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, 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: 299,606,000 shares of common stock on May 8, 2001.








<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, 2001 and March 31, 2000                                2

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

Consolidated Statements of Cash Flows for the three months
   ended March 31, 2001 and March 31, 2000                                     4

Notes to Consolidated Financial Statements                                     5

Management Discussion and Analysis of Financial Position
   and Results of Operations                                                   8


Part II.  Other Information

Item 1:  Legal Proceedings                                                    12

Item 2:  Changes in Securities and Use of Proceeds                            12

Item 5: Other Information                                                     13

Item 6:  Exhibits and Reports on Form 8-K                                     14

Signature






                                       1
<PAGE>







<PAGE>



                          PART I. FINANCIAL INFORMATION

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

                                                                           Three Months Ended
                                                                                March 31,
                                                                         2001           2000
                                                                   --------------  -------------
<S>                                                                  <C>            <C>
OPERATING REVENUE .................................................  $ 1,329,662    $ 1,340,884

OPERATING COSTS AND EXPENSES:
Cost of services rendered and products sold .......................    1,071,620      1,084,816
Selling and administrative expenses ...............................      188,901        169,196
                                                                     -----------    -----------
Total operating costs and expenses ................................    1,260,521      1,254,012
                                                                     -----------    -----------

OPERATING INCOME ..................................................       69,141         86,872

NON-OPERATING  EXPENSE (INCOME):
Interest expense ..................................................       34,574         31,865
Interest and investment income ....................................       (3,518)        (3,893)
Minority interest income ..........................................       (1,774)        (2,940)
                                                                     -----------    -----------
                                                                     -----------    -----------

INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM..................       39,859         61,840
Provision for income taxes ........................................       16,635         25,786
                                                                     -----------    -----------
                                                                     -----------    -----------

INCOME BEFORE EXTRAORDINARY ITEM ..................................       23,224         36,054

Extraordinary Item - gain on repurchase of bonds, net of
   $4.2 million in income taxes (1) ...............................        6,003           --
                                                                     -----------    -----------
                                                                     -----------    -----------

NET INCOME ........................................................  $    29,227    $    36,054
                                                                     ===========    ===========

PER SHARE:(2)
Basic earnings per share, before extraordinary item................  $       .08    $       .12
Extraordinary gain on repurchase of bonds(1) ......................          .02            --
                                                                     -----------    -----------
Basic earnings per share ..........................................  $       .10    $       .12
                                                                     ===========    ===========


Diluted earnings per share, before extraordinary item..............  $       .08    $       .12
Extraordinary gain on repurchase of bonds(1) ......................          .02             --
                                                                     -----------    -----------
Diluted earnings per share ........................................  $       .10    $       .12
                                                                     ===========    ===========

DIVIDENDS PER SHARE ...............................................  $       .10    $       .09
                                                                     ===========    ===========

</TABLE>


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

(2) Basic earnings per share are calculated based on 297,790 shares in
2001 and 305,668 shares in 2000 while diluted earnings per share are calculated
based on 309,831 shares in 2001 and 310,138 shares in 2000.


                 See Notes to Consolidated Financial Statements



                                       2
<PAGE>





                                       THE SERVICEMASTER COMPANY
                             Consolidated Statements of Financial Position
                                            (In thousands)

<TABLE>


                                                                                           As of
Assets                                                                      March 31,                December 31,
                                                                              2001                       2000
                                                                         ----------------          ---------------
<S>                                                                          <C>                    <C>
CURRENT ASSETS:
Cash and cash equivalents ................................................   $    24,869            $    44,386
Marketable securities ....................................................        59,220                 56,531
Receivables less allowance of $37,634
   and $37,970, respectively .............................................       469,570                556,941
Inventories ..............................................................        99,036                 88,152
Prepaid expenses and other assets ........................................       265,584                168,403
Deferred taxes and tax receivables .......................................        49,209                 70,346
                                                                              -----------            -----------
       Total current assets ..............................................       967,488                984,759
                                                                              -----------            -----------

PROPERTY AND EQUIPMENT:
   At cost ...............................................................       682,945                681,569
   Less: accumulated depreciation ........................................       386,123                375,585
                                                                              -----------            -----------
     Net property and equipment ..........................................       296,822                305,984
                                                                              -----------            -----------

