  covenants  could result in the
acceleration  of the maturity of the debt. At March 31, 2002,  the Company is in
compliance with the covenants  related to these debt agreements and based on its
operating  outlook  for the  remainder  of 2002,  expects to be able to maintain
compliance in the future.

The assets and  liabilities  relating to the  discontinued  companies  have been
classified  in separate  captions on the  Consolidated  Statements  of Financial
Position.  Assets of the discontinued  operations have declined  reflecting cash
collections on receivables and the sale of fixed assets.  The  liabilities  from
discontinued  operations has decreased  reflecting cash outflows  related to the
wind-down of contracts,  lease termination costs, workers' compensation payments
and legal costs.

Accounts receivable decreased from year-end levels,  reflecting good collections
and improved days sales outstanding at several companies.  Inventories increased
over year-end levels as a result of normal  seasonal  build-ups in the lawn care
business.

Prepaids  and  other  assets  have  increased   from  year-end   reflecting  the
seasonality  in the lawn care  business  and the  increased  volume of  warranty
contracts  written at  American  Home  Shield.  The lawn care  operation  defers
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.  The Company also
capitalizes  sales  commission  and  other  direct

                                        13
<PAGE>

contract  acquisition costs relating to termite baiting and pest as well as home
warranty contracts. Deferred revenues grew significantly reflecting increases in
customer  prepayments  for lawn care  services  and  strong  growth in  warranty
contracts written at American Home Shield.

Capital  expenditures  which include  recurring  capital  needs and  information
technology  projects  are  approximately  at the same levels as prior year.  The
Company has no material capital commitments at this time.

Total  shareholders'  equity was $1.2 billion at March 31, 2002 and December 31,
2001,  reflecting  earnings  growth  which was  offset by cash  dividends.  Cash
dividends  paid directly to  shareholders  totaled $29 million or $.10 per share
for the three months ended March 31, 2002. In April, the Company  announced that
it has increased its quarterly  cash dividend to $.105 per share payable on July
31, 2002 to  shareholders  of record on July 12, 2002.  This quarterly  dividend
payment  represents  an increase of 5% over the dividend rate paid for the prior
eight quarters.  The Company approves its actual dividend payment on a quarterly
basis and continually reviews its dividend policy,  share repurchase program and
other capital  structure  objectives.  The Company has not  undertaken  material
share  repurchases  in 2001 and 2002.  Decisions  relating  to any future  share
repurchases will take various factors into  consideration  such as the Company's
commitment to maintain  investment grade 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  residential  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.

                                        14
<PAGE>



                         PART II. OTHER INFORMATION


Item 6 (a):  Exhibits
<TABLE>
Exhibit No.    Description of Exhibit
----------     ----------------------------------------------------------------------
<S>           <C>
 3(ii)         Bylaws of The ServiceMaster Company, as amended through April 26, 2002
 10.1          Letter agreement with Phil Rooney dated as of April 18, 2002
 15.1          Letter re:  unaudited interim financial information
</TABLE>


Item 6(b):    Reports on Form 8-K

A report on Form 8-K was filed on March 19, 2002, reporting under "Item 5. Other
Events".  The  purpose of the report  was to  provide  under Item 7,  previously
reported  quarterly  consolidated  income  statement  results  for 2001 and 2000
restated  to present  the  results of  continuing  operations  and  discontinued
operations,   as  well  as  to  disclose   quarterly  goodwill  and  trade  name
amortization by segment.


                                        15
<PAGE>


                                    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:  May 10, 2002


                          THE SERVICEMASTER COMPANY
                          (Registrant)

                          By:  /s/Steven C. Preston
                             ------------------------------------
                                Steven C. Preston
                          Executive Vice President and Chief Financial Officer


                                        16
<PAGE>