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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

Commission File No. 0-21323

NAVIGATION TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:
Employee Stock Options to purchase Common Stock, $0.001 par value

        Indicate by check mark whether 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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of Registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o    No ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act. Yes o    No ý

        Substantially all of the voting and non-voting common equity is held by affiliates of the registrant. There is no established trading market for shares of the registrant's Common Stock.

        The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of February 28, 2003 was 1,175,822,637.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the following documents of the registrant are incorporated herein by reference:

PART I

        Certain statements in this document contain or may contain information that is forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the terminology used—for example, words and phrases such as "may," "should," "expect," "anticipate," "plan," "believe," "estimate," "predict" and other comparable terminology typically would be deemed forward-looking. Actual events or results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors, including, without limitation, the risks described in the section of Navigation Technologies' Registration Statement on Form 10, File No. 0-21323 captioned "Risk Factors" under Item 1 thereof. Readers should carefully review this annual report in its entirety, including, but not limited to, the financial statements and notes thereto. Navigation Technologies undertakes no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof. You should rely only on the information contained in this document. We have not authorized anyone to provide you with information that is different. The information contained herein may only be accurate as of the date of this document.

        "NAVTECH," "SDAL" and "SDAL Format" are trademarks of Navigation Technologies Corporation.

Item 1. Business.

Overview and History.

        Navigation Technologies Corporation (the "Company") is a leading provider of digital map information and related software and services used in a wide range of navigation, mapping and geographic-related applications, including products and services that provide maps, driving directions, turn-by-turn route guidance, fleet management and tracking and geographic information systems. These products and services are provided to end users by our customers on various platforms, including: self-contained hardware and software systems installed in vehicles; personal computing devices, such as personal digital assistants and cell phones; server-based systems, including internet and wireless services; and paper media.

        A growing number of companies have developed or are in the process of developing a variety of products and services that use map information furnished in digital form. We believe that commercial acceptance and successful operation of many of these products and services is dependent on the availability of a highly accurate and comprehensive geographical database, such as our NAVTECH data. Our database is a digital representation of road transportation networks in the United States, Canada, numerous European countries and various other countries, constructed to provide a high level of accuracy and useful level of detail. Our database includes extensive road, route and related travel information, including attributes collected by road segment. Some examples of the attributes collected for the NAVTECH database are:

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Existence, location, shape and arterial classification of roads;



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Details regarding ramps, road barriers/dividers, bridges and overpasses;



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Certain traffic rules and regulations, such as one-way streets, turn restrictions, vehicle restrictions and speed limits;



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Sign information;



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Street names and addresses; and



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Points of interest, such as airports, hotels and restaurants.

        We currently provide coverage relating to approximately 4.3 million miles of roadway in the United States and Canada, including virtually all roadways in the United States plus detailed coverage in areas in which a majority of the population of the United States and Canada live and work. In Europe, our

database covers virtually all main arterial roads within Western Europe's major highway network and has detailed coverage for numerous cities throughout Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, The Netherlands, Norway, Portugal, Spain, Switzerland, Sweden and United Kingdom. In addition, we offer coverage in Bahrain, the Czech Republic, the Kingdom of Saudi Arabia, Kuwait, Oman, Qatar, the Republic of South Africa, the Slovak Republic, Taiwan and United Arab Emirates.

        Our principal office is located at 222 Merchandise Mart Plaza, Suite 900, Chicago, Illinois 60654 and our telephone number at that location is (312) 894-7000. We were incorporated originally in California in 1985, and we subsequently reincorporated in Delaware in 1987. Our web site address is www.navtech.com.

Relationship With and Control by Philips.

        Philips Consumer Electronics B.V. ("Philips B.V." or "Philips"), a subsidiary of Koninklijke Philips Electronics N.V. ("Philips N.V."), is our principal stockholder, holding, as of December 31, 2002, approximately 83% of the issued and outstanding shares of our common stock and warrants to acquire 47,380,000 shares of our common stock. Philips previously held all of the Company's outstanding Series A and Series B preferred stock, which converted to common stock as of October 1, 2002. Litigation currently is pending in which Philips is challenging the price at which the Company's Series A and B preferred stock converted to common stock. The result of that litigation may have a substantial dilutive effect to the other holders of our common stock. See "Item 3. Legal Proceedings" for further information on the pending litigation and its potential effect on the conversion of the Series A and Series B preferred stock. Philips has the power to elect all of the members of our board of directors, except to the extent that it has agreed that another shareholder or individual shall have the right to appoint or serve as a director. See "Item 10. Executive Officers and Directors" for additional information regarding these agreements and Philips' rights.

Industry Background.

        Businesses and consumers are seeking solutions for a wide range of navigation and transportation needs. Their goals include time savings, increased efficiency and economy, increased safety and security, reduced stress and inconvenience, and improved traffic congestion reporting and management. Achieving these goals is impeded by the lack of usable information, such as accurate and understandable driving directions, complete and up-to-date information about local travel conditions and restrictions, and similar information. People not traveling by automobile also have been looking for ways to use their wireless telephones and similar wireless devices to access location-based information, such as street-level directions and information about local points of interest.

        In response to these demands, a variety of businesses in several industries, including automotive, electronics, communications and the Internet, have been actively developing and marketing a wide range of navigation products and geographic information-based systems and services. For personal navigation, much of the focus of product development efforts and offerings historically has been on automotive navigation systems. The more technologically sophisticated products—route guidance products—use integrated hardware and software systems located inside a vehicle that enable accurate and efficient vehicle navigation by providing dynamic real-time positioning information and turn-by-turn driving directions. The less technologically sophisticated—map and/or route planning products—are computer-based and typically enable the user to designate geographic points and obtain detailed driving instructions between the points, but lack the just-in-time type of navigation instructions that are characteristic of route guidance products.