INTANGIBLE ASSETS, PRIMARILY TRADE NAMES AND GOODWILL,
    net of accumulated amortization of $443,424
    and $422,899, respectively ...........................................     2,619,917              2,521,633
NOTES RECEIVABLE, LONG-TERM SECURITIES, AND OTHER ASSETS .................       150,090                155,292
                                                                             -----------            -----------

       Total assets ......................................................   $ 4,034,317            $ 3,967,668
                                                                             ===========            ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable .........................................................   $   126,944            $   147,788
Income taxes payable .....................................................        20,052                  1,235
Accrued liabilities ......................................................       264,057                291,852
Deferred revenues ........................................................       391,626                325,246
Current portion of long-term obligations .................................        57,750                 61,360
                                                                             -----------            -----------
        Total current liabilities ........................................       860,429                827,481
                                                                             -----------            -----------

LONG-TERM DEBT ...........................................................     1,699,488              1,756,757
DEFERRED TAX LIABILITY ...................................................       114,281                115,150
OTHER LONG-TERM OBLIGATIONS ..............................................       100,527                100,759
MINORITY INTEREST ........................................................       106,224                  5,933

COMMITMENTS AND CONTINGENCIES.............................................
SHAREHOLDERS' EQUITY:
Common stock $0.01 par value, authorized 1 billion shares; issued
     and outstanding 299,517 and 298,474 shares, respectively ............         2,995                  2,985
Additional paid-in capital ...............................................     1,023,656              1,030,399
Retained earnings ........................................................       300,598                301,207
Accumulated other comprehensive income ...................................       (12,730)                (2,832)
Restricted stock .........................................................        (1,686)                (1,829)
Treasury stock ...........................................................      (159,465)              (168,342)
                                                                             -----------            -----------
       Total shareholders' equity ........................................     1,153,368              1,161,588
                                                                             -----------            -----------
       Total liabilities and shareholders' equity ........................   $ 4,034,317            $ 3,967,668
                                                                             ===========            ===========
</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,
                                                                                2001                 2000
                                                                             ----------           -----------

<S>                                                                          <C>                  <C>
CASH AND CASH EQUIVALENTS AT JANUARY 1 ...................................   $  44,386            $  59,834

CASH FLOWS FROM OPERATIONS:
NET INCOME ...............................................................      29,227               36,054
      Adjustments to reconcile net income
      to net cash flows from operations:
        Depreciation .....................................................      18,147               18,086
        Amortization .....................................................      20,525               17,871
      Tax refund from prior years payments ...............................      21,000               22,000
      Deferred income taxes ..............................................      18,181               22,985
         Change in working capital, net of acquisitions:
            Receivables ..................................................      10,208                6,930
            Sale of receivables ..........................................      75,500                 --
            Inventories and other current assets .........................    (104,227)             (96,203)
            Accounts payable .............................................     (20,323)              (8,879)
            Deferred revenues ............................................      66,935               50,880
            Accrued liabilities ..........................................     (23,246)             (48,515)
         Other, net ......................................................       1,991                 (597)
                                                                              ---------            ---------
NET CASH PROVIDED FROM OPERATIONS ........................................     113,918               20,612
                                                                              ---------            ---------


MEMO:  NET CASH PROVIDED FROM (USED FOR) OPERATIONS
               (EXCLUDING UNUSUAL TAX ITEMS AND SALE OF RECEIVABLES) .....      17,418               (1,388)

CASH FLOWS FROM INVESTING ACTIVITIES
      Property additions .................................................     (14,413)             (19,238)
      Sale of equipment and other assets .................................       3,234                  424
      Business acquisitions, net of cash acquired ........................     (13,825)             (36,424)
      Proceeds from business sales and minority interests ................       5,371               12,259
      Payments to sellers of acquired businesses .........................      (6,776)              (9,147)
      Notes receivable and financial investments .........................      (1,292)              (1,662)
      Net purchases of investment securities .............................      (4,973)              (1,469)
                                                                              ---------            ---------
 NET CASH USED FOR INVESTING ACTIVITIES ..................................     (32,674)             (55,257)
                                                                              ---------            ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Borrowings, net ....................................................      98,204              117,546
      Payment of borrowings and other obligations ........................    (170,926)             (23,834)
      Purchase of ServiceMaster stock ....................................      (1,308)             (51,412)
      Shareholders' dividends ............................................     (29,837)             (27,813)
      Proceeds from employee share plans .................................       3,119                3,741
      Other ..............................................................         (13)                 (87)
                                                                              ---------            ---------
NET CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES ...................    (100,761)              18,141
                                                                              ---------            ---------

