UNITED STATES
                           SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, D.C. 20549


                                      FORM 10-Q/A



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

                For the quarterly period ended September 30, 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)

3250 Lacey Road, Downers Grove, Illinois                     60515-1700
(Address of principal executive offices)                     (Zip Code)

                                  630-663-2000
              (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: 301,344,000 shares of common stock on November 7, 2002.


Explanatory Note:
This  amendment  is being  filed to reflect  the  restatement  of the  Company's
unaudited condensed  consolidated  financial statements,  as discussed in Note 2
thereto, and other information related to such restated financial statements.



<PAGE>




                                TABLE OF CONTENTS

                                                                            Page
                                                                             NO.

THE SERVICEMASTER COMPANY (Registrant) -

PART I.  FINANCIAL INFORMATION

Item 1 : Financial Statements

Condensed Consolidated Statements of Income for the three and nine months ended
September 30, 2002 (Restated) and
   September 30, 2001 (Restated)                                               2

Condensed Consolidated Statements of Financial Position as of
   September 30, 2002 (Restated) and December 31, 2001 (Restated)              4

Condensed Consolidated Statements of Cash Flows for the nine months ended
   September 30, 2002 (Restated) and
   September 30, 2001 (Restated)                                               5

Notes to Condensed Consolidated Financial Statements (Restated)                6

Item 2: Management Discussion and Analysis of Financial
   Condition  and Results of Operations                                       17

Item 3:  Quantitative and Qualitative Disclosures About
     Market
Risk
24

Item 4: Controls and Procedures                                               25


PART II.  OTHER INFORMATION

Item 6:  Exhibits and Reports on Form 8-K                                     26

Signature                                                                     28


Exhibit 99.1:  Certification of Chief Executive Officer Pursuant
to Section 1350 of  Chapter 63 of Title 18 of the
United States Code                                                            31

Exhibit 99.2:  Certification of Chief Financial Officer Pursuant
to Section 1350 of Chapter 63 of Title 18 of the
United States Code                                                            32








                                       1
<PAGE>








<TABLE>




                          PART I. FINANCIAL INFORMATION

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

                                                                             Three Months Ended             Nine Months Ended
                                                                               September 30,                    September 30,
                                                                           2002              2001           2002           2001
                                                                       (Restated 4)     (Restated 4)    (Restated 4)   (Restated 4)
                                                                       -------------    ------------   ------------    -------------
<S>                                                                     <C>             <C>             <C>             <C>
OPERATING REVENUE ..................................................    $ 1,010,661     $   981,284     $ 2,779,861     $ 2,724,179

OPERATING COSTS AND EXPENSES:
Cost of services rendered and products sold ........................        685,893         671,961       1,897,085       1,883,448
Selling and administrative expenses ................................        197,647         184,947         576,977         530,742
Goodwill, trade name and other intangible amortization (1) .........          2,126          17,872           6,432          53,225
                                                                        -----------     -----------     -----------     -----------
Total operating costs and expenses .................................        885,666         874,780       2,480,494       2,467,415
                                                                        -----------     -----------     -----------     -----------

OPERATING INCOME ...................................................        124,995         106,504         299,367         256,764

NON-OPERATING  EXPENSE (INCOME):
Interest expense ...................................................         17,030          30,948          61,296          97,347
Interest and investment income .....................................           (405)         (5,461)         (5,303)        (11,034)
Minority interest and other expense, net ...........................          1,905           2,248           5,489           3,312
                                                                        -----------     -----------     -----------     -----------

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ..............        106,465          78,769         237,885         167,139
Provision for income taxes .........................................         39,477          33,727          87,602          71,628
                                                                        -----------     -----------     -----------     -----------

INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY
     ITEMS .........................................................         66,988          45,042         150,283          95,511

Income from discontinued operations, net of income taxes (2) .......          1,095           7,490           1,173          16,973
Extraordinary gain (loss), net of income taxes (3) .................              -               -          (9,229)          6,003
                                                                        -----------     -----------     -----------     -----------
NET INCOME .........................................................    $    68,083     $    52,532     $   142,227     $   118,487
                                                                        ===========     ===========     ===========     ===========

PER SHARE:
BASIC EARNINGS PER SHARE:
Income from continuing operations before extraordinary items .......    $      0.22     $      0.15     $      0.50     $      0.32

Discontinued operations, net (2) ...................................              -            0.03               -            0.06
Extraordinary gain (loss) (3) ......................................              -               -           (0.03)           0.02
                                                                        -----------     -----------     -----------     -----------
                                                                        $      0.23     $      0.18     $      0.47     $      0.40
                                                                        ===========     ===========     ===========     ===========
SHARES .............................................................        301,093         298,925         300,805         298,425


DILUTED EARNINGS PER SHARE:
Income from continuing operations before extraordinary items ........   $      0.22     $      0.15     $      0.49     $      0.32

Discontinued operations, net (2) ....................................             -            0.02               -            0.06
Extraordinary gain (loss) (3) .......................................             -               -           (0.03)           0.02
                                                                         ------------    -----------    ------------     -----------
                                                                        $      0.22     $      0.17     $      0.46    $       0.39
                                                                         ============    ===========    ============     ===========
SHARES ..............................................................       313,649         312,524         315,155         302,844

Dividends per share .................................................   $     0.105     $      0.10     $     0.305    $       0.30
                                                                         ============    ===========    ============     ===========



</TABLE>



                                       2
<PAGE>






(1) The Company adopted Statement of Financial  Accounting  Standards (SFAS) No.
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 $15.4  million  ($10.4  million,  after-tax)  and $45.9  million
($31.1 million,  after-tax) for the three and nine month periods ended September
30, 2001, respectively.

(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 2001. 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
LandCareConstruction  and Certified  Systems,  Inc., as well as certain Terminix
operations  in Europe.  During the third  quarter of 2002,  the Company sold its
remaining  European  Terminix  operations.  These  operations  are classified in
"Discontinued operations" for all periods presented.

(3) The Company  purchased a portion of its public debt securities in the second
quarter of 2002 and in the first  quarter of 2001.  The Company has  recorded an
extraordinary gain (loss) from the early extinguishment of debt related to these
repurchases.  The Company  intends to adopt SFAS 145  beginning  in fiscal 2003.
Adoption  of  SFAS  145 in  2003  will  result  in the  reclassification  of the
extraordinary gain/loss into income from continuing operations.

(4) See Note 2 in the Notes to the Condensed  Consolidated  Financial Statements
for the basis of the restatement and the financial statement impact.



            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS









                                       3
<PAGE>




<TABLE>





                            THE SERVICEMASTER COMPANY
       CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(IN THOUSANDS)
                                                                               As of Sept.30,      As of Dec. 31,
ASSETS                                                                        2002 (Restated 1)  2001 (Restated 1)
                                                                                -------------      --------------
CURRENT ASSETS:
<S>                                                                              <C>                <C>
Cash and cash equivalents ....................................................   $   170,178        $   402,644
Marketable securities ........................................................        71,789             72,429
Receivables, less allowance of $31,003 and $28,397, respectively .............       397,164            340,935
Inventories ..................................................................        73,634             68,036
Prepaid expenses, deferred costs and other assets ............................       104,092             80,738
Deferred taxes and income taxes receivable ...................................       118,558             90,200
Assets of discontinued operations ............................................         8,604             64,068
                                                                                 -----------        -----------
       Total Current Assets ..................................................       944,019          1,119,050
                                                                                 -----------        -----------
PROPERTY AND EQUIPMENT:
   At cost ...................................................................       480,480            469,140
   Less: accumulated depreciation ............................................      (289,122)          (272,930)
                                                                                 -----------        -----------
     Net property and equipment ..............................................       191,358            196,210
                                                                                 -----------        -----------

OTHER  ASSETS:
Goodwill .....................................................................     1,912,605          1,904,178
Intangible assets, primarily trade names .....................................       258,826            261,136
Notes receivable .............................................................        57,953             59,204
Long-term securities and other assets ........................................        64,883             81,467
                                                                                 -----------        -----------
       Total Assets ..........................................................   $ 3,429,644        $ 3,621,245
                                                                                 ===========        ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable .............................................................   $    94,993        $    97,251
Accrued liabilities:
   Payroll and related expenses ..............................................        92,067             83,182
   Self-insured claims and related expenses ..................................        81,050             63,819
   Income taxes payable ......................................................        41,771                 --
   Other .....................................................................        92,435            131,780
Deferred revenues ............................................................       378,346            343,873
Liabilities of discontinued operations .......................................        31,675             50,449
Current portion of long-term debt ............................................        31,404             34,944
                                                                                 -----------        -----------
       Total Current Liabilities .............................................       843,741            805,298
                                                                                 -----------        -----------

LONG-TERM DEBT ...............................................................       810,719          1,120,249

LONG-TERM LIABILITIES:
     Deferred taxes ..........................................................       259,780            233,000
     Liabilities of discontinued operations ..................................        28,500             50,600
     Other long-term obligations .............................................       120,568            102,234
                                                                                 -----------        -----------
        Total Long-Term Liabilities ..........................................       408,848            385,834
                                                                                 -----------        -----------

MINORITY INTEREST ............................................................       101,851            102,677

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Common stock $0.01 par value, authorized 1 billion shares; issued
     315,753 and 314,538 shares, respectively ................................         3,158              3,145
Additional paid-in capital ...................................................     1,050,467          1,039,228
Retained earnings ............................................................       372,956            322,103
Accumulated other comprehensive loss .........................................        (3,024)            (2,496)
Restricted stock .............................................................          (446)              (581)
Treasury stock ...............................................................      (158,626)          (154,212)
                                                                                 -----------        -----------
       Total Shareholders' Equity ............................................     1,264,485          1,207,187
                                                                                 -----------        -----------
       Total Liabilities and Shareholders' Equity ............................   $ 3,429,644        $ 3,621,245
                                                                                 ===========        ===========
</TABLE>

(1) See Note 2 in the Notes to the Condensed  Consolidated  Financial Statements
for the basis of the restatement and the financial statement impact.