        As the market for "smart" navigation products and services has continued to develop, new applications for the technology have also been developing. In addition to automotive navigation

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systems, these applications include: geographic information systems (GIS) and fleet management applications; wireless/hand-held product applications; public safety/emergency services; Internet mapping; PC-based applications; and call center-based navigation services.

        Many of these products and services are dependent upon the availability of a comprehensive database, such as our NAVTECH database. We believe that business and consumer acceptance of these products and services will depend significantly on factors such as the accuracy and detail of the database, the scope of its coverage and the commitment of the database provider to quality and to updating and enhancing the database.

Strategy.

        We have devoted substantial resources to the development of a comprehensive, accurate and detailed navigable database for the United States, Canada, numerous European countries and various other countries. Our efforts to develop our business to date have consisted principally of the creation, updating and enhancement of our NAVTECH database, the establishment of a multi-office, multi-country field organization, and the development of technology and software related to our NAVTECH database. Our strategy is to establish Navigation Technologies as the leading provider of digital map information and enabling technology for navigation and other geographic information-based products and services and other applications.

NAVTECH Database.

        The NAVTECH database is a digital representation of road transportation networks in the United States, Canada, numerous European countries and various other countries, constructed to provide the high level of accuracy and detail necessary to support route guidance products and similar applications. We devote significant resources to creating, updating and enhancing our data and maintaining its quality. We also have made significant investments in software and related tools for database creation and updating. The NAVTECH database is constructed to the same general specifications regardless of coverage area so that product developers, manufacturers and service providers generally can design a single product that can be sold throughout the United States, Canada, Europe and various other countries.

        Generally, we provide varying levels of coverage ranging from intertown coverage, our base coverage, to our most comprehensive coverage, detailed coverage. Detailed coverage provides sufficient detail to allow door-to-door, turn-by-turn route guidance to addresses, points of interest and other locations within coverage areas. This coverage also generally includes a broad, logical driving area around the named city regardless of city, county and state boundaries. Road network coverage, which is in between detailed coverage and intertown coverage, typically includes most roads with the exception of some local, residential or rural roads (referred to as functional class 5 roads) with verification done of roads that typically contain the most complex driving and navigating decisions (called functional class 1-4). Intertown coverage includes the major roadways and select local travel information, and seamlessly connects the detailed coverages. Route guidance products typically incorporate both detailed and intertown information.

        In the contiguous 48 states of the United States and portions of Hawaii and Canada, detailed coverage is complete for cities and their respective surrounding areas, covering in the aggregate approximately 60% of the total combined population of the United States and Canada. We have road network coverage with full road inclusion for an additional 39% of the population, which consists of coverage for 35% of the population that contains verification for roads with functional class 1-4 and coverage for 4% of the population that only contains verification for roads with functional class 1-2.

        In Europe, detailed coverage is complete for urban and rural areas covering approximately 74% of the total combined population of the following 21 countries: Andorra, Austria, Belgium, Denmark,

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Finland, France, Germany, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, The Netherlands, Norway, Portugal, San Marino, Spain, Sweden, Switzerland, Vatican City and the United Kingdom. Intertown coverage is complete for all mentioned countries with the exception of Finland, Ireland, Norway and the Northern Ireland part of the United Kingdom. In these countries as well as in the Czech Republic and the Slovak Republic, the intertown coverage is limited to the connector roads between the major metropolitan areas and the country borders.

        Creating, maintaining and delivering a comprehensive, high quality navigable database is a multi-step, labor-intensive process. The major steps consist of:

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Data Collection. We gather raw geographic data, street name information and navigation information (e.g., barriers, one-way restrictions, turn restrictions and other driving rules) from a variety of sources, including government agencies and other regional and local sources, and by direct observation using our field staff.



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Data Entry. We use our proprietary technologies and methods to convert the data that we have collected into our database according to our specifications. The method is to create a geometric base of elements that represent objects in the real world and then to apply additional data, such as street names and addresses, postal codes, one-way road information, and points of interest to that geographic base.



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Data Validation. Throughout the data entry process, our proprietary systems constantly check the accuracy of the data.



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Data Extraction. We process the data into a variety of formats and data sets for delivery to our customers.

        During initial database creation, our field personnel build relationships with authorities at all levels responsible for the roadways to gather driving rule and other information and field-verify the database. In many cases, the Company enters into agreements with governmental offices or territories in order to license certain roadway information. Because of the large number and varying sizes and structures of such governmental entities, the form of these agreements varies greatly. Moreover, because each agreement covers only a limited geographical area and the information covered by such agreements can be obtained by alternate means (including through direct observation by our field personnel), the Company believes that none of these agreements are material to the Company's business.

        Once initial development for an area is complete, the assigned field office assumes primary responsibility for keeping the database up to date and accurate. We continually update our NAVTECH database to reflect changes to the roadway network and points of interest, and we release these updates to our customers on a periodic basis throughout the year.

        Our local field offices gather information on road conditions and plans from multiple sources, check data quality and continually validate database information. Our local field personnel also contribute to the updating and quality control efforts by driving the roads to check and update database information. We also use customer and end-user feedback to identify errors and anomalies in the data and to improve our database.