CASH DECREASE DURING THE PERIOD ..........................................     (19,517)             (16,504)
                                                                              ---------            ---------
CASH AND CASH EQUIVALENTS AT MARCH 31 ....................................   $  24,869            $  43,330
                                                                              =========            =========

</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. It is suggested that these
consolidated financial statements be read in conjunction with the 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, 2000. In the opinion of the
Company, all adjustments necessary to present fairly the financial position of
The ServiceMaster Company as of March 31, 2001 and December 31, 2000, and the
results of operations and cash flows for the three months ended March 31, 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 3: 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 and the comparative first quarter 2000 financial
information has been restated to incorporate the accounting change.

Note 4: Basic earnings per share 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 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
computation to the numerator and denominator of the diluted earnings per share
computation.




<TABLE>


                                                        Three Months                       Three Months
                                                    Ended March 31, 2001               Ended March 31, 2000
                                              -------------------------------     ------------------------------


(IN THOUSANDS, EXCEPT PER SHARE DATA)            Income      Shares      EPS        Income      Shares     EPS
                                                 ------      ------      ---        ------      ------     ---
<S>                                           <C>         <C>           <C>        <C>        <C>          <C>
Basic earnings per share                      $  29,227   $  297,790    $ 0.10     $ 36,054   $ 305,668    $ 0.12
                                                                        =======                            =======
Effect of dilutive securities, net of tax:
         Options                                               3,941                              4,470
         Convertible securities                   1,192        8,100                    -           -
                                                -------      -------                 -------   ---------

Diluted earnings per share                    $  30,419   $  309,831    $ 0.10    $  36,054   $ 310,138    $ 0.12
                                              =========== ===========  ========   ==========  =========    ========
</TABLE>




                                       5
<PAGE>





Note 5: 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, 2001
and 2000 is presented in the following  table.  The decrease in interest paid in
2001 is primarily  due to the timing of payments  resulting  from  refinancing a
portion of  floating-rate  borrowings  in the public  bond  market in the second
quarter last year. Tax payments  include a $21 million tax refund related to tax
over-payments in 2000. This is comparable to last year when the Company received
a similar tax refund in the first quarter.


                                                          (in thousands)
                                                        2001           2000
                                                     ----------    -----------
Cash paid or (received for):
Interest expense...................................  $   46,703     $    49,891
Interest and dividend income.......................  $   (2,157)    $    (2,250)
Income taxes.......................................  $  (19,761)    $   (19,771)


Note 6: Total comprehensive income was $19.3 million and $43.7 million for the
three months ended March 31, 2001 and 2000, respectively. Total comprehensive
income includes primarily net income, changes in unrealized gains on marketable
securities and translation balances.

Note 7: On March 23, 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 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
Management Services, TruGreen and Terminix business units. The agreement is a
364-day facility renewable at the option of the purchasers.

At March 31, 2001, $127.9 million of net accounts receivable had been sold to
ServiceMaster Funding Company LLC, and of this amount $75.5 million was
subsequently sold to Falcon Asset Securitization Corporation under this
agreement. Cash proceeds of $75.3 million were received 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 is classified as
accounts receivable in the accompanying balance sheet. 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 marginal 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 was immaterial.

Statement of Financial Accounting Standards No. 140 (SFAS 140), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a Replacement of FASB Statement No. 125," provides accounting and reporting
standards for sales, securitization, and servicing of receivables and other
financial assets and extinguishments of liabilities. The aforementioned
transaction is in compliance with the requirements of SFAS 140.



                                       6
<PAGE>





Note 8: The business of the Company is primarily conducted through four
operating segments: TruGreen, Terminix, Home Maintenance and Improvement, and
Management Services. 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 unit provides
residential and commercial lawn care and landscaping services through the
TruGreen ChemLawn and TruGreen LandCare companies. The Terminix unit provides
domestic termite and pest control services to residential and commercial
customers. The Home Maintenance and Improvement unit includes American
Residential Services, American Home Shield, ServiceMaster Clean and Merry Maids.
This unit provides heating, ventilation and air conditioning, plumbing, and
cleaning services to residential and commercial customers as well as home
warranties to consumers. The Management Services unit provides a variety of
supportive management services to health care, education and commercial
accounts.