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       4
<PAGE>



<TABLE>


                            THE SERVICEMASTER COMPANY
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)
                                                                                     Nine Months Ended
                                                                                       September 30,
                                                                                 2002                2001
                                                                             (Restated 1)          (Restated 1)
                                                                              -----------          -----------
<S>                                                                           <C>                  <C>
CASH AND CASH EQUIVALENTS AT JANUARY 1 ....................................   $ 402,644            $  42,669

CASH FLOWS FROM OPERATIONS:
NET INCOME ................................................................     142,227              118,487
     Adjustments to reconcile net income to net cash flows from operations:
        Income from discontinued operations ...............................      (1,173)             (16,973)
        Extraordinary (gain) loss .........................................       9,229               (6,003)

        Depreciation expense ..............................................      37,124               36,782
        Amortization expense ..............................................       6,432               53,225
        Deferred income tax expense .......................................      69,990               77,667

         Change in working capital, net of acquisitions:
            Receivables ...................................................     (53,594)             (72,073)
            Sale of receivables ...........................................          --               92,500
            Inventories and other current assets ..........................     (31,504)             (32,522)
            Accounts payable ..............................................      (1,370)             (12,697)
            Deferred revenues .............................................      34,222               43,390
            Accrued liabilities ...........................................      29,702                6,514
            Tax refund from prior years payments ..........................          --               21,000
            Other, net ....................................................       3,259                3,007
                                                                              ---------            ---------
NET CASH PROVIDED FROM OPERATIONS .........................................     244,544              312,304
                                                                              ---------            ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Property additions ..................................................     (41,802)             (32,231)
      Sale of equipment and other assets ..................................       2,031                7,837
      Business acquisitions, net of cash acquired .........................     (10,132)             (23,298)
      Proceeds from business sales and minority interests .................          --                4,925
      Notes receivable, financial investments and securities ..............      (1,512)             (18,417)
      Proceeds from sale of European businesses ...........................      30,500                   --
                                                                              ---------            ---------
NET CASH USED FOR INVESTING ACTIVITIES ....................................     (20,915)             (61,184)
                                                                              ---------            ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net payments of debt ................................................    (338,129)            (240,120)
      Purchase of ServiceMaster stock .....................................     (14,529)              (1,308)
      Shareholders' dividends .............................................     (91,374)             (88,921)
      Other, net ..........................................................      15,386                9,009
                                                                              ---------            ---------
NET CASH USED FOR FINANCING ACTIVITIES ....................................    (428,646)            (321,340)
                                                                              ---------            ---------

                                                                              ---------            ---------
CASH PROVIDED FROM (USED FOR) DISCONTINUED OPERATIONS .....................     (27,449)              54,696
                                                                              ---------            ---------

CASH DECREASE DURING THE PERIOD ...........................................    (232,466)             (15,524)
                                                                              ---------            ---------

CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 .................................   $ 170,178            $  27,145
                                                                              =========            =========

</TABLE>


(1) See Note 2 in the Notes to the Condensed  Consolidated  Financial Statements
for the basis of the restatement and the financial statement impact.

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       5
<PAGE>




                            THE SERVICEMASTER COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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

NOTE 2: The condensed  consolidated  financial  statements have been prepared by
the Company in accordance  with  generally  accepted  accounting  principles and
pursuant to the rules and regulations of the Securities and Exchange Commission.
The  Company  suggests  that  the  quarterly  condensed  consolidated  financial
statements be read in conjunction with the consolidated financial statements and
the notes  thereto  included  in the  Company's  most  recent  Annual  Report to
Shareholders and the Annual Report to the Securities and Exchange  Commission on
Form  10-K.  The  condensed   consolidated   financial  statements  reflect  all
adjustments,  which are in the  opinion of  management,  necessary  for the fair
presentation of the financial position, results of operations and cash flows for
the interim  periods.  The results of operations  for any interim period are not
necessarily indicative of the results which might be obtained for a full year.

RESTATEMENT The Company has restated its consolidated  financial  statements for
the year ended  December 31, 2001 as well as the previously  reported  quarterly
results  for  2002  and  2001.  Subsequent  to the  original  issuance  of these
condensed  consolidated  financial  statements,  management  determined that the
historical  accounting  treatment relating to the items below required revision.
The table below presents the net income impacts from the restatement.
<TABLE>

                                       Three Months        Three Months      Nine Months       Nine Months
                                           Ended              Ended             Ended             Ended
(In millions, except per share data)   Sept. 30, 2002     Sept. 30, 2001    Sept. 30, 2002    Sept. 30, 2001

--------------------------------------------------------------------------------------------------------------
Continuing Operations:
<S>                                        <C>                <C>              <C>              <C>
AHS deferred acquisition costs             $     -            $ (0.7)          $    -           $ (5.3)
Trade name license fee                           -                 -                -                -
Interim accounting (TruGreen)                  7.6               8.7              3.6             (0.6)
Other, net                                     1.6               1.5              4.3              4.3
Tax adjustment from reincorporation              -              (0.2)               -             (0.6)
---------------------------------------------------------------------------------------------------------------
  Income Impact                            $   9.2            $  9.3           $  7.9           $ (2.2)
  Diluted EPS Impact                       $  0.03            $ 0.03           $ 0.03           $(0.01)

Discontinued Operations:
  Income Impact                            $   0.6            $ (2.9)          $  0.5           $ (5.3)
  Diluted EPS Impact                       $     -            $(0.01)          $    -           $(0.02)

Cumulative effect of accounting change:
  Income Impact                            $     -            $    -           $ 44.6           $    -
  Diluted EPS Impact                       $     -            $    -           $ 0.15           $    -

</TABLE>

A summary of the significant effects of the restatement is as follows:
<TABLE>

                                                    Three Months Ended                Three Months Ended
                                                    September 30, 2002                September 30, 2001
                                              --------------------------------------------------------------
                                              As Previously                      As Previously
(in thousands, except per share data)            Reported      As Restated          Reported     As Restated
-------------------------------------------------------------------------------------------------------------

<S>                                               <C>             <C>                  <C>           <C>
Operating revenue                                 $1,013,484      $1,010,661           $981,552      $981,284

Operating income                                     108,752         124,995             88,594       106,504

Income  from  continuing  operations  before
  income taxes                                        91,429         106,465             62,807        78,769

Income from continuing operations                     57,810          66,988             35,730        45,042

Discontinued operations, net                             527           1,095             10,393         7,490
-------------------------------------------------------------------------------------------------------------
Net income                                           $58,337         $68,083            $46,123       $52,532
=============================================================================================================

Diluted earnings per share:
Income from continuing operations                      $0.19           $0.22              $0.12         $0.15

Discontinued operations, net                               -               -               0.03          0.02
-------------------------------------------------------------------------------------------------------------
Diluted earnings per share                             $0.19           $0.22              $0.15         $0.17
=============================================================================================================
</TABLE>


                                       6
<PAGE>

<TABLE>


                                                          As of                             As of
                                                    September 30, 2002                December 31, 2001
                                              ---------------------------------------------------------------
                                              As Previously                      As Previously
                                                 Reported      As Restated          Reported     As Restated
                                              ---------------------------------------------------------------
<S>                                                 <C>             <C>              <C>           <C>
Current assets                                      $937,931        $944,019         $1,131,824    $1,119,050
Net property, plant, and equipment                   173,686         191,358            180,937       196,210
Other long-term assets                             2,306,172       2,294,267          2,361,978     2,305,985

-------------------------------------------------------------------------------------------------------------
Total assets                                      $3,417,789      $3,429,644         $3,674,739    $3,621,245
=============================================================================================================

Current liabilities                                 $840,668        $843,741           $796,113      $805,298
Long-term debt                                       795,987         810,719          1,105,518     1,120,249
Long-term liabilities                                446,833         408,848            449,470       385,834
Minority interest                                    101,851         101,851            102,677       102,677

Total shareholders' equity                         1,232,450       1,264,485          1,220,961     1,207,187

-------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity        $3,417,789      $3,429,644         $3,674,739    $3,621,245
=============================================================================================================
</TABLE>

<TABLE>

                                                    Nine Months Ended                  Nine Months Ended
                                                    September 30, 2002                September 30, 2001
                                              ---------------------------------------------------------------
                                              As Previously                      As Previously
(in thousands, except per share data)          Reported (1)    As Restated          Reported      As Restated
-------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>                <C>            <C>
Operating revenue                                 $2,779,676      $2,779,861         $2,716,830     $2,724,179

Operating income                                     283,672         299,367            255,177        256,764

Income  from  continuing  operations  before
  income Taxes                                       225,032         237,885            169,190        167,139

Income from continuing operations before
  extraordinary items                                142,345         150,283             97,755         95,511

Discontinued operations, net                             684           1,173             22,305         16,973
Extraordinary gain (loss), net                       (9,229)         (9,229)              6,003          6,003
Cumulative effect of accounting change, net         (44,577)               -                  -              -
--------------------------------------------------------------------------------------------------------------
Net income                                           $89,223        $142,227           $126,063       $118,487
==============================================================================================================
Diluted earnings per share:
Income from continuing operations before
  extraordinary items                                  $0.46           $0.49              $0.32          $0.32

Discontinued operations, net                               -               -               0.07           0.05
Extraordinary gain (loss), net                        (0.03)          (0.03)               0.02           0.02
Cumulative effect of accounting change, net           (0.15)               -                  -              -
--------------------------------------------------------------------------------------------------------------
Diluted earnings per share                             $0.29           $0.46              $0.42          $0.39
==============================================================================================================
</TABLE>




(1)  Includes the  cumulative  effect of the change in  accounting  principle at
     American Home Shield.

AMERICAN HOME SHIELD DEFERRED ACQUISITION COSTS
In July 2002, the Company changed its method of accounting for deferred customer
acquisition  costs in its  American  Home  Shield  business  from  SFAS No.  60,
"Accounting  and  Reporting  by  Insurance  Enterprises,"  pursuant to which the
Company believed it was appropriate to amortize deferred  acquisition costs over
the expected customer life to FASB Technical Bulletin No. 90-1,  "Accounting for
Separately Priced Extended Warranty and Product Maintenance Contracts," pursuant
to which  deferred  acquisition  costs are amortized  over the initial  contract
life.

The new method of  accounting  reduced  after-tax  earnings  by $.03 per diluted
share in 2002,  but had no  material  impact on cash flow in  current  or future
years. In the second quarter of 2002, the Company retroactively  recorded to the
first  quarter of 2002 a  cumulative  charge of $45  million  ($.15 per  diluted
share) to effect this change.

Following  discussions with the Staff of the Securities and Exchange Commission,
the Company has restated prior years to account for deferred  acquisition  costs
in  accordance  with  FASB  Technical  Bulletin  No.  90-1.  The  effect of this
restatement is to eliminate the cumulative  charge for the accounting change and
reduce full year income from  continuing  operations by $8.5 million or $.03 per
diluted  share in 2001,  and $6.1 million or $.02 per diluted  share in 2000. In
addition, this change results in a reduction of retained earnings of $30 million
at January 1, 2000. This restatement  reduced income from continuing  operations
by $.7  million  for the third  quarter  of 2001 and $5.3  million  for the nine
months ended September 30, 2001.