        In connection with our NAVTECH database, we provide consulting services, customer support, software and software development tools to our customers that purchase such tools and services. We believe these tools and services help these customers reduce the development costs and time to market for their products and services that use NAVTECH data.

        We are also currently working with several suppliers and customers to combine in-vehicle incident and traffic flow information with our NAVTECH database.

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Technology.

        We believe that a significant factor in our successful creation and updating of the NAVTECH database is our proprietary software environment. We have employed an integrated, large-system approach, with databases, software support and operations environments. We have devoted significant resources and expertise to the development of a custom data management software and communications environment. We also have built our workstation software to enable sophisticated database creation and the performance of updating tasks in a well-controlled and efficient environment. A particular advantage that we have developed in this area is the ability to access the common database from any of our many field offices and the ability to edit portions of the data on a concurrent basis among several users. Our field personnel are able to operate our proprietary software for data capture on portable computers which are taken into field vehicles to capture data in real-time and then can be taken back into the field office for further processing of the data.

        In addition, we have developed software known as SDAL (Standard Data Access Library) software, which is intended to support a common database physical storage format known as SDAL Format, which we also developed. This software and format allows and encourages interoperability across navigation systems of different suppliers and simplifies database distribution and support logistics. The Company is in the process of developing the next generation of this software. We are also developing a navigation application development framework, which, together with such software, will enable our customers to bring products based on the NAVTECH database to market more quickly and at reduced cost.

Marketing and Database Distribution.

        We market our NAVTECH database to vehicle manufacturers, automotive electronics manufacturers, developers of advanced transportation applications, developers of geographic-based information products and services, location-based service providers and other product and service providers. Our marketing efforts include a direct sales force, attendance and exhibition at trade shows and conferences, advertisements in relevant industry periodicals, direct sales mailings and advertisements, electronic mailings and internet-based marketing.

        There are multiple methods of distribution to provide NAVTECH data to end users. For example, our customers produce copies of NAVTECH data on various storage media, such as CD-ROMs, DVDs and other media. Our customers then distribute those media, either bundled or otherwise incorporated into the customer's products or separate, but for use with the customer's products, to end users directly and indirectly through retail establishments, vehicle manufacturers and their dealers, and other re-distributors. We also produce copies of NAVTECH data and distribute those copies to end users both directly and indirectly through vehicle manufacturers and their dealers. In those cases where we produce and distribute copies to end users, the copies are either prepared for specific use with our customers' products or are in our SDAL Format. Additionally, some of our customers store NAVTECH data on servers and distribute information, such as map images and driving directions, based on the NAVTECH data over the Internet and through other communication networks.

        Our general policy is to charge a license fee for use of our NAVTECH data. The amount of the fee varies depending upon the nature of the application using the data and may be charged on a per-copy, per-transaction, subscription or other basis. Typically, where our customer makes and distributes copies of our NAVTECH database, the customer is responsible for paying a license fee to us. Where we make and distribute copies of our NAVTECH database ready for end users, a license fee is sometimes paid to us by the end user and sometimes paid to us by the maker or reseller of the product in which the copy of our NAVTECH database is to be used. For in-vehicle navigation systems, we sometimes provide services related to the distribution of copies of the database and charge a fee for

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the provision of such services. We have also invested significant resources in internal-use software to enhance our NAVTECH database capabilities.

        We generate consulting revenue from our professional services group, also known as our technical customer support organization. Our technical customer support organization assists customers from product inception through testing and market introduction, with support continuing beyond. A customer support manager is assigned to large customers and works closely with our database creation and updating groups to coordinate availability of appropriate database coverage in conjunction with customer product release and roll-out plans.

Customers.

        We have established customer relationships and entered into licensing arrangements with vehicle manufacturers, automotive electronics manufacturers, governmental entities and other developers, manufacturers and marketers of products and services that use NAVTECH data. Our customers include: customers who primarily sell or develop vehicle route guidance products for factory installation, dealer installation and aftermarket sale; customers who develop and market online and wireless products and services incorporating NAVTECH data in a variety of applications, including travel information and driving direction services; and customers such as software logistics solutions firms and developers and marketers of fleet routing, scheduling and similar products.

        During our fiscal year ended December 31, 2000, BMW AG (including its affiliates) was our only customer who represented 10% or more of our revenue. During the fiscal years ended December 31, 2001 and December 31, 2002, BMW AG (including its affiliates) represented approximately 19% and 15% of revenue, respectively, and Harman International Industries, Inc. (including its affiliates) represented approximately 11% and 13% of our revenue, respectively. We sell copies of our database and map disks to BMW in North America and Europe pursuant to BMW's standard purchasing terms and conditions, modified in specific instances by separate agreements with BMW. BMW is not obligated to make any minimum purchases under these arrangements. We have also entered into an agreement with BMW to develop a database for South Africa and to sell copies of such database and map disks to BMW. We have entered into a data license agreement with Harman pursuant to which we grant Harman territory-specific, non-exclusive, non-transferable and non-sublicensable licenses to use our database information in certain of Harman's products. The license agreement does not provide for any minimum license fees with respect to the territories currently covered by the agreement.