The Other Operations unit includes entities that are managed separately from the
four major units and aggregated together in accordance with SFAS 131 due to
their size or developmental nature. This unit includes the Company's
international operations which include Terminix Europe; ServiceMaster Employer
Services, a professional employer organization that provides clients with
administrative processing of payroll, workers' compensation insurance, health
insurance, unemployment insurance and other employee benefit plans;
WeServeHomes.com, a joint venture offering home services through the Internet;
the Company's headquarters operations; and certain non-core businesses that have
been sold or discontinued. Segment information as of and for the three months
ended March 31, 2001 and 2000 is presented below.

<TABLE>



                                                                THREE MONTHS
                                                               ENDED MARCH 31,
(IN THOUSANDS)
                                                               Home
                                                            Maintenance &       Management           Other
       2001               TruGreen           Terminix        Improvement         Services          Operations       Consolidated
-------------------    ---------------    ---------------  ----------------  --------------     ---------------    ---------------
<S>                      <C>                <C>              <C>                <C>                <C>               <C>
Revenue                  $  258,320         $  194,670       $  291,013         $  473,230         $  112,429        $1,329,662
Operating Income         $   16,957         $   25,406       $   20,017         $   14,691         $   (7,930)       $   69,141
Total Assets             $1,627,640         $  788,529       $  972,800         $  138,050         $  507,298        $4,034,317
Capital Employed         $1,459,555         $  625,496       $  660,468         $   54,768         $  216,543        $3,016,830
</TABLE>
<TABLE>

       2000
-------------------
<S>                      <C>                <C>              <C>                <C>                <C>               <C>
Revenue                  $  263,056         $  164,933       $  256,880         $  469,279         $  186,736        $1,340,884
Operating Income         $   32,239         $   20,527       $   19,047         $   16,476         $   (1,417)       $   86,872
Total Assets             $1,639,698         $  680,943       $  906,934         $  231,452         $  557,987        $4,017,014
Capital Employed         $1,448,163         $  519,305       $  603,711         $  126,609         $  373,732        $3,071,520



</TABLE>




                                       7
<PAGE>







                                          `
                         MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

FIRST QUARTER 2001 COMPARED TO FIRST QUARTER 2000

Revenue for the first quarter totaled $1.33 billion, one percent below the prior
year. Revenue growth was three percent, after adjusting for the impact of sold
or discontinued businesses. Operating income decreased 20 percent to $69.1
million, with margins decreasing to 5.2 percent from 6.5 percent. The decrease
in operating margins is primarily attributable to significantly lower operating
margins at TruGreen LandCare (the commercial landscape operations) and TruGreen
ChemLawn (the Company's lawn care operations). Also included in operating income
are the costs relating to the WeServeHomes.com initiative. These costs accounted
for three percent of the decrease in operating income and about 10 basis points
of the decrease in operating margins. As in the prior year, these costs have
been allocated to the Company's minority partner in WeServeHomes.com, Kleiner
Perkins, and are offset through minority interest income below the operating
income line.

Diluted earnings per share for the quarter declined from $.12 to $.10 and net
income decreased from $36.1 million to $29.2 million. The 2001 results include a
$.02 per share, or $6 million after-tax extraordinary gain resulting from the
repurchase of certain ServiceMaster corporate bonds. Excluding this
extraordinary item, net income and diluted earnings per share were $23.2 million
and $.08, respectively.

The Company had previously indicated an earnings outlook for 2001 of $.61 to
$.65 per share. While the business fundamentals and operating performance have
not changed significantly from the prior forecast, anticipated venture fund
gains of approximately $.03 to $.04 per share, which had been targeted to fund
investments in WeServeHomes.com, are no longer anticipated to materialize. As a
result, earnings in 2001 are likely to be near the bottom end of this range.