                                       7
<PAGE>



TRADE NAME LICENSE FEE
In connection  with the sale of its Management  Services  business in the fourth
quarter of 2001,  the Company  entered into a three-year  licensing  arrangement
with  ARAMARK  Corporation  for the use of the  ServiceMaster  trade name.  This
agreement was valued at $15 million and accordingly, a like amount was allocated
from the purchase price.  The Company intended to recognize this amount over the
three-year  contractual  period,  and as such,  recognized  $2  million  related
thereto in each of the first and second  quarters of 2002. In November 2002, the
Company  announced that it had determined  that it was  appropriate to recognize
the entire $15 million  licensing fee in the fourth  quarter of 2001. The effect
of this correction is to increase full year income from continuing operations by
$9 million and diluted  earnings per share by $.03 in 2001, and to reduce income
from  continuing  operations  by $2.5 million and diluted  earnings per share by
$.01 in the first half of 2002. The impact of this  restatement was reflected in
the  Company's  Form 10-Q filing of November 14, 2002.  There is no  restatement
reflected for this item in the amended Form 10-Q filing.

INSURANCE (TRUGREEN)
In January 2002, the Company reported that it had recognized a $9 million pretax
expense in 2001  relating to a revised  estimate of the 2000  insurance  reserve
requirements.  Net income has been  restated  for this item which  results in an
increase to full year  income from  continuing  operations  of $3.7  million (or
$.01) in 2001 and a decrease to income from  continuing  operations  of the same
amount in 2000.  The  remaining  adjustment  results in a decrease  to full year
income from  discontinued  operations of $1.1 million in 2000. This  restatement
impacted the fourth quarter of 2001.

REINCORPORATION TAX
Prior to 1997,  the  Company was in  partnership  form and  therefore  was not a
federal taxpayer. Consequently, the Company did not record deferred tax balances
reflecting  the  differences  between  the book and tax basis of its  assets and
liabilities. When the Company converted to corporate form in 1997, it realized a
significant step-up in the tax basis of its assets,  which was largely reflected
as an increase in the basis of the tax  intangibles and provided for significant
tax deductions over the next 15 years. In accounting for this event in 1997, the
Company recorded the net deferred tax asset associated with differences  between
the book and tax basis of its tangible assets and liabilities.  As it related to
intangible  assets,  the  Company  made a  determination  that the tax  basis of
intangibles  equaled  the  overall  book  balance  of  intangible  assets  on an
enterprise  basis.  Subsequently it was determined that intangible assets needed
to be  considered  at the  individual  business  unit level which  resulted in a
situation where tax basis exceeded book basis in certain units.  This difference
created an  additional  deferred tax asset.  The Company  restated the financial
statements to reflect the deferred tax asset as if it had been recorded in 1997.

This change results in an increase to retained earnings as of January 1, 2000 of
$92.6  million,  and an increase to the tax full year  provision for  continuing
operations of $.8 million in both 2001 and 2000 and an increase to the full year
tax  provision  for  discontinued  operations of $.8 million and $1.2 million in
2001 and 2000, respectively. This restatement also results in an increase to the
tax  provision  relating  to the gain on certain  businesses  sold in the fourth
quarter of 2001 of $45.8 million.  The net impact of these items was to increase
deferred tax assets by $33.4  million and equity by $43.2 million as of December
31, 2001. This restatement increased the tax provision for continuing operations
by $.2  million and $.6  million  for the third  quarter  and nine months  ended
September  30,  2001,   respectively.   In  addition,   the  tax  provision  for
discontinued  operations  increased by $.3 million and $.8 million for the third
quarter and nine months ended September 30, 2001, respectively.

OTHER, NET
Other items primarily  relate to adjustments in accruals,  timing of revenue and
expense items and other miscellaneous  items. The Company also determined it was
appropriate to expense the costs associated with telephone directory  placements
when the directory is published rather than expensing the cost over the contract
period.  In addition,  certain  operating leases of constructed  properties have
been included in the balance sheet as assets with associated debt. The financial
statements  have been  restated from the amounts  previously  reported for these
items. The restatement related to these items resulted in income from continuing
operations  increasing  $1.6 million and $1.5 million for the third quarter 2002
and 2001,  respectively.  For the nine months ended September 30, 2002 and 2001,
income from  continuing  operations  increased by $4.3 million in both  periods.
Income from  discontinued  operations  increased by $.6 million and decreased by
$2.7  million for the


                                       8
<PAGE>


third quarter 2002 and 2001,  respectively.  For the nine months ended September
30, 2002 and 2001, income from discontinued  operations increased by $.5 million
and decreased $4.5 million, respectively.

INTERIM ACCOUNTING
TruGreen  ChemLawn  incurs  pre-season  advertising  costs and annual repair and
maintenance  procedures  in the first  quarter.  These  costs are  deferred  and
recognized as expense in proportion to the related  revenues.  Full-year results
are not affected.  The quarterly information for 2002 and 2001 has been restated
to treat certain costs that were previously  deferred,  as current period costs.
There was no impact on  full-year  results for 2002 and 2001 as a result of this
change.  This  restatement   resulted  in  income  from  continuing   operations
increasing  by $7.6 million and $8.7  million for the third  quarter of 2002 and
2001,  respectively,  and  increasing by $3.6 million and decreasing $.6 million
for the nine months ended September 30, 2002 and 2001, respectively.

NOTE 3: The Company has  identified the most  important  accounting  policies in
order to portray its financial condition and results of operations. These relate
primarily to revenue recognition and the deferral of customer acquisition costs.
The following  revenue  recognition  policies  have not changed since  year-end.
Revenues  from  lawn  care,  non-baiting  termite,  pest  control,   heating/air
conditioning and plumbing  services are recognized as the services are provided.
Revenues from  landscaping  services are  recognized  based upon agreed  monthly
contract   payments  or  when  services  are   performed   for   non-contractual
arrangements.  Revenues from the Company's  commercial  installation  contracts,
primarily  relating to HVAC,  are  recognized  on the  percentage  of completion
method in the ratio that total  incurred  costs bear to total  estimated  costs.
Fees from home warranty and termite baiting contracts are recognized as revenues
over the life of the  contract in  proportion  to the direct  costs  (service or
claim), which are expensed as incurred.  Franchised revenues (which in aggregate
represents  approximately  three  percent  of  consolidated  totals)  consist of
initial  franchise  fees and  continuing  monthly fees based upon the franchisee
revenue.   Revenue  is  recognized   when  reported  from  the   franchisee  and
collectibility is assured.

Customer  acquisition costs, which are incremental and direct costs of obtaining
the customer,  relating to several of the  Company's  contracts are deferred and
amortized  over the life of the contract,  in proportion to revenue  recognized.
These costs  include  sales  commissions  and direct  selling costs which can be
shown to have resulted in a successful sale.

TruGreen ChemLawn has significant seasonality to its business. In the winter and
early spring,  this business  sells a series of lawn  applications  to customers
which are  rendered  primarily  in March  through  October.  The Company  incurs
incremental  selling  expenses at the beginning of the year that directly relate
to successful  sales in which the revenues will be recognized in later quarters.
This business also defers, on an interim basis, pre-season advertising costs and
annual  repairs  and  maintenance  procedures  that are  performed  in the first
quarter. These costs are deferred and recognized  approximately in proportion to
the contract revenue over the production season, and are not deferred beyond the
calendar year-end.

As noted  above,  TruGreen's  pre-season  advertising  costs  are  deferred  and
recognized  approximately  in proportion to the contract  revenue over the year.
These costs are not deferred  beyond the calendar  year-end.  Beginning in 2002,
the cost of direct-response advertising at Terminix is capitalized and amortized
over its expected period of future benefits.  This  direct-response  advertising
consists primarily of direct-mail promotions,  for which the cost is capitalized
and amortized over the one-year customer contract life.

The preparation of the financial  statements requires management to make certain
estimates  and  assumptions   required  under  generally   accepted   accounting
principles which may differ  materially from the actual results.  Disclosures in
the 2001 Annual Report  presented the significant  areas that require the use of
management's  estimates and discussed how  management  formed its judgment.  The
areas   discussed   included  the  allowance  for   receivables,   accruals  for
self-insured retention limits related to medical, workers compensation, auto and
general liability  insurance,  the possible outcome of litigation and the useful
lives for depreciation  and  amortization  expense and the valuation of tangible
and  intangible   assets.   There  have  been  no  changes  in  these  areas  or
methodologies in 2002.

NOTE 4: The  Company  carries  insurance  policies on  insurable  risks which it
believes to be appropriate.  The Company  generally has  self-insured  retention
limits and has obtained fully insured layers of coverage above


                                       9
<PAGE>

such self-insured retention limits.  Accruals for self-insurance losses are made
based on the Company's claims experience and actuarial assumptions.  The Company
has certain liabilities with respect to existing or potential claims,  lawsuits,
and other  proceedings.  The Company  accrues for these  liabilities  when it is
probable  that future  costs will be incurred  and such costs can be  reasonably
estimated.

The  Company  believes  that  other  legal  proceedings  and  currently  pending
litigation  arising in the ordinary  course of business will not have a material
effect on the consolidated financial statements.

