[Mac OS X TeX] pdflatex and psfrag?

[Hemant Bhargava]

<x-flowed>Hi -

A question for psfrag users ...

Is pdflatex incompatible with psfrag?  I don't see the psfrag 
replacements in my output (pdf) file.
I have attached below the preamble and figure statement below. I had 
originally a figure.eps file (and everything worked under my old 
system), but now I converted this to figure.pdf using epstopdf, and I am 
running this under TeXShop with pdflatex engine.

For anyone who wants to help, the .tex and .pdf files are located in

http://www.smeal.psu.edu/~bhargava/Temp/psfragtest.tex
http://www.smeal.psu.edu/~bhargava/Temp/utilityeg1.pdf

I have also included the original .eps file, and the output .pdf that I 
obtain

http://www.smeal.psu.edu/~bhargava/Temp/utilityeg1.eps
http://www.smeal.psu.edu/~bhargava/Temp/psfragtest.pdf

I believe psfrag should work with pdflatex, so I am suspecting the 
problem is with my file conversion.

Thanks in advance,

- Hemant

\documentclass[slidesonly]{seminar}
\usepackage[pdftex]{graphicx}
\usepackage{psfrag}
\usepackage[]{hyperref}

and this is how the figure is called

\begin{figure}[tbp]
\centering
\psfrag{T}{$\theta$}
\psfrag{L}[br][br]{$U(\theta, q_{L})$} %
\psfrag{H}[bl][bl]{$U(\theta, q_{H})$}
\psfrag{R}[bc][bc]{$\frac{U(\theta, q_{L})}{U(\theta, q_{H})}$}
         \includegraphics[width=3in]{utilityeg1.pdf}
\label{fig:Utilityeg}
\end{figure}


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</x-flowed>