        In 1991, the Company entered into a database license agreement with an unaffiliated company (the "1991 Agreement") that required fixed prepaid license fees for use of the Company's database in route guidance products and other applications. Under the 1991 Agreement, the Company received $3,000,000 in cash through 1994, in exchange for aggregate future credits of $6,500,000, which could be utilized by such company as credits against 50% of future license obligations subject to a maximum of $2,000,000 in any one year. Any portion of this $6,500,000 in credits that was unused as of December 31, 2000, was refundable in cash by the Company. Due to the repayment contingencies discussed above, the amounts received were initially recorded as refundable deferred licensing advances. The total amount initially recorded of $3,000,000 was accreted to the maximum amount repayable as of December 31, 2000, at rates ranging from 9% to 14% using the effective interest rate method. The interest rate on remaining unpaid balances under the 1991 Agreement increased to 15% after December 31, 2000.

        On September 27, 2002, the Company amended the 1991 Agreement (the "2002 Amendment"). Immediately prior to the 2002 Amendment, approximately $7,800,000 was due by the Company under the 1991 Agreement. Pursuant to the provisions of the 2002 Amendment, the Company was required to (i) repay $4,000,000 of the outstanding balance in cash, and (ii) provide aggregate future credits of $6,000,000, which must be used by the unaffiliated company by December 31, 2007. The Company

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made cash payments of $2,000,000 on October 11, 2002 and $2,000,000 on November 14, 2002. The $6,000,000 of license fee credits can be applied toward payment of up to 75% of license fees owed to the Company, including minimum annual license fees. Any portion of the unused license fee credits as of December 31, 2007 will be forfeited. Upon execution of the 2002 Amendment, the Company re-classified the remaining $3,800,000 balance of refundable deferred licensing advances to long-term deferred revenue. The $3,800,000 of long-term deferred revenue recorded upon execution of the 2002 Amendment will be recognized as revenue in future periods in proportion to the unaffiliated company's usage of the $6,000,000 of license fee credits. Non-cash revenue of $48,000 was recognized during the year ended December 31, 2002, and the unused license fee credits available are $5,924,000 as of December 31, 2002.

        We have entered into written agreements of various types, principally license agreements, with each of our customers. These agreements, however, are not requirements contracts. We endeavor to grow and diversify our customer base on a continuous basis through our marketing and sales efforts.

License Agreements.

        We license and distribute our database in several ways, including by licensing and delivering our database to our business customers, such as application developers and service providers, who then distribute the database directly or indirectly to business and consumer end users in connection with their products and services. We also license and distribute our database directly (or indirectly through distributors) to both business and consumer end users. In addition to the basic license terms that typically provide for non-exclusive licenses, our license agreements generally include additional terms and conditions for the licenses relating to the specific use of the data. Our license fees vary depending on several factors, including the use for which the data has been licensed, the content of the data to be used by the product or service, and the geographical scope of the data.

        The license fees paid for the licenses are usually on a per-copy basis or a per-transaction basis. In general, there is no requirement that a customer sell a minimum number of copies or transactions, although certain of the licenses require a minimum annual license fee to be paid by the customer.

        Certain of the license agreements allow our customers to require or request us to produce copies of the database on their behalf and to deliver those copies to the customer or to another distributor for redistribution to consumer end users. Similarly, we produce and deliver such database copies to vehicle manufacturers pursuant to purchase orders or other agreements, and the vehicle manufacturers and their dealers redistribute the copies to vehicle purchasers. If a customer makes an election for us to provide such database copies, or if we agree to provide such copies to a vehicle manufacturer, then such customer, vehicle manufacturer or another party is obligated to pay us a fee for each copy that we produce and deliver that includes a per-copy license fee and a service fee for packaging and distribution.

Competition.

        The market for map information is highly competitive. We compete with other companies, as well as with governmental and quasi-governmental agencies, that provide map information in a wide range of map applications with varying levels of functionality. We believe that the principal elements of competition in the market for map information are the geographical coverage of the database, the range and specificity of the information in the database, database accuracy, the price to customers for the use of the database, the price to consumers for the applications or other goods in which the applications are provided, alternative goods available to purchasers, and the availability of software and hardware products that are compatible with the database (or available or used in products/services that use such map information). We currently have several major competitors in providing map information, including TeleAtlas N.V., Geographic Data Technologies Incorporated (GDT) and numerous European

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governmental and quasi-governmental mapping agencies (e.g., Ordnance Survey in the United Kingdom) that license map data for commercial use. We believe that GDT and TeleAtlas are now offering more detailed map data for the United States than previously available from such companies, enabling greater functionality, such as turn-by-turn directions. Increased competition or other competitive pressures may result in price reductions, reduced profit margins, or loss of market share, each of which could have a material adverse effect on the Company's business, financial condition, and results of operations.

Intellectual Property.

        Our success and ability to compete are dependent, in part, upon our ability to establish and adequately protect our intellectual property rights. In this regard, we rely primarily on a combination of copyright laws (including, in Europe, database protection laws), trade secrets and patents to establish and protect our intellectual property rights in our NAVTECH database, software and related technology. Although the Company actively attempts to utilize patents to protect its technologies and currently holds several patents relating to the collection and distribution of geographical and other data, the Company believes that none of the patents currently held by the Company, individually or in the aggregate, are material to the Company's business. Navigation Technologies also protects its database, software and related technology, in part, through the terms of our license agreements and by confidentiality agreements with our employees, consultants, customers and others. We also claim rights in our trademarks and service marks. Certain of our marks are registered in the United States, Europe and elsewhere and we have filed applications to register certain other marks in such jurisdictions. We have licensed others to use certain of our marks in connection with our database and software and expect to continue licensing certain of our marks in the future.

Employees.

        As of December 31, 2002, we had a total of 1,186 employees. We believe that relations with our employees are good, and we have not experienced any work stoppages due to labor disputes.

International operations and foreign currency fluctuations.