NOTE 5: In June 2001,  the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standards  (SFAS) 142,  "Goodwill  and Other
Intangible  Assets".  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.  In accordance with SFAS 142, the Company discontinued the
amortization  of goodwill  and  indefinite  lived  intangible  assets  effective
January 1, 2002.  Goodwill  and  intangible  assets that are not  amortized  are
subject  to  at  least  an  annual  assessment  for  impairment  by  applying  a
fair-value-based  test. The Company completed its initial assessment of goodwill
impairment in the second  quarter of 2002 and the testing  concluded  that there
were no  impairment  issues.  Estimated  fair  value  was  determined  for  each
reporting unit by utilizing the expected  present value of the future cash flows
of the units. In all instances,  the estimated fair value of the reporting units
exceeded their book values.  The Company will perform  impairment  testing on an
annual basis and may test for  impairment on a more frequent basis if management
believes  events have changed  resulting  in a reporting  units fair value being
reduced below its book value.  In accordance  with SFAS 142, the following table
provides summarized transitional information for the periods ended September 30,
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                    Nine Months Ended
                                                         September 30,                         September 30,
                                                ---------------------------------      -------------------------------
(in thousands, except per share data)                  2002              2001                2002              2001
                                                ---------------    --------------      -------------     -------------
<S>                                                   <C>               <C>                <C>               <C>
Reported operating income                             $124,995          $106,504           $299,367          $256,764
Add back:  Goodwill and trade name
  amortization                                               -            15,443                  -            45,893
                                                ---------------    --------------      -------------     -------------
Operating income as adjusted under
   SFAS 142                                           $124,995          $121,947           $299,367          $302,657
                                                ===============    ==============      =============     =============
Reported income from continuing
  operations before extraordinary
  gain (loss)                                          $66,988           $45,042           $150,283           $95,511
Add back:  Goodwill and trade name
  amortization, net of tax                                   -            10,445                  -            31,140
                                                ---------------    --------------      -------------     -------------
Income from continuing operations
  before extraordinary gain/loss as
  adjusted under SFAS 142                               66,988            55,487            150,283           126,651
Discontinued operations, net of taxes                    1,095             7,490              1,173            16,973
Extraordinary gain/(loss), net of taxes                      -                 -            (9,229)             6,003
                                                ---------------    --------------      -------------     -------------
Net income as adjusted under SFAS 142                  $68,083           $62,977           $142,227          $149,627
                                                ===============    ==============      =============     =============

Reported basic earnings per share from
  continuing operations before
  extraordinary gain/(loss)                              $0.22             $0.15              $0.50             $0.32
Add back:  Goodwill and trade name
  amortization, net of tax                                   -              0.03                  -              0.10
                                                ---------------    --------------      -------------     -------------
Basic earnings per share from continuing
  operations before extraordinary gain/(loss)
  as adjusted under SFAS 142                              0.22              0.19               0.50              0.42
Discontinued operations, net                                 -              0.03                  -              0.06
Extraordinary gain/(loss), net                               -                 -             (0.03)              0.02
                                                ---------------    --------------      -------------     -------------
Basic earnings per share as adjusted
  under SFAS 142                                         $0.23             $0.21              $0.47             $0.50
                                                ===============    ==============      =============     =============
</TABLE>

                                       10
<PAGE>


<TABLE>


                                                       Three Months Ended                    Nine Months Ended
                                                         September 30,                         September 30,
                                                ---------------------------------      -------------------------------
(in thousands, except per share data)                  2002              2001                2002              2001
                                                ---------------    --------------      -------------     -------------

Reported diluted earnings per share
  from continuing operations before
<S>                                                      <C>               <C>                <C>               <C>
  extraordinary gain/(loss)                              $0.22             $0.15              $0.49             $0.32
Add back:  Goodwill and trade name
  amortization, net of tax                                   -              0.03                  -              0.10
                                                ---------------    --------------      -------------     -------------
Diluted earnings per share from continuing
  operations before extraordinary gain/(loss)
  as adjusted under SFAS 142                              0.22              0.18               0.49              0.42
Discontinued operations, net                                 -              0.02                  -              0.06
Extraordinary gain/(loss), net                               -                 -             (0.03)              0.02
                                                ---------------    --------------      -------------     -------------
Diluted earnings per share as adjusted
  under SFAS 142                                         $0.22             $0.21              $0.46             $0.49
                                                ===============    ==============      =============     =============

</TABLE>

The following table summarizes goodwill and intangible assets.

(IN THOUSANDS)                                As of              As of
                                          September 30,       December 31,
                                              2002              2001
                                         ---------------    --------------
Goodwill (1)                                 $1,912,605        $1,904,178
Trade names (1)                                 238,550           238,550

Other intangible assets                          77,475            74,197
Accumulated amortization (2)                   (57,199)          (51,611)
                                         ---------------    --------------
Net other intangibles                            20,276            22,586
                                         ---------------    --------------
Total                                        $2,171,431        $2,165,314
                                         ===============    ==============


(1)  Not subject to amortization
(2)  Annual  amortization  expense of  approximately $6 - $8 million is expected
     over the next five years.


NOTE 6: The  Company  has  announced  that;  beginning  in 2003,  it will  begin
accounting for employee stock options as compensation expense in accordance with
SFAS 123,  "Accounting for Stock Based  Compensation."  If the Company continues
its historical  pattern of option  granting,  the impact would be  approximately
$.005 per diluted share in 2003, growing to approximately $.03 per diluted share
over five years.

In April 2002, the FASB issued SFAS 145,  "Rescission of FASB  Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections".  The
primary  impact  to the  Company  of SFAS 145 is that it  rescinds  SFAS 4 which
required all  material  gains and losses from the  extinguishment  of debt to be
classified as extraordinary  items.  SFAS 145 requires that the more restrictive
criteria of APB Opinion No. 30 will be used to  determine  whether such gains or
losses are  extraordinary.  The Company  intends to adopt SFAS 145 in its fiscal
year 2003,  as  required  by SFAS 145.  Adoption  of SFAS 145 will result in the
reclassification  of the extraordinary  gains/losses into income from continuing
operations  included in the accompanying  Condensed  Consolidated  Statements of
Income.

In June 2002, the FASB issued SFAS 146,  "Accounting  for Costs  Associated with
Exit or Disposal Activities".  SFAS 146 requires recording costs associated with
exit or disposal  activities  at their fair  values  when a  liability  has been
incurred.  Under  previous  guidance,  certain  exit  costs  were  accrued  upon
management's  commitment  to an exit plan,  which is generally  before an actual
liability has been  incurred.  The provisions of SFAS 146 are effective for exit
or disposal activities that are initiated after December 31, 2002.

NOTE 7: 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


                                       11
<PAGE>

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,  Certified
Systems Inc.  (CSI),  and 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. 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 results of these discontinued business units have been
separated  and  classified  as  "Discontinued  Operations"  in the  accompanying
financial  statements.  During the third  quarter of 2002,  the Company sold its
Terminix  operations in the United  Kingdom and the financial  results have been
reclassified from "Continuing  Operations" to "Discontinued  Operations" for all
periods presented.

The  Company  continues  to carry  certain  assets on its  financial  statements
relating  to these  operations.  Management  is actively  selling the  remaining
equipment and collecting the outstanding receivables.  The Company believes that
the remaining  assets are presented at their net realizable  value. In addition,
reserves and accrual  balances  remain on the financial  statements  relating to
these  operations.   Cash  payments  incurred  for  the  wind-down  of  LandCare
construction contracts, lease termination costs, workers compensation and health
claims as well as  professional  service  fees have been made in the first  nine
months of 2002.

As part of the overall strategic review, the Company recorded a charge for asset
impairments  and  other  items in the  fourth  quarter  of 2001  which  included
accruals for residual  value  guarantees  on leased  properties,  severance  for
former  executives and terminated  employees,  and other costs.  At December 31,
2001,  the accrual  balance was $36 million.  During the second quarter of 2002,
the Company completed the sale of its ownership interest in five assisted living
facilities.   These   properties   were  financed   through  a  synthetic  lease
arrangement,   whereby,  the  Company  guaranteed  the  residual  value  of  the
properties.  At year-end,  a $13.5 million reserve was established  representing
the amount by which the residual value guarantees  exceeded the value of bids to
purchase the  facilities at that time.  The final sales price was  significantly
greater than these bid levels and the Company realized a gain of $3.6 million in
the second quarter of 2002 from the sale on the assisted living properties.

The following  table below  summarizes the activity during the nine months ended
September 30, 2002 for the remaining liabilities from the discontinued operation
and the reserves for items  recorded in the fourth  quarter of 2001. The Company
believes that the remaining reserves continue to be adequate and reasonable.
<TABLE>

(IN THOUSANDS)                        Balance at          Cash                            Balance at
                                     December 31,       Payments          Income/        September 30,
                                         2001           or Other         (Expense)           2002
                                     ------------     -----------      ------------      --------------
Remaining liabilities from
  discontinued operations
<S>                                     <C>            <C>             <C>                  <C>
     LandCare Construction              $34,100        $21,400         $(2,100)             $14,800
     Certified Systems, Inc.             23,800          7,500          (3,500)              19,800
     Management Services                  7,400          1,000            3,500               2,900
     International businesses            19,600         19,600  (1)    (12,900)              12,900
     Other                               16,100          6,300                -               9,800
Reserves related to strategic
  actions in the fourth quarter
  of 2001                               $36,000        $13,700           $3,600             $18,700
</TABLE>

(1) The liabilities of this business assumed by the buyer of the sold operations
totaled $19.6 million.  During 2002, the Company recorded accruals in connection
with sold  operations  and a cash  adjustment to the purchase  price of the 2001
dispositions.....


The  Company  recorded  a $3.2  million  charge in the  second  quarter  of 2002
relating to the severance and  termination  agreement of a key  executive.  This
severance will be paid out over three years.

NOTE 8: Basic  earnings per share are 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


                                       12
<PAGE>


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 effects of outstanding  stock
options  whose  market  price is in excess  of the  exercise  price  and  shares
potentially issuable under convertible securities have not been included for the
nine  months  ended  September  30,  2001,  as  their  effect  would  have  been
anti-dilutive.

The following  table  reconciles  both the numerator and the  denominator of the
basic earnings per share from continuing operations computation to the numerator
and the denominator of the diluted earnings per share from continuing operations
computation.
<TABLE>


(IN THOUSANDS, EXCEPT PER SHARE DATA)                      Three Months                         Three Months
                                                     Ended September 30, 2002             Ended September 30, 2001
                                                 --------------------------------      ------------------------------
CONTINUING OPERATIONS:                            INCOME       SHARES      EPS           INCOME       SHARES     EPS
----------------------                           --------     --------   ------         --------     --------   -----
<S>                                               <C>         <C>        <C>            <C>           <C>       <C>
Basic earnings per share                          $66,988     301,093    $0.22          $45,042       298,925   $0.15
                                                                         ======                                 =====
Effect of dilutive securities,net of tax:
    Options                                                     4,356                                  5,399
    Convertible securities                          1,195       8,200                     1,195        8,200
                                                 ----------   ---------                 --------     --------
Diluted earnings per share                        $68,183     313,649    $0.22          $46,237      312,524    $0.15
                                                 ==========   =========  ======         =========    ========   =====

</TABLE>
<TABLE>

                                                             Nine Months                           Nine Months
                                                       Ended September 30, 2002              Ended September 30, 2001
                                                   --------------------------------       ------------------------------
CONTINUING OPERATIONS:                              INCOME       SHARES      EPS           INCOME      SHARES     EPS
----------------------                             --------     --------   ------         --------    --------   -----
<S>                                                <C>          <C>         <C>            <C>         <C>        <C>
Basic earnings per share                           $150,283     300,805     $0.50          $95,511     298,425    $0.32
                                                                           ======                                ======
Effect of dilutive securities, net of tax:
    Options                                                       6,150                                  4,419
    Convertible securities                            3,585       8,200                          -           -
                                                   --------     --------                  --------    --------
Diluted earnings per share                         $153,868     315,155     $0.49          $95,511     302,844    $0.32
                                                   ========     ========  =======         ========    ========   ======

</TABLE>

NOTE 9: In the Condensed 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  Condensed  Consolidated  Statements  of Cash Flows for the nine
months ended September 30, 2002 and 2001 is presented in the following table:

                                            (IN THOUSANDS)
                                            2002           2001
                                        -----------    -----------
CASH PAID OR (RECEIVED) FOR:
Interest expense......................  $   68,369     $  106,645
Interest and dividend income..........  $   (8,195)    $   (6,659)
Income taxes..........................  $   36,629     $   (7,277)

The decrease in interest  paid in 2002 is  primarily  due to reduced debt levels
reflecting debt  retirements  utilizing 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 the Company maintained significant
cash levels  throughout the year. The tax payment in 2002 resulted from the gain
on the sale of the Management Services business which compared to the prior year
tax refund of $21 million related to prior year over-payments.