The TruGreen business unit includes lawn care operations performed under the
TruGreen ChemLawn brand name and landscaping services provided under the
TruGreen LandCare brand name. This combined unit reported revenue of $258
million, a decrease of two percent from $263 million in the prior year.
Operating income decreased to $17 million from $32 million last year. Revenue in
the lawn care business was affected by winter weather conditions that persisted
much later in 2001 than in the prior year, resulting in reduced production
levels. Revenue in the landscaping business was consistent with last year,
reflecting management's decision to enforce stricter profitability standards on
contract sales and renewals. In addition, management is actively repositioning
the business portfolio to increase its concentration on more predictable
maintenance services and less on construction services. Lower lawn care revenues
contributed to the reduced operating margins because of sub-optimal labor
utilization and fixed cost leverage. The lawn care operations have experienced
improved customer retention in the first quarter, however, this has been offset
by challenges from increased restrictions on telemarketing. The Company expects
to realize the full year benefit of price increases in the mid-single digits
which will be important to offset some of the increases experienced in the cost
structure last year. Operating margins in landscaping services were lower due to
integration challenges that had not yet begun to emerge in the prior year
period. Management has taken measures such as establishing stronger pricing
guidelines, instituting branch level operating controls and conducting increased
training for region and branch managers, which it believes will enhance future
operating performance. Capital employed increased one percent reflecting
acquisitions, partially offset by improved working capital management.


                                       8
<PAGE>


The Terminix business unit, which includes the domestic termite and pest control
services, reported an 18 percent increase in revenue to $195 million from $165
million in 2000 and operating income growth of 24 percent to $25 million from
$21 million last year. In January 2001, the Company acquired the Allied Bruce
Terminix companies, the Company's largest Terminix franchise and the fourth
largest pest control company in the United States. The total consideration
consisted of an equity interest in the Terminix subsidiary, which is
exchangeable into eight million ServiceMaster common shares and cash payments
due over nine years totaling $25 million. The growth at Terminix reflected both
the acquisition of Allied Bruce, which accounted for approximately one-half of
the revenue and operating growth for the quarter and a significant increase in
termite renewals reflecting the continuing migration to baiting systems, which
carry a higher market price. The margin improvement also reflected continued
branch and overhead efficiencies, as well as an increased mix of higher margin
termite renewals. Capital employed increased 20 percent due to acquisitions.

The Home Maintenance and Improvement business unit 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 the franchised operations, ServiceMaster Clean
and Merry Maids. This business unit achieved revenues of $291 million, an
increase of 13 percent from $257 million last year. Operating income increased 5
percent to $20 million compared with $19 million in the prior year. The combined
ARS operations achieved double-digit revenue growth resulting from strong
residential repair and replacement activity, continuing strength in commercial
construction and acquisitions. Internal growth in residential HVAC and plumbing
services was supported by successful marketing initiatives in the branches,
continuing growth in services performed for American Home Shield, as well as
price increases. American Home Shield reported double-digit growth in revenue
reflecting increasing customer awareness and demand for home warranty service,
broader geographic penetration, higher customer retention and modest price
increases. Strong new warranty sales in the quarter provided favorable
indications for future growth. Operating margins were lower than last year due
to a higher level of claim activity resulting from the colder weather conditions
compared with last year and overhead investments to support ongoing growth in
the business. The franchise operations, ServiceMaster Clean and Merry Maids,
achieved solid revenue and profit growth, reflecting the benefit of successful
marketing programs, national account relationships, and employee retention
initiatives. Capital employed in this unit increased 9 percent, primarily
reflecting acquisitions at ARS.

The Management Services business unit serves institutional healthcare, education
and commercial facilities. The business unit reported revenue of $473 million,
an increase of one percent compared to $469 million last year, with operating
income decreasing 11 percent to $15 million from $16 million in the prior year.
Reduced profits in the healthcare and education markets resulted from prior year
terminations, as well as challenges in a significant SiteService account which
were partially offset by revenue growth and improving margins in the commercial
market. Capital employed decreased 57 percent primarily reflecting the
securitization of a significant portion of this unit's receivables as well as a
strong reduction in working capital.

Other  Operations  consists  of the  Company's  international  operations  which
include  Terminix  Europe;   Employer   Services  (the   professional   employer
organization);   WeServeHomes.com,   the  Company's  internet  initiative;   the
Company's  headquarters  operations;  and certain non-core  businesses that have
been sold or discontinued. Revenues and capital employed declined reflecting the
impact of sold or discontinued  operations.  The decrease in operating  income
reflects in part increased spending at WeServeHomes.com.


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Cost of services rendered and products sold decreased one percent for the
quarter and decreased as a percentage of revenue to 80.6 percent in 2001 from
80.9 percent in 2000. Selling and administrative expenses increased 12 percent
and increased as a percentage of revenue to 14.2 percent from 12.6 percent in
2000.