        We have substantial operations in Europe and other jurisdictions and we expect a significant portion of our revenues and expenses will be generated by our European operations in the future. Accordingly, our operating results are and will continue to be subject to the risks of doing business in foreign countries, including compliance with, or changes in, the laws and regulatory requirements of various foreign countries and the European Union, difficulties in staffing and managing foreign subsidiary operations, taxes, trade barriers and business interruptions. In addition, substantially all of our expenses and revenues relating to our international operations are denominated in foreign currencies. Historically, we have not engaged in activities to hedge our foreign currency exposures although we may do so in the future. As a result, we are and will continue to be subject to risks related to foreign currency fluctuations until we engage in such hedging activities, if ever. Any of these matters could increase our expenses and have a material adverse effect on our financial condition and results of operations.

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        The following summarizes net revenue on a geographic basis for the years ended December 31, 2000, 2001 and 2002 (in thousands):

        Revenues are attributed to North America (United States) and Europe (The Netherlands) based on the entity that executed the related licensing agreement.

        The following summarizes long-lived assets on a geographic basis as of December 31, 2000, 2001, and 2002 (in thousands):

Item 2. Properties.

        Our corporate headquarters are located in Chicago, Illinois, and we maintain a regional headquarters in Best, The Netherlands. We also have a production facility in Fargo, North Dakota. The table below provides additional information concerning our principal facilities, including the approximate square footage of each facility and the lease or sublease expiration date. We believe that our facilities are generally suitable to meet our needs for the foreseeable future, but we believe we need additional space for our corporate headquarters, and are in the process of securing such space.

        In addition to these facilities, we also have approximately 141 field, administrative, and home offices in 17 countries worldwide.

Item 3. Legal Proceedings.

        Philips B.V. filed a complaint (the "Complaint") against the Company in the Court of Chancery of the State of Delaware in and for New Castle County on September 20, 2002. The Complaint alleged that the Company did not intend to comply with its obligations under the Certificates of Designation for the Company's Series A and Series B preferred stock to convert such preferred stock into common

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stock pursuant to the terms of such Certificates. The Complaint sought declaratory relief, injunctive relief and specific performance to require the Company to determine the applicable conversion price in accordance with the terms of the respective Certificates of Designation. On September 27, 2002, a special committee of the Board of Directors (the "Special Committee") was formed to address the Company's defense to the Complaint. On December 30, 2002, the Special Committee issued a report to the Board of Directors reporting, among other things, that Messrs. van Ommeren and Shields, as directors of the Company and as members of the Special Committee, had determined that Messrs. van Ommeren and Shields are the disinterested members of the Board of Directors for purposes of determining the conversion price (i.e., the Current Market Price, as defined in the respective Certificates of Designation) for the Series A and Series B preferred stock. Messrs. van Ommeren and Shields then determined that the Current Market Price of the Company's common stock as of October 1, 2002 was $0.86 per share. This determination was made by Messrs. van Ommeren and Shields and does not reflect the views of the full Board of Directors of the Current Market Price. The number of shares of common stock issuable to Philips B.V. as a result of the conversion of the Series A and Series B preferred stock based on a Current Market Price of $0.86 is 776,675,105.686 shares.

        Philips B.V. has informed the Company that it does not agree with the determination by Messrs. van Ommeren and Shields of the Current Market Price and believes that the Current Market Price is substantially lower. Philips B.V. has indicated that it intends to dispute in the legal proceedings the determination by such directors of the Current Market Price.

        The Company has engaged outside counsel in connection with these legal proceedings. It is still not possible at this time to predict the outcome of this dispute, but based on our ongoing review, the Company does not believe the lawsuit will have a material adverse effect on our business, financial condition or results of operations. Regardless of the outcome, this litigation may result in substantial expense and require a significant level of management attention. The ultimate determination of the Current Market Price may or may not be $0.86 per share and will depend on the outcome of the litigation by judgment, settlement or otherwise. In addition, the resolution of the litigation may result in a significant number of additional shares of the Company's common stock being issued to Philips B.V., which would have an immediate and substantial dilutive effect on the holders of our common stock. As of December 31, 2002, the Company has recorded $500,000 of accrued expenses in connection with this matter.

        In addition, there is no established trading market for the Company's common stock, and as such, the determination by the Special Committee that the Current Market Price of the Company's common stock equals $0.86 per share may not be indicative of the price per share of the Company's common stock following a sale or merger of the Company, or an initial public offering of the Company's common stock.

        Except as described above, there is no material pending legal proceeding to which the Company is a party or of which any of the Company's property is subject.

Item 4. Submission of Matters to a Vote of Security Holders.

        On December 19, 2002, Philips, our principal stockholder, approved resolutions authorizing the Company to complete an internal restructuring for tax purposes whereby (i) two of our subsidiaries, Navigation Technologies International Corporation and Navigation Technologies North America, Inc., were converted into Delaware limited liability companies, (ii) all of the Company's ownership interests in its subsidiaries, Navigation Technologies B.V. and Navigation Technologies Kabushiki Kaisha, were contributed to Navigation Technologies International, LLC and (iii) substantially all of the operating assets and liabilities of the Company, other than its ownership of its other subsidiaries and its patents and trademarks, were transferred to Navigation Technologies North America, LLC. Philips voted all of its shares of our voting capital stock approving these resolutions. See "Item 3. Legal Proceedings" and "Item 12. Security Ownership of Certain Beneficial Owners and Management" for information regarding Philips' ownership of our capital stock.