NOTE 10: Total comprehensive  income was $70.8 million and $48.8 million for the
three months ended September 30, 2002 and 2001, respectively, and $141.7 million
and $100.9  million  for the nine  months  ended  September  30,  2002 and 2001,
respectively.  Total comprehensive income includes primarily net income, changes
in  unrealized  gains  and  losses  on  marketable  securities  and  translation
balances.

NOTE 11: 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  September  30,  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.



                                       13
<PAGE>



NOTE 12: In the second  quarter of 2002, the Company  recorded an  extraordinary
loss on early debt  extinguishment of $9.2 million after-tax or $.03 per diluted
share   resulting  from  the  repurchase  of   approximately   $218  million  in
ServiceMaster  corporate  bonds pursuant to a tender offer. In the first quarter
of 2001, the Company  repurchased  approximately  $35 million of its public debt
securities and recorded an extraordinary  gain of $6.0 million after-tax or $.02
per diluted  share.  The Company  intends to adopt SFAS 145  beginning in fiscal
2003.  Adoption of this  Statement  will result in the  reclassification  of the
extraordinary gain/loss into income from continuing operations.

NOTE 13: The Company maintains minority investors in the combined ARS/AMS entity
as well as in Terminix.  Members of management  acquired,  at fair market value,
equity  interests in ARS. The Company and the equity  investors have  respective
options to acquire or sell the minority interests in the future at a price based
on fair market value. The future  acquisition of this minority  interest will be
recorded as additional  purchase cost at the time of payment.  At Terminix,  the
minority ownership reflects an interest issued to the prior owners of the Allied
Bruce  Terminix  Companies  in  connection  with that  acquisition.  This equity
security is exchangeable  into eight million  ServiceMaster  common shares.  The
ServiceMaster  shares are  included  in the shares used for the  calculation  of
diluted earnings per share.

In January  2001,  Jonathan P. Ward,  President and Chief  Executive  Officer of
ServiceMaster,  purchased from  ServiceMaster a 5.50% convertible  debenture due
January 9, 2011, with a face value of $1.1 million.  ServiceMaster  financed the
purchase of the  debenture  with a 5.50% full recourse loan due January 9, 2011.
In May 2001, Mr. Ward purchased a second 5.50% convertible debenture due May 10,
2011,  with a face  value of $1.1  million.  ServiceMaster  financed  50% of the
purchase price of this second  debenture with a 5.50% full recourse loan due May
10, 2011. Each debenture becomes convertible into 20,000 shares of ServiceMaster
common stock on December 31 on each of the years 2001 through 2005.

NOTE 14:  The  business  of the  Company is  conducted  through  five  operating
segments:   TruGreen,   Terminix,   American  Home  Shield,  ARS/AMS  and  Other
Operations.  Due to the Company's sale of its Management  Services business unit
and its exit from other businesses in 2001,  certain operations have become more
significant  for  segment  reporting  purposes.  As a result,  the  Company  has
expanded  its business  segment  reporting  which will allow for better  ongoing
visibility  into the components of the business.  The companies that  previously
were reported in the Home  Maintenance  & Improvement  segment have been further
broken  out into  American  Home  Shield and the  combination  of  ARS/AMS.  The
franchise operations,  ServiceMaster Clean and Merry Maids, formerly in the Home
Maintenance & Improvement segment, are reported in the Other Operations segment.
In  accordance  with  Statement of Financial  Accounting  Standards No. 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 the
LandCare Construction business,  the results of the construction  operations are
now included in discontinued  operations for all periods.  The Terminix  segment
provides  termite and pest control  services to residential  and commercial U.S.
customers.  The  American  Home  Shield  segment  provides  home  warranties  to
consumers that cover heating, ventilation, air conditioning (HVAC), plumbing and
certain appliances. This segment also includes home inspection services provided
by AmeriSpec.  The American Residential Services,  (ARS) and American Mechanical
Services (AMS) segment  provides HVAC and plumbing  services  provided under the
ARS, AMS and Rescue Rooter brand names.  The Other  Operations  segment includes
the franchise  operations of ServiceMaster  Clean and Merry Maids, which provide
disaster restoration and cleaning services as well as the Company's headquarters
operations  which  provides  various  technology,  marketing,  finance and other
support services to the business units.

Segment  information is presented  below. As discussed in Note 2 in the Notes to
the Condensed  Consolidated  Financial Statements,  the information for 2002 and
2001 has been restated.

SFAS 142, "Goodwill and Other Intangible Assets", eliminates the amortization of
goodwill and  intangible  assets with  indefinite  lives  beginning in 2002. The
table  below also  presents  "Proforma"  information  for 2001 which  eliminates
amortization  expense related to goodwill and intangible  assets with indefinite
lives,  so that these  periods are  presented on a comparable  basis to the 2002
information.


                                       14
<PAGE>



<TABLE>


(IN THOUSANDS)                                                   Three Months            Three Months          Three Months
                                                                Ended Sept. 30,         Ended Sept. 30,       Ended Sept. 30,
                                                                     2002                    2001                  2001
                                                                   Reported                Reported              Proforma
--------------------------------------------------------------------------------------------------------------------------
Operating Revenue:
<S>                                                                 <C>                     <C>
  TruGreen                                                          $418,715                $414,279
  Terminix                                                           235,414                 212,029
  American Home Shield                                               121,639                 104,297
  ARS/AMS                                                            192,721                 215,123
  Other Operations                                                    42,172                  35,556
-----------------------------------------------------------------------------------------------------
Total Operating Revenue                                           $1,010,661                $981,284
=====================================================================================================
</TABLE>
<TABLE>

Operating Income:
<S>                                                                  <C>                     <C>                 <C>
  TruGreen                                                           $76,204                 $70,145             $76,744
  Terminix                                                            25,359                  19,275              24,235
  American Home Shield                                                19,715                   8,726               9,374
  ARS/AMS                                                              7,736                  13,717              16,057
  Other Operations                                                   (4,019)                 (5,359)             (4,463)
--------------------------------------------------------------------------------------------------------------------------
Total Operating Income                                              $124,995                $106,504            $121,947
==========================================================================================================================
</TABLE>

<TABLE>
                                                                   As of                  As of
                                                              Sept. 30, 2002          Dec. 31, 2001
-----------------------------------------------------------------------------------------------------
Identifiable Assets:
<S>                                                              <C>                    <C>
  TruGreen                                                       $1,122,330             $1,082,135
  Terminix                                                          847,881                823,333
  American Home Shield                                              367,064                323,229
  ARS/AMS                                                           495,329                519,026
  Other Operations (and discontinued businesses)                    597,040                873,522
-----------------------------------------------------------------------------------------------------
Total Identifiable Assets                                        $3,429,644             $3,621,245
=====================================================================================================

</TABLE>
<TABLE>

                                                            Nine Months         Nine Months          Nine Months
                                                          Ended Sept. 30,     Ended Sept. 30,       Ended Sept. 30,
                                                               2002                2001                 2001
                                                             Reported            Reported             Proforma
--------------------------------------------------------------------------------------------------------------------------
Operating Revenue:
<S>                                                         <C>                 <C>
  TruGreen                                                  $1,082,137          $1,074,099
  Terminix                                                     712,339             640,450
  American Home Shield                                         323,995             277,486
  ARS/AMS                                                      549,891             630,468
  Other Operations                                             111,499             101,676
-----------------------------------------------------------------------------------------------------
Total Operating Revenue                                     $2,779,861          $2,724,179
=====================================================================================================
</TABLE>
<TABLE>
Operating Income:
<S>                                                           <C>                 <C>                  <C>
  TruGreen                                                    $150,648            $131,599             $151,388
  Terminix                                                     107,584              82,479               97,257
  American Home Shield                                          40,904              20,802               22,669
  ARS/AMS                                                       15,041              32,338               39,217
  Other Operations                                            (14,810)            (10,454)              (7,874)
--------------------------------------------------------------------------------------------------------------------------
Total Operating Income                                        $299,367            $256,764             $302,657
==========================================================================================================================
</TABLE>




                                       15
<PAGE>





The following table summarizes the previously amortized goodwill and trade names
by segment that, beginning on January 1, 2002 are no longer amortized.

                                        September 30,          December 31,
                                            2002                  2001
                                    ------------------    ------------------
TruGreen                                     $913,987              $910,573
Terminix                                      708,408               705,608
American Home Shield                           72,085                72,085
ARS/AMS                                       347,971               347,863
Other Operations                              108,704               106,599
                                    ------------------    ------------------
Total                                      $2,151,155            $2,142,728
                                    ==================    ==================






                                       16
<PAGE>










      MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                 OF OPERATIONS

RESULTS OF OPERATIONS

THIRD QUARTER 2002 COMPARED TO THIRD QUARTER 2001

CONSOLIDATED REVIEW

The  Company  has  restated  its  financial  statements  for 2001 as well as the
previously  reported  2002  quarterly  results.  See Note 2 of the  Notes to the
Condensed   Consolidated   Financial  Statements  for  the  description  of  the
restatement and the financial statement impact.  This Management  Discussion and
Analysis reflects the impacts of the restatement.

Revenue for the third quarter was $1.01  billion,  three percent above 2001, and
operating  income was $125 million.  The Company reported income from continuing
operations  in 2002 of $67 million and income from  discontinued  operations  of
$1.1  million.  Net income was $68  million in 2002 and $53  million in 2001 and
diluted earnings per share were $.22 in 2002 and $.17 in 2001.