Interest expense increased from the prior year, primarily due to higher rates on
the Company's revolving credit facility and the impact of refinancing a portion
of floating-rate borrowings in the public bond market in the second quarter last
year.

The Company is in the process of performing an in-depth strategic review of its
portfolio of businesses and this process will focus on understanding how each of
the businesses can create value as part of a strategic enterprise. Concurrent
with this overall strategy review, the Company expects to implement operational
imperatives that will focus on ways to improve customer retention, the quality
of service and employee loyalty.

FINANCIAL POSITION

Net cash provided from operations increased to $114 million in the quarter
compared with $21 million in the prior year. The significant increase reflects
the sale of $75.5 million of accounts receivable through the Company's
securitization program and lower working capital usage which provided $25
million in cash flow. The improvements in working capital usage reflect strong
receivable collections in the landscape business, increased customer prepayment
in the lawn care operation, and sales growth at American Home Shield which
improved the deferred revenue account. There was a $21 million tax refund in the
quarter related to prior year tax over payments which is comparable to the tax
refund received last year in the quarter. 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 the proceeds from the accounts
receivable securitization financing program and strong cash flows that were used
to fund acquisitions and property additions. 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.

Accounts receivable decreased from year-end levels, reflecting the sale of
receivables through the securitization financing program and 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. In addition, the
Company capitalizes sales commission and other direct contract acquisition costs
relating to termite baiting and pest contracts.


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Deferred revenues grew significantly reflecting increases in customer
prepayments for lawn care and 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 timing in the funding
for those expenditures. The Company has no material capital commitments at this
time.

The increase in minority interest 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 February 2001, Kleiner Perkins, the Company's minority partner in
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 WeServeHomes.com
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 March 31, 2001 and December 31,
2000, reflecting earnings growth which was offset by cash dividends. Cash
dividends paid directly to shareholders totaled $30 million or $.10 per share
for the three months ended March 31, 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 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; CONSOLIDATION OF HOSPITALS IN THE HEALTHCARE
MARKET; THE COST AND LENGTH OF TIME TO INTEGRATE ACQUIRED BUSINESSES; UNEXPECTED
CHANGES IN OPERATING COSTS; THE CONDITION OF THE U.S. ECONOMY; AND OTHER FACTORS
DISCUSSED ABOVE 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 May 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 filed a notice of
appeal that same day. On June 13, 2000, Mr. Martin filed a notice of
cross-appeal. The appeal has 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. We cannot predict when the court of appeals will issue its
decision, but we believe a decision will be issued by the end of the summer.
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 2:  Changes in Securities and Use of Proceeds

(c) On January 9, 2001, in connection with Jonathan P. Ward's agreement to
become the President and Chief Executive Officer of ServiceMaster, ServiceMaster
sold a 5.50% convertible debenture due January 9, 2011 to Mr. Ward with a face
value of $1,050,000. The debenture becomes convertible into 20,000 shares of
common stock of ServiceMaster on December 31, of each of the years 2001 through
2005. The debenture was sold pursuant to the exemption from registration
provided by section 4(2) of the Securities Act of 1933. ServiceMaster financed
the purchase of the debenture with a 5.50% full recourse loan of $1,050,000 to
Mr. Ward.




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Item 5. Other Information

In 2000, ServiceMaster adopted Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition", and reported new year end segments and disclosures. To supplement
the year end information and disclosures, the Company is providing the following
information in Exhibits 99.1 and 99.2 to this Form 10-Q filing:

(a)  the quarterly consolidated income statements for 2000 reflecting the
     restatement impacts relating to the adoption of SAB 101, and

(b)  quarterly 2000 financial information by business unit.




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ITEM 6(A):    EXHIBITS


Exhibit No.                Description of Exhibit

10.1     ServiceMaster  2001 Directors Stock Plan  (incorporated by reference to
         Exhibit B to the Proxy Statement (SEC File No. 1-4762) filed with the
         Securities and Exchange Commission on March 23, 2001)

10.2     ServiceMaster 2001 Long-Term Performance Award Plan, as amended March
         16, 2001

10.3     ServiceMaster Deferred Compensation Plan, as amended and restated
         effective March 16, 2001

99.1     Consolidated Quarterly Results

99.2     Quarterly Business Unit Disclosures



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

   The Company did not file any current reports on Form 8-K during the
   quarter ended March 31, 2001.

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