Steve, the adult spots the child and changes the swear word "Sh*t!" to "Sugar!".
We live in a far more vulgar society today but adults censoring themselves because kids were around was a big part of my childhood. There were plenty of times a man would be talking to my dad and would casually curse about something, stop short, look at me, and say "Sorry Sal" (my dad's name). The idea was you didn't want to send another man's kid home to say "Mom, dad was talking to Mr Smith today, what does f-ck mean?" Or even worse, say the word itself. "Ma these French fries are pretty f-cking good!"
Whenever a kid would say a bad word in front of an (especially female) adult, the question always was "Who taught you to use that word?", like they were going to hunt down the adult responsible and give them Hell. We used to think it was funny, adults used the language all over the place, we knew what they meant when they said "sugar!" or "fudge!", but we would have to hand over some particular adult as the guilty party in our corruption. If it was someone the mother did not see or really know, like one of your father's morally questionable friends or relatives then your father would catch Hell for it ("Jeanne, I can't control Charlie, he was a Marine in the war"). This wasn't just my family, this was true all over the neighborhood.
An important rite of passage was when an adult would casually swear, look at me, and say to my dad "Ah he is a big boy now, isn't he?". That meant I was old enough not to swear in front of a female adult and thus give up my membership in the club of being a young man. Then the word changed from "Shhhhhhhhh.... Sugar! .... aww hell -SH*T!!!"