Diluted earnings per share from continuing operations were $.22 in 2002 compared
with $.15 in 2001. As discussed  further in Note 4 of the Notes to the Condensed
Consolidated  Financial Statements,  Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets",  requires that beginning
in 2002,  goodwill  and trade  names no longer be  amortized.  SFAS 142 does not
permit the  restatement of the 2001 financial  information to reflect the impact
of SFAS 142. The diluted earnings per share  equivalent of reduced  amortization
expense  under SFAS 142 is $.03 ($15  million  pretax) for the third  quarter of
2001.

Third quarter operating income in 2002 was $125 million compared to $107 million
in 2001. The 2001 figure includes $15 million of  amortization  expense that has
been  eliminated  under SFAS 142.  Operating  margins  after  adjusting  for the
amortization  expense  eliminated  under SFAS 142 was 12.4 percent of revenue in
2002,  consistent with 2001. The increase in operating income reflects continued
strong performance at American Home Shield,  solid performance from Terminix and
the TruGreen lawn care  operations  and $6 million of licensing fees received in
the sale of the Terminix  United Kingdom  operations.  The increase in operating
income is partially offset by continuing challenges in the heating,  ventilation
and air conditioning  (HVAC) and plumbing  businesses of ARS and AMS, as well as
increased  expenditures  related to  Company-wide  operational  initiatives  and
overhead support.

Cost of  services  rendered  and  products  sold  increased  two percent for the
quarter and  decreased as a  percentage  of revenue to 67.9 percent in 2002 from
68.5 percent in 2001. This decrease  reflects a change in mix of the business as
TruGreen  ChemLawn,  Terminix,  and  American  Home Shield  increased in size in
relationship to the overall business of the Company.  These businesses generally
operate at higher gross margin  levels than the rest of the  business,  but also
incur  somewhat  higher selling and  administrative  expenses as a percentage of
revenue.  Selling  and  administrative  expenses  increased  seven  percent  and
increased as a percentage  of revenue to 19.6 percent from 18.8 percent in 2001.
The  increase  in selling and  administrative  expenses  reflects  the change in
business mix discussed above,  increased  expenditures for marketing  leadership
and sales initiatives,  as well as enterprise-wide  expenditures in procurement,
technology  and  initiatives  to  measure  and  improve  customer  and  employee
satisfaction.

Interest  expense  decreased from the prior year,  primarily due to reduced debt
levels  as a portion  of the  proceeds  received  from  sales of the  Management
Services  and certain  European  pest control  businesses  were used to pay down
debt.  Interest and investment  income decreased  primarily  reflecting one time
venture  capital gains realized in 2001 and a reduced level of investment  gains
realized on the American Home Shield investment  portfolio.  As of September 30,
2002,  there was an unrealized loss of  approximately $6 million on the American
Home Shield investment portfolio which has been reflected in other comprehensive
income.  Minority  interest and other expense reflected a lower level of expense
as 2001  included  approximately  $1 million of losses  relating  to the sale of
accounts receivables under the Company's securitization program.


                                       17
<PAGE>


The tax provision in 2002 reflects a lower effective tax rate than 2001 based on
benefits   received   through  the   consolidation   for  tax  purposes  of  the
ServiceMaster  Home Service Center. As a result of the Company's  acquisition of
the minority  interest,  it was able to  reorganize  the  subsidiary in 2002 and
utilize prior year net operating losses of this subsidiary operation.

SEGMENT REVIEW

SEGMENT  RESULTS FOR 2002  REFLECT THE  ELIMINATION  OF GOODWILL  AND TRADE NAME
AMORTIZATION REQUIRED UNDER SFAS 142. THEREFORE,  FOR COMPARATIVE PURPOSES, 2001
RESULTS  HAVE  BEEN  PRESENTED  ON A  PROFORMA  BASIS AS IF SFAS 142 HAD BEEN IN
EFFECT FOR 2001 THEREBY  EXCLUDING THE AMORTIZATION  EXPENSE AFFECTED BY THE NEW
ACCOUNTING STANDARD. (SEE THE BUSINESS SEGMENT REPORTING IN NOTE 14 IN THE NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS).  MANAGEMENTS DISCUSSION AND
ANALYSIS FOCUSES ON THE 2002 REPORTED AND THE 2001 PROFORMA AMOUNTS.

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 $419 million,  one percent  above 2001.  Operating
income decreased one percent to $76 million from $77 million (proforma) in 2001,
reflecting  solid  improvement in the lawn care  operations  offset by increased
expenditures  in  the  landscape  operations  related  to  sales  and  retention
initiatives.  Revenue in the lawn care business  improved two percent over 2001,
reflecting growth in customer counts from increased sales and improved retention
rates.  Solid  growth in the sale of  ancillary  services  was  supported by the
higher level of full program  customers.  Operating  income  margins in the lawn
care operations were  comparable to 2001.  Revenue in the landscape  maintenance
operations  declined  one  percent  reflecting  a  volume  decrease  in the core
maintenance  business,  offset  in part by  solid  growth  in the  utility  line
clearing business.  Despite the volume decline, the base of maintenance business
consists of more  profitable  contracts  with  stronger  customers  and improved
pricing.  Margins in the landscaping  operations  declined primarily  reflecting
lower  labor  and  material  costs  offset  by  increased  insurance  costs  and
investments to support sales and retention initiatives.  This business has hired
a senior sales  leader and is  expanding  and  developing  its sales  force.  In
addition,  management  continues  to  focus  on labor  efficiency  programs  and
improving the results of the bottom quartile of its branches.

The Terminix  segment,  which  includes  the  domestic  termite and pest control
services,  reported an 11 percent  increase in revenue to $235 million from $212
million in 2001 and operating  income growth of five percent to $25 million from
$24 million  (proforma) in 2001.  Revenue growth reflects the impact of the 2001
acquisition  of Sears  Termite & Pest  Control as well as new sales and improved
customer  retention  in both the termite and pest  control  business.  Operating
income margins declined  reflecting the near-term  expenses  associated with the
rollout of Terminix's new branch information system,  increased direct marketing
expenditures  and  investments  in Six  Sigma,  offset in part by the prior year
acquisition  and  improved  branch  efficiencies  related to labor and  material
costs.

The American Home Shield  segment,  which provides home  warranties to consumers
that cover HVAC,  plumbing and other appliances,  reported a 17 percent increase
in revenue to $122 million  from $104  million in 2001.  The increase in revenue
reflected strong growth in the real estate sales channel,  significant growth in
direct sales to  consumers  and  continued  improvement  in customer  retention.
Operating income increased 110 percent to $20 million from $9 million (proforma)
in 2001.  Operating income margins  improved  significantly  reflecting  various
initiatives  to improve the cost  structure  and modest  weather  conditions  in
several regions, which resulted in a reduced level of claims.

The  ARS/AMS  segment  provides  direct  HVAC and  plumbing  services  under the
American  Residential  Services (ARS),  Rescue Rooter,  and American  Mechanical
Services  (AMS) (for  commercial  accounts)  brand names.  The segment  reported
revenue of $193  million,  a decrease of ten percent  from $215 million in 2001.
Operating income  decreased to $8 million compared to $16 million  (proforma) in
2001. A decline in call volume for air  conditioning  and  plumbing  repairs and
reduced  construction  activity continued to affect the industry and resulted in
the segment's  decline in revenue and profit.  ARS has hired a senior operations
leader and is  realigning  its field  operating  structure to narrow the span of
control in troubled  locations.  Management  is developing  specific  turnaround
plans for each location, including improving the quality and depth of management
through internal and external  recruiting and creating a management


                                       18
<PAGE>


development  program.  ARS is  continuing  to rebuild  its  marketing  and sales
strategies by centralizing its marketing  planning and placement,  improving the
lead  and  sales  tracking  system,   and  reducing  reliance  on  yellow  pages
advertising.

The Other Operations segment includes the Company's  ServiceMaster  Clean, Merry
Maids,  and  international  operations  as well as its  headquarters  functions.
Reported  segment  revenue of $42 million in 2002  compared  with $36 million in
2001.  The  increase  in  revenue  largely  reflects  the impact of a $6 million
licensing fee received in 2002.  In the third quarter of 2002,  the Company sold
its  Terminix  operations  in the United  Kingdom  and  entered  into a two-year
licensing agreement with the buyer for the use of the Terminix trade name in the
United  Kingdom.  This agreement was valued at $6 million and accordingly a like
amount was allocated from the purchase price. This segment reported an operating
loss of $4 million in 2002. The reduced operating loss reflects continued growth
in profits in  ServiceMaster  Clean and Merry  Maids and the impact of the trade
name license fee,  partially  offset by increased  expenditures  in 2002 related
technology and major operational initiatives to improve operating efficiency and
build greater customer and employee satisfaction.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2002 AS COMPARED TO SEPTEMBER 30, 2001

CONSOLIDATED REVIEW

Revenue for the nine months in 2002  increased  two percent to $2.8  billion and
operating  income was $299 million.  The Company reported income from continuing
operations in 2002 of $150 million,  income from  discontinued  operations of $1
million,  and a $9 million  extraordinary loss from the early  extinguishment of
debt.  Net income was $142  million in 2002 and $118 million in 2001 and diluted
earnings per share were $.46 in 2002 and $.39 in 2001.

Diluted earnings per share from continuing operations were $.49 in 2002 compared
with $.32 in 2001.  As  discussed  in the  three-month  comparison,  the diluted
earnings per share equivalent of reduced amortization expense under SFAS 142 are
$.10 ($46 million pretax) for the nine months of 2001.

Nine month operating income in 2002 was $299 million compared to $257 million in
2001. The 2001 figure includes $46 million of amortization expense that has been
eliminated   under  SFAS  142.   Operating   margins  after  adjusting  for  the
amortization  expense  eliminated  under SFAS 142  decreased  to 10.8 percent of
revenue in 2002 from 11.1  percent in 2001.  The  decline  in  operating  income
reflects strong increases at American Home Shield and Terminix offset by reduced
volume  in the  HVAC  and  plumbing  businesses  of ARS and  AMS  and  increased
expenditures  related  to  Company-wide  operational  initiatives  and  overhead
support.

Cost of services  rendered and products sold  increased one percent for the nine
months and  decreased  as a  percentage  of revenue to 68.2 percent in 2002 from
69.1 percent in 2001. Selling and administrative expenses increased nine percent
and  increased as a  percentage  of revenue to 20.8 percent from 19.5 percent in
2001. The increase in selling and administrative expenses reflects strong growth
in  operations  that  have  higher  gross  margin  levels  than  the rest of the
business, but also incur somewhat higher selling and administrative  expenses as
a percentage of revenue,  as well as increased  expenditures  for initiatives to
measure and improve customer and employee satisfaction.

