At the institution, Billy's parents review the catatonic grandfather's records with the doctor, leaving Billy and the old man alone.
With the adults gone, Grandpa suddenly becomes lucid and giddily tells Billy that Santa Claus not only gives presents to good boys and girls, he punishes naughty ones.
Meanwhile, Billy and his family are heading home until they saw the man with his car apparently broken down on the dark, deserted road.
Against Billy's terrified objections, his father pulls up beside the stranded man, who then pulls out his gun and shoots Billy's father.
Billy runs into a field, hides and watches as the criminal drags Billy's mother from the car, tried to rape her and slits her throat, killing her.