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PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Market Information

        There is no established trading market for shares of Navigation Technologies common stock; therefore, information with respect to the market prices of the common stock has been omitted. However, in connection with the Company's stock option exchange, the Company granted replacement options to purchase 83,927,226 shares of common stock to employees on May 15, 2002, with an exercise price equal to $0.10 per share, which was determined by the Company's Board of Directors to be the fair market value of the Company's common stock on that date. In connection with the determination of fair market value, the Board had the assistance of an independent valuation firm, considered information provided by the Company's principal stockholders and reviewed such other information as deemed relevant. See also "Item 3. Legal Proceedings" for information regarding a dispute over the Current Market Price (as defined in the Company's Certificates of Designation for the Series A and Series B preferred stock) of the Company's common stock.

Holders

        As of December 31, 2002, 496 persons of record held shares of our common stock, 1,104 persons of record held employee stock options to acquire our common stock and 1 person of record held warrants to acquire our common stock. As of December 31, 2002, an aggregate of 108,957,210 shares of our common stock were subject to employee stock options and 47,380,000 shares of our common stock were subject to warrants.

        The Company's Series A and Series B preferred stock converted to common stock as of October 1, 2002. See "Item 3. Legal Proceedings" for information regarding litigation with respect to the conversion of the Series A and Series B preferred stock.

Dividends

        We have never declared or paid any cash dividends on our capital stock. We currently intend to retain future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion.

Securities Authorized for Issuance under Equity Compensation Plans

        The following table provides information as of December 31, 2002, regarding the number of shares of common stock that may be issued under the Company's equity compensation plans.

        The number of securities remaining available for future issuance under equity compensation plans set forth above represents shares available for issuance under the Company's 2001 Stock Incentive Plan.

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Item 6. Selected Financial Data.

        The following selected historical consolidated financial data as of December 31, 2001 and 2002 and for the years ended December 31, 2000, 2001 and 2002, have been derived from the audited consolidated financial statements of Navigation Technologies, appearing elsewhere in this document. The following selected historical consolidated financial data as of December 31, 1998, 1999 and 2000 and for the years ended December 31, 1998 and 1999, have been derived from the audited consolidated financial statements of Navigation Technologies, which are not included herein. The selected historical consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes thereto appearing elsewhere in this document.

NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES

(In thousands)

(1)

The Company's outstanding borrowings with Philips were extinguished in exchange for preferred stock during 2001.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this document. Certain information contained in this discussion and analysis and presented elsewhere in this document, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk and uncertainties. In evaluating these statements, you should specifically consider the various risk factors identified in Navigation Technologies' Registration Statement on Form 10, as amended, File No. 0-21323, that could cause results to differ materially from those expressed in such forward-looking statements.

Overview.

        Navigation Technologies Corporation is a leading provider of digital map information and related software and services used in a wide range of navigation, mapping and geographic-related applications, including products and services that provide maps, driving directions, turn-by-turn route guidance, fleet management and tracking and geographic information systems. These products and services are provided to end users by our customers on various platforms, including: self-contained hardware and software systems installed in vehicles; personal computing devices, such as personal digital assistants and cell phones; server-based systems, including internet and wireless services; and paper media.

        Prior to the year ended December 31, 2002, we had been unprofitable on an annual basis since our inception, and, as of December 31, 2002, we had an accumulated deficit of $757.6 million. Our operating expenses have increased as we have made investments related to the development, improvement and commercialization of our database. We anticipate that operating expenses will continue to increase as we continue our growth and development activities, including further development and enhancement of the NAVTECH database and increasing our sales and marketing efforts. Although our revenues have grown significantly over the past three years, we may not be able to sustain these growth rates. While we have been successful in achieving an operating profit in 2002, we cannot assure you that we will be able to maintain profitable operations in the future.

        The market for products and services that use the NAVTECH database is evolving, and we believe that our future success depends upon the development of markets for a variety of products and services that use our database. Even if such products and services continue to be developed and marketed by our customers and gain market acceptance, we may not be able to license the database at prices that will result in our maintaining profitable operations. Moreover, the market for map information is highly competitive, and competitive pressures in this area may result in price reductions for our database, which could materially adversely affect our business and prospects.

        Material portions of our revenues and expenses have been generated by our European operations, and we expect that our European operations will account for a material portion of our revenues and expenses in the future. Substantially all of our international expenses and revenue are denominated in foreign currencies, and fluctuations in the value of currencies in relation to the United States dollar have caused and will continue to cause dollar-translated amounts to vary from one period to another. Historically, we have not engaged in activities to hedge our foreign currency exposures, although we may do so in the future. Revenues derived from our European operations in 2000, 2001 and 2002, accounted for approximately 59%, 64%, and 68%, respectively, of our total revenue.

Critical Accounting Policies.

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

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expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and make various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that, of the significant policies used in the preparation of our consolidated financial statements (see Note 1 of Notes to Consolidated Financial Statements), the following are critical accounting policies, which may involve a higher degree of judgment and complexity.

Revenue Recognition

        We derive a substantial majority of our revenue from licensing our database. We also generate revenue from professional services. Revenue is recognized net of provisions for estimated uncollectible amounts and anticipated returns. Database licensing revenue includes revenue that is associated with nonrefundable minimum licensing fees, license fees from usage (including license fees in excess of nonrefundable minimum fees), prepaid licensing fees from our distributors and customers and direct sales to end users.