Interest expense decreased from the prior year,  reflecting  reduced debt levels
resulting from the pay down of debt with the proceeds received from the sales of
the Management  Services and certain European pest control businesses as well as
strong cash flows from  operations.  The  decrease in  interest  and  investment
income  reflects  one-time  venture capital gains realized in 2001 and a reduced
level of  investment  gains in the American  Home Shield  investment  portfolio.
Minority  interest  and other  expense  increased  from the  prior  year as 2001
included  minority  interest  income related to the  ServiceMaster  Home Service
Center  initiative.  In the  first  quarter  of 2001 and  until  May  2001,  the
operating losses totaling $6.1 million 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 and management.



                                       19
<PAGE>


The tax provision in 2002 reflects a lower  effective tax rate based on benefits
received through the consolidation  for tax purposes of the  ServiceMaster  Home
Service  Center.  As a  result  of the  Company's  acquisition  of the  minority
interest,  it was able to  reorganize  the  subsidiary in 2002 and utilize prior
year net operating losses of this subsidiary operation.

In the second quarter of 2002,  the Company  repurchased a portion of its public
debt securities and recorded an extraordinary loss of $.03 per diluted share ($9
million after-tax) resulting from the early extinguishment of debt. In the first
quarter of 2001,  the  Company  recorded a $.02  extraordinary  gain ($6 million
after-tax)  resulting  from the  repurchase of certain  ServiceMaster  corporate
debt.

KEY PERFORMANCE INDICATORS

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 in order to avoid
seasonal anomalies.

                                                KEY PERFORMANCE INDICATORS
                                                    As of September 30,

                                                2002                2001
                                            ------------          -----------
TRUGREEN CHEMLAWN -
   Growth in Full Program Contracts                2%                  -4%
   Customer Retention Rate                      62.4%                60.1%

TERMINIX -
   Growth in Pest Control Customers               11%                  13%
   Pest Control Customer Retention Rate         76.7%                76.6%

   Growth in Termite Customers                     8%                  19%
   Termite Customer Retention Rate              89.5%                89.1%

AMERICAN HOME SHIELD -
   Growth in Warranty Contracts                   16%                  15%
   Customer Retention Rate                      53.0%                52.1%

SEGMENT REVIEW

SEGMENT  RESULTS FOR 2002  REFLECT THE  ELIMINATION  OF GOODWILL  AND TRADE NAME
AMORTIZATION REQUIRED UNDER SFAS 142. THEREFORE,  FOR COMPARATIVE PURPOSES, 2001
RESULTS  HAVE  BEEN  PRESENTED  ON A  PROFORMA  BASIS AS IF SFAS 142 HAD BEEN IN
EFFECT FOR 2001 THEREBY  EXCLUDING THE AMORTIZATION  EXPENSE AFFECTED BY THE NEW
ACCOUNTING STANDARD. (SEE THE BUSINESS SEGMENT REPORTING IN NOTE 14 IN THE NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS).  MANAGEMENTS DISCUSSION AND
ANALYSIS FOCUSES ON THE 2002 REPORTED AND THE 2001 PROFORMA AMOUNTS.

The TruGreen segment reported revenue of $1.08 billion, an increase of one
percent over the prior year. Operating income was $151 million in 2002,
comparable to the 2001 proforma amount. Revenue in the lawn care operations
increased two percent over 2001. Customer contracts have increased two percent
over the prior twelve months compared with a four percent decline for the year
ended 2001, reflecting the benefit of new marketing strategies as well as the
impact of improved customer retention. In addition to telemarketing, which is
the primary channel used by TruGreen ChemLawn to sell its services, the business
has expanded expenditures in direct mail and television advertising leading to
higher sales of new customers. Quality and other satisfaction initiatives have
resulted in improving retention of existing customers. The customer retention
rate improved 230 basis points to 62.4 percent compared to the same period in
2001. Operating income margins in the lawn care operations increased as the
business is beginning to see margin leverage resulting from top-line growth and
the success of its quality of service and Six Sigma initiatives. Revenue in the
landscaping operations declined two percent reflecting a decrease in snow
removal services due to mild winter weather and a decrease in the core
maintenance business. Despite the decline in the maintenance business, the base
of contracts is more profitable reflecting lower job costs, improved pricing,
and a stronger base of customers. This business has strengthened and expanded
its


                                       20
<PAGE>


sales operations.  Operating income margins in the landscaping business declined
primarily  as a result  of a  decreased  volume of higher  margin  snow  removal
business,  increased workers compensation claims, and increased expenditures for
field operations  training.  In the fourth quarter,  sales of enhanced  services
will be a priority along with the reduction of seasonal labor levels.

The Terminix  segment reported an 11 percent increase in revenue to $712 million
from $640  million  in 2001 and  operating  income  growth of 11 percent to $108
million from $97 million  (proforma) in 2001.  Revenue  growth was driven by the
acquisition  in 2001 of Sears  Termite & Pest Control as well as solid  internal
growth. Terminix has continued to show favorable comparisons in both termite and
pest  control  customer  retention,   reflecting  increased  focus  on  quality,
training,  and customer  service  processes in the  branches.  Operating  income
margins declined slightly compared to 2001 reflecting increased expenditures for
marketing and health  insurance,  offset in part by the continuing  migration to
higher margin  products,  improved labor  efficiencies and lower material costs.
The  fourth  quarter  will be the  first  time  in  which  the  year  over  year
comparisons  include the Sears  acquisition  in both  years.  As expected by the
Company,  there has been a  substantial  decrease  in  profitable  pest  control
customers  from the Sears name in certain  markets,  as the Company has not been
able to replace  terminations  with new sales at the same rate in these markets.
As a result,  the  Company  expects to see a  reduction  in  revenue  growth and
retention rates in the fourth quarter. In addition,  operating income margins in
the fourth quarter will be impacted by the near-term  expenses  associated  with
the rollout of Terminix's  new branch  information  system.  The rollout of this
system to the branches  will continue  through  2004,  and the system will be an
important tool in the Company's efforts to improve sales productivity,  customer
service, cost efficiency and regulatory compliance.

The American Home Shield  segment  reported a 17 percent  increase in revenue to
$324 million from $277 million in 2001 and operating income growth of 80 percent
to $41 million  compared  to $23  million  (proforma)  in 2001.  Revenue  growth
reflected  increases in all sales channels,  complemented  by improved  customer
retention.  Operating  income  margins  improved as the segment  benefited  from
strong volume growth, improved management of service costs and reduced incidence
of claims resulting, in part, from less extreme weather trends.

The ARS /AMS segment  reported a 13 percent  decrease in revenue to $550 million
from $630  million in 2001 and 62 percent  decrease in  operating  income to $15
million compared to $39 million (proforma) in 2001. A soft economic  environment
combined with mild weather led to lower demand for heating, air conditioning and
plumbing  repairs and replacement  service.  These  operations also  experienced
lower construction  activity in both the residential and commercial  sectors. As
noted in the  three-month  comparison,  this business  continues to focus on new
sales and  marketing  strategies  that  place  less  reliance  on  yellow  pages
advertising. ARS is also realigning its field operating structure and developing
specific turnaround plans for troubled locations.

Other  Operations  revenue  increased to $111 million from $102 million in 2001,
reflecting the $6 million in licensing fees received in the sale of the Terminix
United  Kingdom  operations  and solid growth in the franchise  operations.  The
combined franchise  operations  reported a three percent increase in revenue and
solid  profit  growth,  supported  by strong  demand  for  disaster  restoration
services at  ServiceMaster  Clean and  acquisition  growth at Merry Maids.  This
segment  reported an operating  loss of $15 million  compared  with a loss of $8
million (proforma) in 2001, reflecting increased expenditures on enterprise-wide
initiatives including procurement, marketing, and technology.

FINANCIAL CONDITION

Net cash  provided from  operations  for the first nine months was $245 million,
$102 million in excess of net income, and reflects an improvement of $46 million
over the previous year, before the impact of the Company's  accounts  receivable
securitization  program  and  tax  refunds  in  2001.  Net  cash  provided  from
operations is 62 percent higher than earnings for the nine months and represents
a 23 percent  increase over the $199 million that was reported  last year.  This
increase was driven,  in part, by a $45 million  reduction in the use of working
capital,  primarily at TruGreen ChemLawn and American Home Shield as a result of
better  receivables  and payables  management.  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.



                                       21
<PAGE>


Cash and marketable  securities totaled  approximately $242 million at September
30, 2002.  During the second  quarter of 2002,  the Company  completed  the last
major  phase of the debt  reduction  program  announced  in October  2001,  when
through a tender  offer,  the Company  repurchased  $218 million of its publicly
traded debt. As a result of continued  strong cash flows and the  application of
the net proceeds received from the Company's 2001  dispositions,  total debt was
reduced  by $313  million  during  the nine  month  period.  This  represents  a
reduction in debt  outstanding of  approximately  $1.1 billion over the last two
years and the  Company's  lowest level in over five years.  The debt  repurchase
allowed the Company the opportunity to lengthen its maturity profile by focusing
the majority of the  repurchase on debt with shorter  maturities.  Approximately
60% of the Company's  debt now matures beyond seven years and 40% beyond fifteen
years. The Company's first public bond maturity is not due until 2005.

The Company  maintains a three-year  revolving credit facility for $490 million,
which will expire in December  2004.  As of  September  30, 2002 the Company had
issued  approximately  $130  million of letters of credit under the facility and
had unused commitments of approximately $360 million.  The Company also has $550
million of senior  unsecured debt and equity  securities  available for issuance
under an effective shelf registration statement. In addition, the Company has an
agreement to  ultimately  sell, on a revolving  basis,  certain  receivables  to
unrelated  third  party  purchasers.  At  September  30,  2002,  there  were  no
receivables  outstanding that had been sold to third parties. The agreement is a
364-day facility that is renewable at the option of the purchasers.  The Company
may sell up to $65 million of its eligible  receivables  to these  purchasers in
the future and therefore has immediate access to cash proceeds from these sales.
The amount of eligible  receivables  varies during the year based on seasonality
of the business and will at times limit the amount available to the Company. The
Company  also  maintains  operating  lease  facilities  with banks  totaling $95
million that provide for the  acquisition  and  development  of properties to be
leased by the Company.  There are residual value  guarantees of these properties
up to 82 percent of the fair market value of the  properties.  At September  30,
2002, there was approximately $72 million funded under these facilities.  Of the
$95 million in facilities,  $80 million  expires in October 2004 and $15 million
expires in January 2008.  Approximately $15 million of these leases that involve
constructed  properties  have been  included on the balance sheet as assets with
related debt as of September 30, 2002 and December 31, 2001. The majority of the
Company's vehicle fleet is leased through operating leases.  The lease terms are
non-cancelable for the first twelve month term, then are month-to-month  leases,
cancelable at the Company's option. There are residual value guarantees (ranging
from 70 percent to 87 percent  depending on the  agreement)  on these  vehicles,
which historically have not resulted in significant net payments to the lessors.
At September 30, 2002,  there was  approximately  $265 million of residual value
relating to the Company's fleet.

