I initially had this issue as well, but I didn't put much effort into fixing it. I eventually got it to work on accident when getting captcha to work.
Picture generation is done using the GD library which I had installed already, but what fixed it was the addition of TTF support. This is an addon to support text/image generation which makes sense because I think the system is actually using a barcode True Type font to create the image of the barcode themselves.
I'm running a VPS Cloud server with cPanel WHM. I went to easyApache, went through the steps to rebuild PHP. Got to the exhaustive options list and checked the TTF (FreeType) option. Maybe this will help you if you don't have cPanel
http://www.lampdocs.com/blog/tag/how-to-install-freetype-ttf-support/