        Nonrefundable minimum licensing fees are received upfront and represent a minimum guarantee of fees to be received from the licensee (for sales made by that party to end users) during the period of the arrangement, typically one year. We generally cannot determine the amount of up-front license fees that have been earned during a given period until we receive a report from the customer. Accordingly, we amortize the total up-front fee paid by the customer ratably over the term of the arrangement. When we determine that the actual amount of licensing fees earned exceeds the cumulative revenue recognized under the amortization method (because the customer reports licensing fees to us that exceed such amount) we recognize the additional licensing revenues.

        License fees from usage (including license fees in excess of the nonrefundable minimum fees) are recognized in the period in which they are reported by the customer to us. Prepaid licensing fees are recognized in the period in which the distributor or customer reports that it has shipped our database to the end user. Revenue for direct sales licensing is recognized when the database is shipped to the end user.

        Revenues from licensing arrangements including a database update are allocated equally to the two shipments of our database to the customer. The Company does not sell database updates to its existing customers at a reduced price, so the database update is considered to have an equal value to the original database provided under such arrangements. Licensing arrangements that entitle the customer to unspecified updates over a period of time are recognized as revenue ratably over the period of the arrangement.

        Revenue from the sale of professional services provided on a time and material basis is recognized as the services are performed.

Allowance for Doubtful Accounts

        We record allowances for estimated losses from uncollectible accounts based upon specifically identified amounts that we believe to be uncollectible. In addition, we record additional allowances based on historical experience and our assessment of the general financial condition of our customer base. If our actual collections experience changes, revisions to our allowances may be required. We have a number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in the credit worthiness of one of these customers or other matters affecting the collectibility of amounts due from such customers could have a material adverse affect on our results of operations in the period in which such changes or events occur.

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Database Licensing, Production and Software Development Costs

        We have invested significant amounts in creating and updating our database and developing related software applications for internal-use. Database licensing and production costs consist of database creation and updating, database licensing and distribution, and database-related software development. Database creation and updating costs are expensed as incurred. These costs include the direct costs of database creation and validation, costs to obtain information used to construct the database, and ongoing costs for updating and enhancing the database content. Database licensing and distribution costs include the direct costs related to reproduction of the database for licensing and per-copy sales and shipping and handling costs. Database-related software development costs consist primarily of costs for the development of software as follows: (i) applications used internally to improve the effectiveness of database creation and updating activities, (ii) enhancements to internal applications that enable our core database to operate with emerging technologies, and (iii) applications to facilitate customer use of our database. Costs of internal-use software are accounted for in accordance with AICPA Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Accordingly, certain application development costs relating to internal-use software have been capitalized and are being amortized on a straight-line basis over the estimated useful lives of the assets, generally five years. It is reasonably possible that our estimates of the remaining estimated economic life of the technology could differ from the current amortization periods. In that event, impairment charges or shortened useful lives of internal-use software could be required. Research and development activities are expensed as incurred.

Impairment of Long-lived Assets

        As of December 31, 2001 and 2002, the Company's long-lived assets consisted of property and equipment and internal-use software. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by the comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Significant management judgment is required in determining the fair value of our long-lived assets to measure impairment, including projections of future discounted cash flows. During the third quarter of 2002, the Company performed a strategic review of its software development initiatives, including a comprehensive assessment of its internal-use software development projects to ensure that projects with capitalized costs are expected to provide substantive future service potential. Based on this review, management determined that certain capitalized software development costs were impaired, and it was necessary to write-down the balance by $2,114,000. Future changes in technology or strategic decisions affecting our software development initiatives could generate further impairments in future periods. However, management currently believes that the remaining capitalized software development costs after this write-down are recoverable. In reaching this conclusion, management considered the progress of each of our internal-use software development projects to date, expected completion timelines, and budgeted future expenditures for each of the projects.

Realizability of Deferred Tax Assets

        In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences, as determined pursuant to SFAS No. 109, become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Management's evaluation of the

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realizability of deferred tax assets must consider both positive and negative evidence, and the weight given to the potential effects of positive and negative evidence is based on the extent that it can be objectively verified. We have generated significant taxable losses since our inception, and management has concluded that, as of December 31, 2001 and 2002, a valuation allowance against substantially all of our deferred tax assets is required.

        For the year ended December 31, 2002, our European operations generated taxable income, while the taxable loss incurred by our domestic operations decreased from prior years. If the level of taxable income generated in certain jurisdictions, including European jurisdictions, continues to increase in future periods, management may determine that sufficient objective evidence exists to conclude that it is more likely than not that all or a portion of the deferred tax assets attributable to such jurisdictions will be realized. If such a determination is made in a future period, we would reduce the deferred tax asset valuation allowance and record an income tax benefit in our consolidated statements of operations. It is possible that such adjustments would be material to the results of our operations in the periods in which these determinations are made. However, there can be no assurance that Navigation Technologies will continue to experience growth in revenues and operating income in future periods.

Results of Operations.

Comparison of Years Ended December 31, 2001 and 2002

        Revenues.    Total revenues increased 50.2% from $110.4 million in 2001 to $165.8 million in 2002. The increase in total revenues was due to a significant increase in revenues from database licensing, which resulted primarily from increased sales to existing customers. Growth occurred in all geographic regions in 2002, as North American revenues increased 32.7% from $39.8 million in 2001 to $52.8 million in 2002, and European revenues increased 60.1% from $70.6 million in 2001 to $113.0 million in 2002. North American and European revenue was positively affected by the increase of navigation unit sales during 2002. Foreign currency translation increased revenues within the European operations by $11.7 million during 2002 due to the strengthening of the Euro. Approximately 38% of our revenues in 2001 came from three customers (accounting for 19%, 11%, and 8% of total revenues, respectively), while approximately 36% of our revenues for 2002 came from three customers (accounting for 15%, 13%, and 8% of total revenues, respectively).