The following table presents the Company's obligations and commitments:

<TABLE>

                                                                            2003 and      2005 and       2007 and
(IN                 MILLIONS)                 TOTAL             2002          2004          2006        LATER YEARS
--------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>           <C>           <C>              <C>
Debt balances                                  $842              $9            $58           $161             $614
NON-CANCELABLE OPERATING LEASES (1)             251              16            101             65               69
--------------------------------------------------------------------------------------------------------------------
Total amount                                 $1,093             $25           $159           $226             $683
</TABLE>

(1) Includes lease payments and residual value guarantees on leased properties.

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 September 30, 2002 the Company was
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  Condensed  Consolidated  Statements of
Financial  Position.  In the first quarter,  the Company made


                                       22
<PAGE>




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.  Assets of the  discontinued  operations  have  declined
reflecting  cash  collections on receivables  and the sale of fixed assets.  The
liabilities from discontinued operations have decreased reflecting cash outflows
related  to the  wind-down  of  contracts,  lease  termination  costs,  workers'
compensation payments and legal costs.

Receivables and inventories  increased from year-end levels,  reflecting general
business growth and increased  seasonal  activity.  Prepaid  expenses,  deferred
costs  and  other  assets  increased  from  year-end   levels,   reflecting  the
seasonality  in the lawn care  operations  and  increased  volume  of  contracts
written at Terminix and American  Home Shield.  The lawn care  operations  incur
incremental  selling  expenses at the beginning of the year that directly relate
to successful  sales in which the revenues will be recognized in later quarters.
This business also defers, on an interim basis, pre-season advertising costs and
annual  repairs  and  maintenance  procedures  that are  performed  in the first
quarter.  These costs are deferred and  recognized in proportion to the contract
revenue over the  production  season,  and are not deferred  beyond the calendar
year-end.  The Company  also  capitalizes  sales  commissions  and other  direct
contract  acquisition  costs  relating to termite and pest control  contracts as
well as home warranty contracts.  Deferred revenue grew reflecting  increases in
customer  prepayments for termite 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 higher than prior year levels reflecting the payments of
the residual value  guarantees  relating to leases for the five assisted  living
facilities sold in the second quarter.  See Note 7 for additional  details.  The
Company has no material capital commitments at this time.

Total  shareholders'  equity  increased to $1.3  billion at  September  30, 2002
compared to $1.2 billion at December 31, 2001,  reflecting  earnings  which were
offset by cash dividends.  Cash dividends paid directly to shareholders  totaled
$91 million or $.305 per share for the nine months ended  September 30, 2002. In
October 2002, the Company paid a fourth quarter cash dividend of $.105 per share
and declared a first  quarter 2003 cash  dividend of $.105 per share  payable on
January 31, 2003. This quarterly dividend payment provides for an annual payment
for 2002 of $.41 per share, a 2.5% increase over 2001. 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.  Through  September  30,  2002,  the  Company  has  completed  share
repurchases  totaling $15 million,  compared to $1 million last year.  Decisions
relating  to any  future  share  repurchases  will  take  various  factors  into
consideration  such as the  Company's  commitment to maintain  investment  grade
credit ratings,  general  business  conditions,  and other strategic  investment
opportunities.


FORWARD LOOKING STATEMENTS

THE COMPANY'S FORM 10-Q/A FILING CONTAINS  STATEMENTS  CONCERNING FUTURE RESULTS
AND OTHER MATTERS THAT MAY BE DEEMED TO BE  "FORWARD-LOOKING  STATEMENTS" WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE COMPANY
INTENDS THAT THESE  FORWARD-LOOKING  STATEMENTS,  WHICH LOOK FORWARD IN TIME AND
INCLUDE  EVERYTHING  OTHER THAN HISTORICAL  INFORMATION,  BE SUBJECT TO THE SAFE
HARBORS   CREATED   BY  SUCH   LEGISLATION.   THE   COMPANY   NOTES  THAT  THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT COULD AFFECT ITS
RESULTS OF  OPERATIONS,  FINANCIAL  CONDITION OR CASH FLOWS.  FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER  MATERIALLY  FROM THOSE EXPRESSED OR IMPLIED IN A
FORWARD-LOOKING  STATEMENT INCLUDE THE FOLLOWING (AMONG OTHERS): EXTREME WEATHER
CONDITIONS THAT AFFECT THE DEMAND FOR THE COMPANY'S SERVICES; COMPETITION IN THE
MARKETS  SERVED BY THE  COMPANY;  LABOR  SHORTAGES  OR  INCREASES IN WAGE RATES;
UNEXPECTED  INCREASES IN OPERATING COSTS, SUCH AS HIGHER INSURANCE,  HEALTH CARE
OR FUEL PRICES;  INCREASED  GOVERNMENTAL  REGULATION OF  TELEMARKETING;  GENERAL
ECONOMIC  CONDITIONS  IN THE UNITED  STATES,  ESPECIALLY AS THEY MAY AFFECT HOME
SALES OR CONSUMER SPENDING LEVELS; TIME AND EXPENSES ASSOCIATED WITH INTEGRATING
AND WINDING DOWN  BUSINESSES;  AND OTHER FACTORS  DESCRIBED FROM TIME TO TIME IN
DOCUMENTS FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.




                                      23
<PAGE>



                    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

The economy and its impact on discretionary consumer spending, labor wages, fuel
costs,  insurance  costs and medical  inflation  rates could be  significant  to
future operating earnings.

The  Company  does  not hold or  issue  financial  instruments  for  trading  or
speculative   purposes.   The  Company  has  entered  into  specific   financial
arrangements  in the normal course of business to manage  certain  market risks,
with a policy of matching  positions  and  limiting  the terms of  contracts  to
relatively short durations.  The effect of financial instrument  transactions is
not material to the Company's financial statements.

The Company  generally  maintains  the majority of its debt at fixed rates (over
95% of total debt at December 31, 2001 and September  30, 2002) and,  therefore,
its exposure to interest rate  fluctuations  is not significant to the Company's
results of operations.  The payments on the approximately $72 million of funding
outstanding  under the Company's real estate  operating lease facilities as well
as its  cancelable  vehicle  fleet and  equipment  operating  leases are tied to
floating  interest  rates.  However,  the Company does not expect  interest rate
fluctuations to be significant to the Company's results of operations.

The Company has several debt and lease  agreements  where the  interest  rate or
rent payable under the agreements  automatically  adjust based on changes in the
Company's credit ratings.  While the Company is not currently expecting a change
in its credit ratings, based on amounts outstanding at September 30, 2002, a one
rating category improvement in the Company's credit ratings would reduce expense
on an  annualized  basis by  approximately  $.7 million.  A one rating  category
reduction  in  the  Company's  credit  ratings  would  increase  expense  on  an
annualized basis by approximately $1.3 million.

The following table summarizes  information  about the Company's fixed rate debt
instruments  as of December 31, 2002 and presents the  principal  cash flows and
related  weighted-average  interest rates by expected  maturity dates.  The fair
value of the  Company's  fixed  rate  debt was  approximately  $880  million  at
December 31, 2002.

                              Expected Maturity Date
                     ------------------------------------------
                                                                There-
 (In millions)       2003    2004    2005     2006    2007      after     Total
-------------------- ------- ------- -------- ------- --------- --------- ------
Fixed rate debt      $31     $24     $151     $11     $59       $559      $835
  Avg. Rate          4.2%    4.8%    8.2%     6.0%    6.7%      7.5%      7.2%
-------------------- ------- ------- -------- ------- --------- --------- ------





                                       24
<PAGE>




                             CONTROLS AND PROCEDURES

The Company's  Chairman and Chief Executive  Officer,  Jonathan P. Ward, and the
Company's  Chief  Financial  Officer,  Steven C.  Preston,  have  evaluated  the
Company's  disclosure  controls and  procedures  within 90 days of the filing of
this report.

Messrs.  Ward and Preston have concluded that the Company's  disclosure controls
and  procedures  provide  reasonable  assurance  that the  Company  can meet its
disclosure  obligations.  The Company's  disclosure  controls and procedures are
based  upon  a  roll-up  of  financial  and  non-financial   reporting  that  is
consolidated in the principal  executive office of the Company in Downers Grove,
Illinois.  The reporting process is designed to ensure that information required
to be  disclosed by the Company in the reports that it files or submits with the
Commission  is recorded,  processed,  summarized  and  reported  within the time
periods specified in the Commission's rules and forms.

There have been no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect these controls subsequent to the
date of their evaluation.



                                       25
<PAGE>




PART II. OTHER INFORMATION

ITEM 6(A): EXHIBITS
<TABLE>

<S>               <C>
Exhibit 99.1      Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63
                   of Title 18 of the United States Code
Exhibit 99.2      Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63
                   of Title 18 of the United States Code
</TABLE>

ITEM 6(B):    REPORTS ON FORM 8-K
A report on Form 8-K was filed on  August  14,  2002  reporting  under  "Item 9.
Regulation FD Disclosure".  In this filing,  the Company reported that on August
13, 2002 it had filed sworn statements of its Chief Executive  Officer and Chief
Financial  Officer (the "Sworn  Statements")  with the  Securities  and Exchange
Commission (the  "Commission")  pursuant to the  Commission's  Order of June 27,
2002. These Sworn Statements were included as exhibits to the Form 8-K.


                                       26
<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 14, 2003


                          THE SERVICEMASTER COMPANY
                          (Registrant)

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

                                                     Steven C. Preston
                          Executive Vice President and Chief Financial Officer






                                       27
<PAGE>










                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Jonathan P. Ward, certify that:

1. I have reviewed  this  quarterly  report on Form 10-Q/A of The  ServiceMaster
Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  May 13, 2003

                                 /S/ JONATHAN P. WARD
                                 ---------------------
                                 Jonathan P. Ward
                                 Chairman and Chief Executive Officer








                                       28
<PAGE>











                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Steven C. Preston, certify that:

1. I have reviewed  this  quarterly  report on Form 10-Q/A of The  ServiceMaster
Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  May 13, 2003

                                 /S/ STEVEN C. PRESTON
                                 ----------------------
                                 Steven C. Preston
                                 Executive Vice President
                                 and Chief Financial Officer





                                       29
<PAGE>