        Database Licensing and Production Costs.    Database licensing and production costs increased 17.2% from $80.7 million in 2001 to $94.6 million in 2002. This increase was due primarily to the increased database licensing and production costs from increased revenue and a $2.1 million net write-down for impairment of internal-use software during 2002. The remaining increase was due to our continued investment in updating, improving, and maintaining the coverage of our database as well as increased efforts related to technological enhancements to our database in both North America and Europe plus an unfavorable foreign currency translation effect within European operations of $3.9 million due to the strengthening Euro, offset, in part, by the capitalization of $10.8 million and $10.0 million of development costs for internal-use software in 2001 and 2002, respectively.

        Selling, General, and Administrative Expenses.    Selling, general, and administrative expenses increased 4.4% from $58.7 million in 2001 to $61.3 million in 2002. This increase was due primarily to our investments in growing the size of our worldwide sales force and marketing initiatives, and in improving our infrastructure to support future growth plus an unfavorable foreign currency translation effect within European operations of $1.8 million due to the strengthening Euro.

        Other Income and Expense.    Interest expense decreased from $17.9 million in 2001 to $0.8 million in 2002. The decrease was due primarily to the reduction of our indebtedness during the first quarter of 2001 through the exchange of shares of our Series A and Series B preferred stock for our outstanding borrowings from Philips.

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        Income Tax Expense.    Income tax expense was zero in 2001, compared to $1.1 million in 2002. The increase was primarily due to various European countries that do not have tax loss carryforwards as well as $0.4 million arising from a tax audit during 2002. The remaining foreign operations did not incur income tax expense in 2002, because taxable income was applied against available loss carryforwards. No income tax benefit was recorded for domestic or foreign losses during 2001, because a full valuation allowance was recorded against our net deferred tax assets in all jurisdictions. No income tax benefit has been recorded for our domestic losses during 2002, because a full valuation allowance was recorded against our net deferred tax assets in the United States.

        Operating Income (Loss), Net Income (Loss) and Net Loss Per Share of Common Stock.    Our operating loss decreased from $(28.9) million in 2001 to $9.9 million of operating income in 2002, due primarily to our revenue growth in 2002. Our net loss decreased from $(116.5) million in 2001 to $8.2 million of net income in 2002, primarily because the 2001 results included a $(69.6) million extraordinary loss from the early extinguishment of debt that we incurred in connection with the exchange of the shares of our preferred stock for our outstanding indebtedness to Philips and interest charges of $(17.1) million incurred on debt outstanding prior to the exchange. Basic and diluted net loss per share of common stock before extraordinary item decreased from $(0.35) in 2001 to $(0.17) in 2002. This change primarily reflects the impact of our improved operating results and reduced interest expense. In addition, the cumulative preferred stock dividends of $91.4 million and $110.5 million in 2001 and 2002, respectively, on the preferred stock issued to Philips during the first quarter of 2001 in exchange for the extinguishment of debt also affected these results. Including the extraordinary loss on the early extinguishment of debt, basic and diluted net loss per share of common stock decreased from $(0.52) in 2001 to $(0.17) in 2002.

Comparison of Years Ended December 31, 2000 and 2001

        Revenues.    Total revenues increased 34.3% from $82.2 million in 2000 to $110.4 million in 2001. The increase in total revenues was due to a significant increase in revenues from database licensing, which resulted primarily from increased sales to existing customers. Growth occurred in all geographic regions in 2001, as North American revenues increased 18.8% from $33.5 million in 2000 to $39.8 million in 2001, and European revenues increased 45.0% from $48.7 million in 2000 to $70.6 million in 2001. Approximately 34% of our revenues in 2000 came from three customers (accounting for 17%, 9%, and 8% of total revenues, respectively), while approximately 38% of our revenues for 2001 came from three customers (accounting for 19%, 11%, and 8% of total revenues, respectively).

        Database Licensing and Production Costs.    Database licensing and production costs increased 2.5% from $78.7 million in 2000 to $80.7 million in 2001. This increase was due primarily to our investment in updating and improving the coverage of our database in both North America and Europe, offset, in part, by the capitalization of $7.8 million and $10.8 million of development costs for internal-use software in 2000 and 2001, respectively.

        Selling, General, and Administrative Expenses.    Selling, general, and administrative expenses increased 6.9% from $54.9 million in 2000 to $58.7 million in 2001. This increase was due primarily to our investments in growing the size and capabilities of our worldwide sales force, and in improving our infrastructure to support future growth.

        Other Income and Expense.    Interest expense decreased from $58.5 million in 2000 to $17.9 million in 2001. The decrease was due primarily to the reduction of our indebtedness during the first quarter of 2001 through the exchange of shares of our Series A and Series B preferred stock for our outstanding borrowings from Philips.

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        Operating Income (Loss), Net Income (Loss) and Net Loss Per Share of Common Stock.    Our operating loss decreased from $(51.3) million in 2000 to $(28.9) million in 2001, due primarily to the operating leverage generated by our revenue growth in 2001. Our net loss, however, increased from $(109.6) million in 2000 to $(116.5) million in 2001, as a result of the $(69.6) million extraordinary loss from the early extinguishment of debt we incurred in connection with the exchange of the shares of our preferred stock for our outstanding indebtedness to Phi